UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) For the or For the 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: 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 ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically Yes ☒ No ☐ 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). There were ——————————————————————☒ 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 1934 Quarterly Period Ended quarterly period ended September 30, 2017 (OR)☐Transition Report Pursuant to Section 13 2022 15(d) of the Securities Exchange Act of 1934☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Transition 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 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)“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 ☒ Emerging growth company ☐ Emerging growth company ☒financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐3,931,838 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; | |
● | our failure to realize synergies and other financial benefits from mergers and acquisitions within expected time frames, including increases in expected costs or difficulties related to integration of merger and acquisition partners; | |
● | inability to identify and successfully negotiate and complete additional combinations with potential merger or acquisition partners or to successfully integrate such businesses; | |
● | our history of operating losses; | |
● | our limited operating history in a new and unproven market; | |
● | increasing competition in the market for online professional networks; | |
● | our ability to comply with increasing governmental regulation and other legal obligations related to privacy; | |
● | our ability to adapt to changing technologies and social trends and preferences; | |
● | our ability to attract and retain a sales and marketing team, management and other key personnel and the ability of that team to execute on the Company’s business strategies and plans; | |
● | our ability to obtain and maintain intellectual property protection; | |
● | 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 Securities and Exchange Commission (“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 2021 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.
PROFESSIONAL DIVERSITY NETWORK, INC.
FORM 10-Q
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017
TABLE OF CONTENTS
PART I | |||
ITEM 1. FINANCIAL STATEMENTS | 3 | ||
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 | ||
PART II | |||
ITEM 1 LEGAL PROCEEDINGS | 39 | ||
ITEM | 39 | ||
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 |
Item 1. FINANCIAL STATEMENTS
Professional Diversity Network, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
September 30, 2022 | December 31, 2021 | |||||||
(Unaudited) | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 1,462,958 | $ | 3,402,697 | ||||
Accounts receivable, net | 896,307 | 1,389,112 | ||||||
Other receivables | 350,252 | 350,000 | ||||||
Prepaid expense and other current assets | 728,096 | 450,784 | ||||||
Current assets from discontinued operations | 4,600 | 4,600 | ||||||
Total current assets | 3,442,213 | 5,597,193 | ||||||
Property and equipment, net | 35,852 | 29,040 | ||||||
Capitalized technology, net | 44,530 | 43,038 | ||||||
Goodwill | 1,274,785 | 1,274,785 | ||||||
Intangible assets, net | 244,482 | 968,281 | ||||||
Right-of-use assets | 381,311 | 427,652 | ||||||
Merchant reserve | 30,849 | 380,849 | ||||||
Security deposits | 66,340 | 66,340 | ||||||
Long-term investments | 1,350,000 | - | ||||||
Long-term assets from discontinued operations | 197,201 | 197,595 | ||||||
Total assets | $ | 7,067,563 | $ | 8,984,773 | ||||
Current Liabilities: | ||||||||
Accounts payable | $ | 417,225 | $ | 248,595 | ||||
Accrued expenses | 1,122,274 | 1,878,415 | ||||||
Deferred revenue | 1,678,890 | 2,149,885 | ||||||
Stock to be issued | - | 400,000 | ||||||
Lease liability, current portion | 91,387 | 81,825 | ||||||
Current liabilities from discontinued operations | 483,841 | 420,850 | ||||||
Total current liabilities | 3,793,617 | 5,179,570 | ||||||
Lease liability, non-current portion | 372,208 | 434,938 | ||||||
Other long-term liabilities | 100,000 | 100,000 | ||||||
Deferred tax liability | 120,707 | 162,360 | ||||||
Total liabilities | 4,386,532 | 5,876,868 | ||||||
Commitments and contingencies | - | - | ||||||
Stockholders’ Equity | ||||||||
Common stock, $ | par value; shares authorized, shares and shares issued as of September 30, 2022 and December 31, 2021, and and shares outstanding as of September 30, 2022 and December 31, 2021.184,093 | 160,673 | ||||||
Additional paid in capital | 100,606,407 | 98,440,172 | ||||||
Accumulated other comprehensive (loss) income | (14,604 | ) | 6,565 | |||||
Accumulated deficit | (97,351,520 | ) | (95,779,817 | ) | ||||
Treasury stock, at cost; | shares at September 30, 2022 and shares at December 31, 2021(552,562 | ) | (37,117 | ) | ||||
Total Professional Diversity Network, Inc. stockholders’ equity | 2,871,814 | 2,790,476 | ||||||
Noncontrolling interest | (190,783 | ) | 317,429 | |||||
Total stockholders’ equity | 2,681,031 | 3,107,905 | ||||||
Total liabilities and stockholders’ equity | $ | 7,067,563 | $ | 8,984,773 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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)
2022 | 2021 | 2022 | 2021 | |||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Revenues: | ||||||||||||||||
Membership fees and related services | $ | 152,462 | $ | 240,048 | 509,906 | 764,470 | ||||||||||
Recruitment services | 1,165,213 | 1,368,440 | 3,839,608 | 3,695,205 | ||||||||||||
Product sales and other | 757,492 | 19,010 | 1,882,452 | 19,010 | ||||||||||||
Consumer advertising and marketing solutions | 39,328 | 55,517 | 130,916 | 149,347 | ||||||||||||
Total revenues | 2,114,495 | 1,683,015 | 6,362,882 | 4,628,032 | ||||||||||||
Costs and expenses: | ||||||||||||||||
Cost of revenues | 1,228,542 | 346,525 | 3,022,657 | 867,726 | ||||||||||||
Sales and marketing | 759,885 | 525,820 | 2,179,136 | 1,826,319 | ||||||||||||
General and administrative | 1,003,956 | 873,504 | 2,468,934 | 3,303,143 | ||||||||||||
Depreciation and amortization | 232,748 | 29,668 | 746,057 | 88,351 | ||||||||||||
Total costs and expenses | 3,225,131 | 1,775,517 | 8,416,784 | 6,085,539 | ||||||||||||
Loss from continuing operations | (1,110,636 | ) | (92,502 | ) | (2,053,902 | ) | (1,457,507 | ) | ||||||||
Other income (expense) | ||||||||||||||||
Interest and other income | (10,083 | ) | 2,393 | (19,519 | ) | 5,128 | ||||||||||
Other income (expense), net | (10,083 | ) | 2,393 | (19,519 | ) | 5,128 | ||||||||||
Loss before income tax expense (benefit) | (1,120,719 | ) | (90,109 | ) | (2,073,421 | ) | (1,452,379 | ) | ||||||||
Income tax expense (benefit) | (25,479 | ) | (1,724 | ) | (35,720 | ) | (18,767 | ) | ||||||||
Loss from continuing operations, net of tax | (1,095,240 | ) | (88,385 | ) | (2,037,701 | ) | (1,433,612 | ) | ||||||||
Loss from discontinued operations | (13,319 | ) | (10,714 | ) | (42,213 | ) | (71,800 | ) | ||||||||
Net loss including non-controlling interests | $ | (1,108,559 | ) | $ | (99,099 | ) | (2,079,914 | ) | (1,505,412 | ) | ||||||
Net loss attributable to non-controlling interests | 149,059 | 18,537 | 508,212 | 18,537 | ||||||||||||
Net loss attributable to Professional Diversity Network, Inc. | $ | (959,500 | ) | $ | (80,562 | ) | (1,571,702 | ) | (1,486,875 | ) | ||||||
Other comprehensive loss, net of tax: | ||||||||||||||||
Net loss attributable to Professional Diversity Network, Inc. | $ | (959,500 | ) | $ | (80,562 | ) | (1,571,702 | ) | (1,486,875 | ) | ||||||
Foreign currency translation adjustments | (10,787 | ) | (799 | ) | (21,169 | ) | (289,452 | ) | ||||||||
Comprehensive loss, net of tax | $ | (970,287 | ) | $ | (81,361 | ) | (1,592,871 | ) | (1,776,327 | ) | ||||||
Loss per share attributable to Professional Diversity Network, Inc., basic and diluted: | ||||||||||||||||
Continuing operations | $ | (0.07 | ) | $ | (0.01 | ) | (0.13 | ) | (0.10 | ) | ||||||
Discontinued operations | $ | - | $ | - | - | (0.01 | ) | |||||||||
Net loss attributable to Professional Diversity Network, Inc. | $ | (0.07 | ) | $ | (0.01 | ) | (0.13 | ) | (0.11 | ) | ||||||
Weighted average shares outstanding: | ||||||||||||||||
Basic and diluted | 16,922,988 | 15,115,167 | 16,390,563 | 13,830,777 |
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)
Accumulated | ||||||||||||||||||||||||||||||||||||
Additional | Other | Noncontrolling | Total | |||||||||||||||||||||||||||||||||
Common Stock | Paid in | Accumulated | Treasury Stock | Comprehensive | Interests in | Stockholders’ | ||||||||||||||||||||||||||||||
Shares | Amount | Capital | Deficit | Shares | Amount | Income (Loss) | Subsidiary | Equity | ||||||||||||||||||||||||||||
Balance at January 1, 2022 | 16,067,252 | $ | 160,673 | $ | 98,440,172 | $ | (95,779,818 | ) | 1,048 | $ | (37,117 | ) | $ | 6,565 | $ | 317,429 | $ | 3,107,905 | ||||||||||||||||||
Issuance of common stock | 2,006,504 | 20,065 | 1,729,935 | - | - | - | - | - | 1,750,000 | |||||||||||||||||||||||||||
Share-based compensation | 335,525 | 3,355 | 436,300 | - | - | - | - | - | 439,655 | |||||||||||||||||||||||||||
Stock Buyback Plan | - | - | - | - | 579,884 | (515,445 | ) | - | - | (515,445 | ) | |||||||||||||||||||||||||
Translation adjustments | - | - | - | - | - | - | (21,169 | ) | (21,169 | ) | ||||||||||||||||||||||||||
Net loss | - | - | - | (1,571,702 | ) | - | - | - | (508,212 | ) | (2,079,914 | ) | ||||||||||||||||||||||||
Balance at September 30, 2022 | 18,409,281 | $ | 184,093 | $ | 100,606,407 | $ | (97,351,520 | ) | 580,932 | $ | (552,562 | ) | $ | (14,604 | ) | $ | (190,783 | ) | 2,681,031 |
Accumulated | ||||||||||||||||||||||||||||||||||||
Additional | Other | Noncontrolling | Total | |||||||||||||||||||||||||||||||||
Common Stock | Paid in | Accumulated | Treasury Stock | Comprehensive | Interests in | Stockholders’ | ||||||||||||||||||||||||||||||
Shares | Amount | Capital | Deficit | Shares | Amount | Income (Loss) | Subsidiary | 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 | 2,919,355 | 29,194 | 4,249,256 | - | - | - | - | - | 4,278,451 | |||||||||||||||||||||||||||
Issuance of common stock | 279,054 | 2,791 | 163,709 | - | - | - | - | - | 166,500 | |||||||||||||||||||||||||||
Share-based compensation | - | - | 435,915 | - | - | - | - | - | 435,915 | |||||||||||||||||||||||||||
Adjustment from discontinued operations | - | - | (2,591,724 | ) | - | - | - | - | - | (2,591,724 | ) | |||||||||||||||||||||||||
Noncontrolling interest in subsidiary | - | - | - | - | - | - | - | 510,184 | 510,184 | |||||||||||||||||||||||||||
Translation adjustments | - | - | - | - | - | - | (289,452 | ) | - | (289,452 | ) | |||||||||||||||||||||||||
Net loss | - | - | - | (1,486,875 | ) | - | - | - | (18,537 | ) | (1,505,412 | ) | ||||||||||||||||||||||||
Balance at September 30, 2021 | 16,018,252 | $ | 160,183 | $ | 98,242,246 | $ | (94,509,710 | ) | 1,048 | $ | (37,117 | ) | $ | 3,054 | $ | 491,647 | 4,350,293 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
Professional Diversity Network, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
2022 | 2021 | |||||||
Nine Months Ended September 30, | ||||||||
2022 | 2021 | |||||||
Cash flows from operating activities: | ||||||||
Loss from continuing operations | $ | (2,037,701 | ) | $ | (1,433,612 | ) | ||
Adjustments to reconcile net loss from continuing operations to net cash used in operating activities - continuing operations: | ||||||||
Depreciation and amortization | 746,057 | 88,351 | ||||||
Deferred tax benefit | (35,720 | ) | (18,347 | ) | ||||
Amortization of right-of-use asset | (6,827 | ) | 68,540 | |||||
Stock-based compensation expense | 439,655 | 435,914 | ||||||
Litigation settlement reserve | (908,564 | ) | 75,000 | |||||
Reduction of merchant reserve | 350,000 | 380,000 | ||||||
Changes in operating assets and liabilities, net of effects of discontinued operations: | ||||||||
Accounts receivable | 492,553 | (379,828 | ) | |||||
Prepaid expenses and other current assets | (277,312 | ) | 103,263 | |||||
Incremental direct costs | - | 10,845 | ||||||
Accounts payable | 168,630 | (441,603 | ) | |||||
Accrued expenses | 146,490 | (150,649 | ) | |||||
Deferred revenue | (470,995 | ) | 102,381 | |||||
Net cash used in operating activities - continuing operations | (1,393,734 | ) | (1,159,745 | ) | ||||
Net cash used in operating activities - discontinued operations | (5,633 | ) | (33,443 | ) | ||||
Net cash used in operating activities | (1,399,367 | ) | (1,193,188 | ) | ||||
Cash flows from investing activities: | ||||||||
Costs incurred to develop technology | (17,085 | ) | (28,663 | ) | ||||
Purchases of property and equipment | (13,477 | ) | (37,282 | ) | ||||
Payments for investment deposits | - | (350,000 | ) | |||||
Acquisition of equity interest in RemoteMore USA, Inc. | - | (863,333 | ) | |||||
Net cash used in investing activities | (30,562 | ) | (1,279,278 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from the sale of common stock | - | 4,444,950 | ||||||
Repurchases of common stock | (515,445 | ) | - | |||||
Net cash (used in) provided by financing activities | (515,445 | ) | 4,444,950 | |||||
Effect of exchange rate fluctuations on cash and cash equivalents | 5,635 | 2,420 | ||||||
Net (decrease) increase in cash and cash equivalents | (1,939,739 | ) | 1,974,904 | |||||
Cash, cash equivalents, beginning of period | 3,402,697 | 2,117,569 | ||||||
Cash and cash equivalents, end of period | 1,462,958 | 4,092,473 | ||||||
Supplemental disclosures of other cash flow information: | ||||||||
Cash paid for income taxes | $ | - | $ | - |
The accompanying notes are an integral part of these condensed consolidated financial statements.
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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 accounting principles generally accepted in the United States of America (“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 GAAP for complete financial statements. The accompanying condensed consolidated financial statements include all adjustments, which consist of normal recurring adjustments and transactions or events discretely impacting the interim periods, considered necessary by management to fairly state our results of operations, financial position and cash flows. The operating results for interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year. These condensed consolidated financial statements should be read in conjunction with the audited condensed consolidated financial statements and notes thereto included in our 2021 Form 10-K.
Professional Diversity Network, Inc. (“the Company”, “PDN, Inc.”, “we,” “our,” or “us,”) 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:
The NAPW Network is an exclusive women-onlya networking organization for professional networking organization,women, whereby its members can develop their professional networks, further their education and skills, and promote their business and career accomplishments. NAPW provides its members with opportunities to network and develop valuable business relationships with other professionals through its website, as well as at virtual and in-person events hosted at its local chapters across the country. Noble Voice monetizes its consumer transactions by using proprietary technology
RemoteMore USA is an innovative, global entity that provides remote-hiring marketplace services for developers and companies. RemoteMore connects companies with reliable, cost-efficient, vetted developers, and empowers software developers to drive inexpensive online trafficfind meaningful jobs regardless of their location.
In March 2020, our Board of Directors decided 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, 2017,2022, the Company’s principal sources of liquidity were its cash and cash equivalents and the net proceeds from the closings of the CFL Transaction (as defined in Note 7).
The Company had an accumulated deficit of approximately $65,123,000$(97,351,520) at September 30, 2017.2022. During the three and nine months ended September 30, 2022, the Company generated a loss from continuing operations, net of tax, of $(1,095,240) and $(2,037,701). During the nine months ended September 30, 2017,2022, the Company generated a net loss of approximately $17,665,000 (including a goodwill impairment charge of $9,920,000), 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.$1,393,734. At September 30, 2017,2022, the Company had a cash balance of approximately $2,822,000.$1,462,958. Total revenues were approximately $4,422,000 $6,363,000 and $6,360,000 $4,628,000 for the nine months ended September 30, 2022 and 2021. Total revenues were approximately $2,114,000 and $1,683,000for the three months ended September 30, 20172022 and 2016, respectively, and approximately $15,321,000 and $20,554,000 for the nine months ended September 30, 2017 and 2016, respectively.2021. The Company had a working capital surplus from continuing operations of approximately ($1,475,000)$128,000 and $1,000,000 $834,000at September 30, 20172022 and December 31, 2016, respectively.
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Management believes that its available funds cash on hand and cash generatedflow from operations willshould be sufficient to meet itsour working capital requirements at leastfor the fiscal period ending December 31, 2022, however in order to accomplish our business plan objectives, the Company will need to continue its cost reduction efforts, increase revenues, and raise capital through November 2018. However, therethe issuance of common stock, or through a strategic merger or acquisition. 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 effectuaterequire an acceleration of plans to conserve liquidity. Future efforts to raise additional fundsimprove liquidity through the issuance of our common stock may not be successful, or if available, they may not be available on acceptable terms, if at all.
3. Summary of Significant Accounting Policies
Basis of Presentation
Use of Estimates
– The preparation ofSignificant estimates underlying the financial statements includeinclude: the fair value of acquired assets and liabilities associated with acquisitions;acquisitions, the assessment of goodwill for impairment, other intangible assets and long-lived assets for impairment;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.
Principles of Consolidation
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 September 30, 2022 and December 31, 2021, the allowance for doubtful accounts was approximately $129,000 and $247,000, respectively.
Other Receivables– Other receivables represents amounts that are owed to the Company that are not considered trade receivables. The Company periodically reviews its other receivables for credit risk to determine whether an allowance is necessary 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 September 30, 2022 and December 31, 2021, the balance in other receivables as reported on the consolidated balance sheets was deemed collectible.
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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 nine months ended September 30, 2022 and 2021 was approximately $7,000 and $24,000 and for three months ended September 30, 2022 and 2021 was approximately $2,000 and $6,000, and is recorded in depreciation and amortization expense in the accompanying condensed 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.
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 interim condensed consolidated statements of operations. (See Note 4 – Business Combinations.)
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.
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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 consolidated statement of operations and comprehensive loss for the nine months ended September 30, 2017.
Revenue Recognition
–Revenue is recognized when all of the following conditions exist: (1) persuasive evidence of an arrangement exists, (2) services are performed, (3) the sales price is fixed or determinable, and (4) collectability is reasonably assured.Deferred revenue includes customer payments which are received prior to performing services and Related Services
Discontinued Operations
China Operations
The Company previously disclosed in this plan may cancel their membershipits 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 had engaged in the program at any time and receivecriminal 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 the seizure of PDN China’s assets had been lifted in March 2020. However, 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 partial refund (amount remainingjudgment in deferred revenue) or due to consumer protection legislation, a full refund based on the policiesfavor of the member’s credit card company.
The Company has asserted its claim to these services are recognizedfunds as revenue at the timegenuine owner to the on-line profile is completeChinese officials and press release is distributed.
All historical operating results for the Company’s agreements through single and multiple job postings, recruitment media, talent recruitment communities, basic and premier corporate memberships, hiring campaign marketing and advertising, e-newsletter marketing and research and outreach services. Recruitment revenue includes revenue recognized from direct sales to customers for recruitment services and events, as well as revenue from the Company’s direct e-commerce sales. Direct sales to customers are most typically a twelve month 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 month that the event takes place and e-commerce sales are for one month job postings and the revenue from those sales are recognized in the month the sale is made. Our recruitment services mainly consist of the following products:
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Assets and Training
Operating Results of Discontinued Operations
The Company works with its business partners to provide education and training seminars to business people in China. Revenuesfollowing table represents the components of operating results from discontinued operations, which are recognizedincluded in the month whenstatements of operations and comprehensive loss for the seminar takes place.
Schedule of Operating Results of Discontinued Operations
2022 | 2021 | 2022 | 2021 | |||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Revenues | $ | - | $ | - | $ | - | $ | - | ||||||||
General, administrative and other expenses | (13,319 | ) | (10,713 | ) | (42,213 | ) | (71,800 | ) | ||||||||
Loss from discontinued operations before income tax | (13,319 | ) | (10,713 | ) | (42,213 | ) | (71,800 | ) | ||||||||
Income tax expense (benefit) | - | - | - | - | ||||||||||||
Net loss from discontinued operations | $ | (13,319 | ) | $ | (10,713 | ) | $ | (42,213 | ) | $ | (71,800 | ) |
Advertising and Marketing Expenses
– Advertising and marketing expenses are expensed as incurred or the first time the advertising takes place. The production costs of advertising are expensed the first time the advertising takes place. For the three and nine months ended September 30,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 (“ASC 740”), 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.
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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 September 30, 2022. 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, 2018 through 2021.
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 September 30, 2022.
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.
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 |
2022 | 2021 | |||||||
As of September 30, | ||||||||
2022 | 2021 | |||||||
Warrants to purchase common stock | - | 125,000 | ||||||
Stock options | 46,126 | 26,126 | ||||||
Unvested restricted stock | 138,228 | 159,524 | ||||||
Total dilutive securities | 184,354 | 310,650 |
Reclassifications - Certain prior year amounts in the Consolidated Statements of Operations and Comprehensive Loss have been reclassified to conform with the current year presentation.
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. InJune 2016, the FASB issued additional ASUs that clarifyASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The main objective of this update is to provide financial statement users with more decision-useful information about the implementation guidanceexpected credit losses on principal versus agent considerations (ASU 2016-08), on identifying performance obligations and licensing (ASU 2016-10), and on narrow-scope improvements and practical expedients (ASU 2016-12) as well as on the revenue recognition criteriafinancial instruments and other technical corrections (ASU 2016-20). The Company will adopt the standard on January 1, 2018, using the full retrospective transition method, which may result incommitments to extend credit held by a cumulative-effect adjustment for deferred revenue to the opening balance sheet for 2018 and the restatement of the financial statements for all prior periods presented. The Company continues to evaluate the impact of adoption ofreporting entity at each reporting date. To achieve this standard on its consolidated financial statements and disclosures.
4. Business Combinations
On September 20, 2021, the Company acquired a 45.62% interest in RemoteMore, a software developer recruiting company, for an estimated total purchase price of $1,363,333, paying $863,333 in cash and $500,000 to be paid within one year, or until certain factors of the agreement are met. The acquisition is expected to significantly grow the Company’s revenues and recruiting platform and also included bringing onboard Boris Krastev and Boris Borisov, the co-founders of RemoteMore.
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The purchase price allocation as of the date of the acquisition was based on a detailed analysis about the fair value of assets acquired. No liabilities were assumed. The major classes of assets to which we have allocated the purchase price were as follows:
Schedule of Company Measurement
Goodwill | $ | 935,334 | ||
Intangible assets | 427,999 | |||
Business combination total | $ | 1,363,333 |
The goodwill recognized in connection with the acquisition is primarily attributable to anticipated synergies from future growth and is expected to be deductible for tax purposes.
Intangible assets purchased in connection with the acquisition primarily represent contracts acquired, and to a lesser extent trademarks, and are reflected in the Company’s consolidated balance sheets at gross amounts, net of accumulated amortization (see Note 7 – Intangible Assets).
Operations for RemoteMore are included in the Company’s consolidated financial statements at gross amounts as the Company has significant influence in the way RemoteMore operates. The 54.38% interest retained by the seller are included in the Company’s consolidated financial statements as noncontrolling interest. For the three and nine months ended September 30, 2022, RemoteMore generated consolidated amounts of approximately $757,000 and $1,882,000 of revenues and incurred approximately $1,034,000 and $2,802,000 of operating costs, inclusive of amortization expense associated with the aforementioned intangible assets of approximately $205,000 and $667,000, for a loss before income taxes of approximately $277,000 and $945,000, respectively. For the period September 20, 2021 (acquisition date) through September 31, 2021, RemoteMore generated consolidated amounts of approximately $19,000 of revenues and incurred approximately $53,000 of operating costs, for a loss before income taxes of approximately $34,000.
RemoteMore was incorporated in December 2020 and did not begin operations until on or about July 1, 2021. From January 1, 2021, through the acquisition date of September 20, 2021, revenues and expenses would have been deemed immaterial to the Company’s consolidated financial statements.
In February 2022, in connection with the September 2021 acquisition of the 45.62% interest in RemoteMore USA, Inc., and as a component of the aforementioned $500,000 still to be paid, the Company issued shares of its common stock, with a value of $400,000, to the co-founders of RemoteMore. The Company still retains the option to purchase up to an additional 20% interest in RemoteMore for the remaining approximately $100,000.
5. Revenue Recognition
The Company recognizes revenue under the core principle of ASC 606 – Revenue from Contracts with Customers (“ASC 606”), 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 contracts with customers may provide for multiple promised goods and services. The Company typically analyzes the contract and identifies the performance obligations by evaluating whether the promised goods and services are capable of being distinct within the context of the contract at contract inception. Promised goods and services that are not distinct at contract inception are combined. The next step after identifying the performance obligations is determining the transaction price, which includes the impact of variable consideration, based on contractually fixed amounts and an estimation of variable consideration. The Company allocates the transaction price to each performance obligation based on relative stand-alone selling price. Judgment is exercised to determine the stand-alone selling price of each distinct performance obligation. The Company estimates the stand-alone selling price by reference to the total transaction price less the sum of the observable stand-alone selling prices of other goods or services promised in the contract. In general, transaction price is determined by estimating the fixed amount of consideration to which we are entitled for transfer of goods and services and all relevant sources and components of variable consideration. Revenues are generally recognized when control of the promised goods or services is transferred to their customers either at a point in time or over time, in an amount that reflects the consideration it expects to be entitled to in exchange for those goods or services.
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Many of the Company’s contracts have one performance obligation and all consideration is allocated to that performance obligation and recognized at a point in time contemporaneous when the service is performed or with the date of the event.
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.
Nature of Goods and Services
The following is a description of principal activities from which the Company generates its revenue:
Recruitment Services
The Company’s recruitment services revenue is derived from the Company’s agreements through single and multiple job postings, recruitment media, talent recruitment communities, basic and premier corporate memberships, hiring campaign marketing and advertising, e-newsletter marketing and research and outreach services. Recruitment revenue includes revenue recognized from direct sales to customers for recruitment services and events, as well as revenue from the Company’s direct e-commerce sales. Direct sales to customers are most typically a twelve-month 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 NAACP, 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; and |
● | Diversity executive staffing services. |
Membership Fees and Related Services
Membership fees are typically month to month; however, members may prepay for a 12-month period. Memberships are collected up-front and member benefits become available immediately. At the time of enrollment, membership fees are recorded as deferred revenue and are recognized as revenue ratably over the membership period. Members who are enrolled in 12-month 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.
Monthly membership revenues are recognized in the same month 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.
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 condensed consolidated statements of operations.
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Contracted Software Development
Revenues for RemoteMore are generated from providing customized software solutions to customers and are recognized in the period work is performed.
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.
Revenue Concentration
The Company is in an alliance with another company to build, host, and manage the Company’s job boards and website. This alliance member also sells two of the Company’s recruitment services products and bills customers, collects fees, and provides customer services. For the nine months ended September 30, 2022 and 2021, the Company recorded approximately 11.5% and 10.2% of its recruitment services revenue from this alliance sales relationship.
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 14 - Segment Information.
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 September 30, 2022.
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 $1,679,000 are included in current deferred revenues, on the condensed consolidated balance sheets as of September 30, 2022. For the period ended September 30, 2022, we recognized revenue associated with contract liabilities of approximately $1,315,000 that were included in the contract liabilities balance at the beginning of the period.
Deferred revenue includes customer payments which are received prior to performing services and revenues are recognized upon the completion of these services. Annual membership fees collected at the time of enrollment are recognized as revenue ratably over the membership period, which are typically for a 12-month membership period.
Transaction price allocated to the remaining 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 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 that forms part of a single performance obligation in accordance with the series guidance.
The typical duration of all event related and other 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 have an original expected duration of one year or less.
15 |
6. Capitalized Technology
Capitalized technology,Technology, net is as follows:
September 30, 2017 | December 31, 2016 | |||||||
Capitalized cost: | ||||||||
Balance, beginning of period | $ | 1,888,791 | $ | 1,888,791 | ||||
Additional capitalized cost | 122,597 | - | ||||||
Balance, end of period | $ | 2,011,388 | $ | 1,888,791 | ||||
Accumulated amortization: | ||||||||
Balance, beginning of period | $ | 1,715,423 | $ | 1,432,268 | ||||
Provision for amortization | 154,392 | 283,155 | ||||||
Balance, end of period | $ | 1,869,815 | $ | 1,715,423 | ||||
Capitalized Technology, net | $ | 141,573 | $ | 173,368 |
Schedule of approximately $41,000 and $62,000 forCapitalized Technology
September 30, 2022 | December 31, 2021 | |||||||
Capitalized cost: | ||||||||
Balance, beginning of period | $ | 43,038 | $ | 25,867 | ||||
Additional capitalized cost | 17,085 | 49,970 | ||||||
Provision for amortization | (15,593 | ) | (32,799 | ) | ||||
Balance, end of period | $ | 44,530 | $ | 43,038 |
For the three months ended September 30, 20172022 and 2016, respectively,2021, amortization expense was approximately $6,100 and $9,500, and was approximately $154,000$15,600 and $216,000$28,400 for the nine months ended September 30, 20172022 and 2016, respectively,2021, and is recorded in depreciation and amortization expense in the accompanying statements of operations.
7. Intangible Assets
Intangible assets, net was as follows:
Schedule of Intangible Assets
Useful Lives | Gross Carrying | Accumulated | Net Carrying | |||||||||||||
September 30, 2022 | (Years) | Amount | Amortization | Amount | ||||||||||||
Long-lived intangible assets: | ||||||||||||||||
Sales Process | 10 | $ | 2,130,956 | $ | (1,978,541 | ) | $ | 152,415 | ||||||||
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 | 442,500 | (440,833 | ) | 1,667 | |||||||||||
Contracts acquired in RemoteMore acquisition | 3-12 months | 935,683 | (935,683 | ) | - | |||||||||||
13,046,792 | (12,892,710 | ) | 154,082 | |||||||||||||
Indefinite-lived intangible assets: | ||||||||||||||||
Trade name | 90,400 | |||||||||||||||
Intangible assets, net | $ | 244,482 |
Useful Lives | Gross Carrying | Accumulated | Net Carrying | |||||||||||||
December 31, 2021 | (Years) | Amount | Amortization | Amount | ||||||||||||
Long-lived intangible assets: | �� | |||||||||||||||
Sales Process | 10 | $ | 2,130,956 | $ | (1,921,386 | ) | $ | 209,570 | ||||||||
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 | 442,500 | (440,208 | ) | 2,292 | |||||||||||
Contracts acquired in RemoteMore acquisition | 3-12 months | 935,683 | (269,664 | ) | 666,019 | |||||||||||
13,046,792 | (12,168,911 | ) | 877,881 | |||||||||||||
Indefinite-lived intangible assets: | ||||||||||||||||
Trade name | 90,400 | |||||||||||||||
Intangible assets, net | $ | 968,281 |
16 |
As of September 30, 2022, estimated amortization expense in future fiscal years is summarized as follows:
Schedule of Future Annual Estimated Amortization Expense
Year ended December 31, | ||||
Remaining of 2022 | $ | 19,260 | ||
2023 | 77,041 | |||
2024 | 57,781 | |||
Net Carrying Amount | $ | 154,082 |
For the three months ended September 30, 2022 and 2021, amortization expense was approximately $225,000 and $19,000, and for the nine months ended September 30, 2022 and 2021 amortization expense was approximately $724,000 and $57,000, and is recorded in depreciation and amortization expense in the accompanying condensed consolidated statements of operationsoperations.
8. Long-term Investments
On September 27, 2022, the Company entered into a Stock Purchase Agreement (the “SPA”) with Koala Malta Limited, a private limited liability company registered under the laws of Malta (the “Seller”).
Upon the execution of the SPA, the Company purchased 65,700 issued ordinary shares of Koala Crypto Limited (“KCL”) from Seller, representing 9 percent of the total issued share capital of KCL, and comprehensive loss.
September 30, 2017 | Useful Lives (Years) | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | ||||||||||||
Long-lived intangible assets: | ||||||||||||||||
Sales Process | 10 | $ | 3,970,000 | $ | (1,196,514 | ) | $ | 2,773,486 | ||||||||
Paid Member Relationships | 5 | 890,000 | (536,472 | ) | 353,528 | |||||||||||
Member Lists | 5 | 8,957,000 | (5,399,081 | ) | 3,557,919 | |||||||||||
Developed Technology | 3 | 978,000 | (959,666 | ) | 18,334 | |||||||||||
Trade Name/Trademarks | 4 | 480,000 | (359,861 | ) | 120,139 | |||||||||||
Customer Relationships | 5 | 280,000 | (158,667 | ) | 121,333 | |||||||||||
$ | 15,555,000 | $ | (8,610,261 | ) | 6,944,739 | |||||||||||
Indefinite-lived intangible assets: | ||||||||||||||||
Trade Name | 90,400 | |||||||||||||||
Intangible assets, net | $ | 7,035,139 |
December 31, 2016 | Useful Lives (Years) | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | ||||||||||||
Long-lived intangible assets: | ||||||||||||||||
Sales Process | 10 | $ | 3,970,000 | $ | (898,764 | ) | $ | 3,071,236 | ||||||||
Paid Member Relationships | 5 | 890,000 | (402,972 | ) | 487,028 | |||||||||||
Member Lists | 5 | 8,957,000 | (4,055,531 | ) | 4,901,469 | |||||||||||
Developed Technology | 3 | 978,000 | (718,166 | ) | 259,834 | |||||||||||
Trade Name/Trademarks | 4 | 480,000 | (269,861 | ) | 210,139 | |||||||||||
Customer Relationships | 5 | 280,000 | (116,667 | ) | 163,333 | |||||||||||
$ | 15,555,000 | $ | (6,461,961 | ) | 9,093,039 | |||||||||||
Indefinite-lived intangible assets: | ||||||||||||||||
Trade Name | 90,400 | |||||||||||||||
Intangible assets, net | $ | 9,183,439 |
Years ending December 31, | ||||
2017 (three months) | $ | 653,933 | ||
2018 | 2,563,872 | |||
2019 | 1,846,697 | |||
2020 | 397,000 | |||
2021 | 397,000 | |||
2022 | 397,000 | |||
Thereafter | 689,237 | |||
$ | 6,944,739 |
Upon execution of the SPA, the Company, the Seller and amortization expenseKCL also entered into a Shareholders’ Agreement. The Shareholders’ Agreement imposes certain transfer restrictions on the Seller and the Company as shareholders of KCL, provides for certain governance and approval rights among the parties, and gives the Company a put option with respect to its investment in KCL in the accompanying condensed consolidated statementsevent of operationsa change of control of the Seller. At the same time, Alan Tak Wai Yau, an individual and comprehensive loss.
9. Commitments and Contingencies
Lease Obligations
As of September 30, 20172022, right of use assets and 2016, respectively,related lease obligations were $381,311 and $463,595, as recorded on the Company’s condensed consolidated balance sheets.
17 |
Other - PDN China’s bank account with a balance of approximately $811,000 and $808,000 for the nine months ended$195,000, at September 30, 2017 and 2016, respectively, is included in general and administrative expense in2022, was frozen by Guangzhou Police due to the condensed consolidated statements of operations and comprehensive loss. Included in rent expense is sublease income of approximately $96,000 and $90,000 for the three months ended September 30, 2017 and 2016, respectively, and approximately $288,000 and $279,000 for the nine months ended September 30, 2017 and 2016, respectively.
Legal Proceedings
The Company and its wholly-ownedwholly owned subsidiary, NAPW, Inc., are parties to a proceeding captioned In reDeborah Bayne, et al. vs. NAPW, Inc. and Professional Diversity Network, Cases 31-CA-159810 and 31-CA-162904,Inc., No. 18-cv-3591 (E.D.N.Y.), filed with the National Labor Relations Board (“NLRB”) inon June 201520, 2018, and alleging violations of the NationalFair Labor RelationsStandards Act (“NLRA”) against the Company and its wholly-owned subsidiary, NAPW, Inc., where employee was allegedly terminated for asserting rights under Section 7certain provisions of the NLRA. While theNew York Labor Law. Plaintiffs are seeking monetary damages and equitable relief. The Company disputes that it or its subsidiary violated the applicable laws or that either entity has any rights were impacted,liability and intends to vigorously defend against these claims. The matter is in the NLRB has issued its order requiringfinal stages of discovery, and we have completed depositions of relevant witnesses. During the first quarter of 2020, the Company to take certain remedial actionsrecorded a $450,000 litigation settlement reserve in the formevent of posting notices and revising certain policies, as well as to payan unfavorable outcome in this proceeding. In November 2020, both parties entered into mediation proceedings, but a settlement was not reached. While the claimant certain back pay and offer reinstatement. The CompanyCOVID-19 pandemic has complied with the order in all respects except back pay and reinstatement. The Company disputes the amount of back pay owedcaused delays to the claimant and disputeslitigation, it is expected that reinstatement is appropriate underthese delays will decrease as the circumstances and an evidentiary hearing on the issue of back pay is currently scheduled for January of 2018. The amount of back pay and other potential liabilities ordered by NLRB is $146,000.
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.
18 |
10. 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 $ per share (the “Common Stock”), such that CFL would 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 transaction.
As of September 30, 2022, CFL beneficially holds shares of the Company’s outstanding Common Stock equal to approximately 27.9%. The Amendment increaseddecrease in CFL’s percentage of the cap onCompany’s total outstanding common stock is a result of dilution from other equity offerings.
11. Stockholders’ Equity
Preferred Stock – The Company has no preferred stock issued. The Company’s amended and restated certificate of incorporation and amended and restated bylaws include provisions that allow the amountCompany’s Board of Directors to issue, without further action by the stockholders, up to 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 . As of September 30, 2022, the Company or pursuant to a tender or exchange offer for anyhad shares of common stock from 51%outstanding.
In February 2022, in connection with the September 2021 acquisition of the then45.62% interest in RemoteMore USA, Inc., and as a component of the $500,000 to be paid within one year, the Company issued shares of its common stock, with a value of $400,000, to the co-founders of RemoteMore (see Note 4 – Business Combinations).
In September 2022, in connection with the acquisition of a 9% interest in Koala Crypto Limited the Company issued shares of its common stock to Seller in a private placement (the “Consideration Shares”). The Consideration Shares were valued at $1,350,000 (see Note 8 – Long-term Investments).
Stock Buyback Plan – The Company has a share repurchase program (“Stock Buyback Plan”) under which it is authorized to purchase up to $2.0 million of its outstanding common shares. The timing and amount of any shares repurchased under the Stock Buyback Plan will depend on a variety of factors, including price, corporate and regulatory requirements, capital availability and other market conditions. The Stock Purchase Plan may be suspended or discontinued at any time without prior notice. Repurchases may also be made under a plan meeting the requirements of Rule 10b5-1 under the Securities Exchange Act of 1934, which would permit shares to be repurchased when the Company might otherwise be precluded from doing so under insider trading laws. Any repurchased shares will be available for use in connection with its stock plans and for other corporate purposes. No shares have been or will be knowingly purchased from Company insiders or their affiliates. Since inception of the Stock Buyback Plan through September 30, 2022, the Company has purchased shares of its common shares, for a total of approximately $515,000 at an average cost of approximately $ per share (excluding commissions). Transactions occurred in open market purchases and pursuant to a trading plan under Rule 10b5-1. At September 30, 2022, the Company has approximately $1,485,000 repurchase authority remaining under the current Stock Buyback Plan.
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. Through a series of amendments to the 2013 Plan, the number of authorized shares available for issuance of common stock under the Plan is shares.
19 |
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,number of highly complex and subjective variables. These variables include, but are not limited to, 54.64%expected stock price volatility over the term of the then outstanding shares of commonawards, and actual and projected employee stock option exercise behaviors. The risk-free rate is based on a fully-diluted basis. The Amendment also clarifies that the 312,500 shares of common stock purchased by CFL in the Second Share Issuance are subject to all of the restrictions contained in the Stockholders’ Agreement, as amended. All other terms and conditions of the Stockholders’ Agreement remain in full force and effect and were ratified and affirmed by the parties in the Amendment.
Forfeitures are required to be estimated at the time of grant and revised, if necessary, in a $213,000 and $624,000 income tax benefit, respectively. subsequent periods if actual forfeitures differ from those estimates.
Schedule of Stock Option Activity
Weighted | ||||||||||||||||
Average | ||||||||||||||||
Weighted | Remaining | |||||||||||||||
Average | Contractual | Aggregate | ||||||||||||||
Number of | Exercise | Life | Intrinsic | |||||||||||||
Options | Price | (in Years) | Value | |||||||||||||
Outstanding - January 1, 2022 | 66,126 | $ | 4.52 | $ | - | |||||||||||
Granted | - | - | - | - | ||||||||||||
Exercised | - | - | - | - | ||||||||||||
Forfeited | - | - | - | - | ||||||||||||
Outstanding - September 30 2022 | 66,126 | $ | 4.52 | $ | - | |||||||||||
Exercisable at September 30, 2022 | 46,126 | $ | 5.57 | $ | - |
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 | $ | - | |||||||||||
Granted | 30,000 | 2.10 | ||||||||||||||
Exercised | - | - | - | |||||||||||||
Forfeited | (30,000 | ) | 3.69 | - | ||||||||||||
Outstanding - September 30 2021 | 66,126 | $ | 4.52 | $ | - | |||||||||||
Exercisable at September 30, 2021 | 36,126 | $ | 6.53 | $ | - |
Total unrecognized stock-based compensation expense related to unvested stock options at September 30, 2022 was 6.2%approximately $ and 25.7%, respectively, resulting inis expected to be recognized through the second quarter of 2024.
Warrants
As of September 30, 2022 and December 31, 2021, there were no warrants outstanding or exercisable.
20 |
Restricted Stock Units
Schedule of Restricted Stock Award Activity
Number of | ||||
Shares | ||||
Outstanding - January 1, 2022 | 159,525 | |||
Granted | 341,874 | |||
Forfeited | (27,646 | ) | ||
Vested | (335,525 | ) | ||
Outstanding - September 30, 2022 | 138,228 |
Number of | ||||
Shares | ||||
Outstanding - January 1, 2021 | 233,875 | |||
Granted | 59,525 | |||
Forfeited | - | |||
Vested | (133,875 | ) | ||
Outstanding - September 30, 2021 | 159,525 |
During the effective income tax rate for the three monthsperiod ended September 30, 2017, compared2022, the Company granted restricted stock units (“RSUs”) to a newly appointed non-employee director as partial compensation for his service as a director. The aggregate grant date fair value of the combined awards amounted to approximately $ . The RSU awards to the three monthsboard members fully vest on the one-year anniversary after the date of grant. Also during the period ended September 30, 2016, is mainly attributable2022, RSUs were forfeited due to a departure of a non-employee director.
In June 2022, the Company granted
RSUs to non-employee directors as partial compensation for their service as a director. The aggregate grant date fair value of the combined awards amounted to approximately $ . . The Company also granted RSU’s to certain officers and managers with immediate vesting. The aggregate grant date fair value of the combined awards amounted to approximately $ .During the period ended September 30, 2020, the Company granted changeCompany’s Chief Executive Officer. . The differenceaggregate grant date fair value of the combined awards amounted to approximately $ . RSUs to the
The Company recorded non-cash stock-based compensation expense of $effective income tax rateaccompanying consolidated statements of operations for the nine months ended September 30, 2017, compared2022 and 2021, respectively, pertaining to granting of restricted stock awards. and $ as a component of general and administrative expenses in the
Total unrecognized stock-based compensation expense related to unvested restricted stock at September 30, 2022 was approximately $ and is expected to be recognized through the second quarter of 2023.
13. 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, 2022 and 2021, the Company recorded income tax benefit of $25,479 and $1,724, respectively. For the nine months ended September 30, 2016, is mainly attributable2022 and 2021, the Company recorded a benefit for income tax of $35,720 and $18,767. The increase in income tax benefit during the current three-month and nine-month periods, as compared to the impairment charge recognized on NAPW’s goodwill and the changesame periods in the valuation allowance. prior year, was primarily due to an increase in discrete tax items and changes in the Company’s net operating losses.
21 |
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred income tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based on the consideration of these items, management has determined that enough uncertainty exists relative to the realization of the deferred income tax asset balances to warrant the application of a valuation allowance as of September 30, 2017 and December 31, 2016.
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 | $ | - |
14. 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 September 30, 2022 and December 31, 2021 and results of operations for the three and nine months ended September 30, 20172022 and 2016:
Three Months Ended September 30, 2017 | ||||||||||||||||||||
United States | ||||||||||||||||||||
PDN Network | NAPW Network | Noble Voice | China Operations | Consolidated | ||||||||||||||||
Membership fees and related services | $ | - | $ | 2,204,909 | $ | - | $ | - | $ | 2,204,909 | ||||||||||
Lead generation | - | - | 1,370,465 | - | 1,370,465 | |||||||||||||||
Recruitment services | 694,454 | - | - | - | 694,454 | |||||||||||||||
Products sales and other | - | 18,285 | - | - | 18,285 | |||||||||||||||
Education and training | - | - | - | 68,890 | 68,890 | |||||||||||||||
Consumer advertising and marketing solutions | 65,188 | - | - | - | 65,188 | |||||||||||||||
Total revenues | 759,642 | 2,223,194 | 1,370,465 | 68,890 | 4,422,191 | |||||||||||||||
Loss from operations | (249,017 | ) | (1,651,322 | ) | (448,310 | ) | (362,004 | ) | (2,710,653 | ) | ||||||||||
Depreciation and amortization | 13,213 | 740,489 | 49,754 | 3,442 | 806,898 | |||||||||||||||
Income tax expense (benefit) | (17,311 | ) | (123,091 | ) | (29,688 | ) | (43,043 | ) | (213,133 | ) | ||||||||||
Net loss | (217,589 | ) | (1,528,231 | ) | (418,622 | ) | (323,643 | ) | (2,488,085 | ) | ||||||||||
Capital expenditures | 93,676 | - | (5,575 | ) | 12,356 | 100,457 |
Schedule of Segment Information
Network | Network | RemoteMore | Overhead | Consolidated | ||||||||||||||||
Three Months Ended September 30, 2022 | ||||||||||||||||||||
PDN | NAPW | Corporate | ||||||||||||||||||
Network | Network | RemoteMore | Overhead | Consolidated | ||||||||||||||||
Membership fees and related services | $ | - | $ | 152,462 | $ | - | $ | - | $ | 152,462 | ||||||||||
Recruitment services | 1,165,213 | - | - | - | 1,165,213 | |||||||||||||||
Contracted software development | - | - | 757,492 | - | 757,492 | |||||||||||||||
Consumer advertising and marketing solutions | 39,328 | - | - | - | 39,328 | |||||||||||||||
Total revenues | 1,204,541 | 152,462 | 757,492 | - | 2,114,495 | |||||||||||||||
Income (loss) from continuing operations | (77,907 | ) | (261,132 | ) | (266,161 | ) | (505,436 | ) | (1,110,636 | ) | ||||||||||
Depreciation and amortization | 7,475 | 19,597 | 205,676 | - | 232,748 | |||||||||||||||
Income tax expense (benefit) | (1,895 | ) | (10,410 | ) | - | (13,174 | ) | (25,479 | ) | |||||||||||
Net income (loss) from continuing operations | (74,971 | ) | (250,689 | ) | (277,318 | ) | (492,262 | ) | (1,095,240 | ) |
As of September 30, 2022 | ||||||||||||||||||||
Goodwill | $ | 339,451 | $ | - | $ | 935,334 | $ | - | $ | 1,274,785 | ||||||||||
Intangibles assets, net | 90,400 | 152,415 | 1,667 | - | 244,482 | |||||||||||||||
Assets from continuing operations | 6,577,544 | 504,675 | (216,457 | ) | - | 6,865,762 |
Network | NAPW Network | RemoteMore | Overhead | Consolidated | ||||||||||||||||
Three Months Ended September 30, 2021 | ||||||||||||||||||||
PDN | NAPW | Corporate | ||||||||||||||||||
Network | Network | RemoteMore | Overhead | Consolidated | ||||||||||||||||
Membership fees and related services | $ | - | $ | 240,048 | $ | - | $ | - | $ | 240,048 | ||||||||||
Recruitment services | 1,368,440 | - | - | - | 1,368,440 | |||||||||||||||
Contracted software development | - | - | 19,010 | - | 19,010 | |||||||||||||||
Consumer advertising and marketing solutions | 55,517 | - | - | - | 55,517 | |||||||||||||||
Total revenues | 1,423,957 | 240,048 | 19,010 | - | 1,683,015 | |||||||||||||||
Income (loss) from continuing operations | 692,356 | (167,696 | ) | (34,488 | ) | (582,674 | ) | (92,502 | ) | |||||||||||
Depreciation and amortization | 5,875 | 23,793 | - | - | 29,668 | |||||||||||||||
Income tax (benefit) expense | 7,406 | (2,276 | ) | - | (6,854 | ) | (1,724 | ) | ||||||||||||
Net loss from continuing operations | 687,343 | (165,421 | ) | (34,488 | ) | (575,820 | ) | (88,385 | ) |
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 |
As of December 31, 2021 | ||||||||||||||||||||
Goodwill | $ | 339,451 | $ | - | $ | 935,334 | $ | - | $ | 1,274,785 | ||||||||||
Intangibles assets, net | 90,400 | 209,570 | 668,311 | - | 968,281 | |||||||||||||||
Assets from continuing operations | 7,596,499 | 684,881 | 501,198 | - | 8,782,578 |
Network | Network | RemoteMore | Overhead | Consolidated | ||||||||||||||||
Nine Months Ended September 30, 2022 | ||||||||||||||||||||
PDN | NAPW | Corporate | ||||||||||||||||||
Network | Network | RemoteMore | Overhead | Consolidated | ||||||||||||||||
Membership fees and related services | $ | - | $ | 509,906 | $ | - | $ | - | $ | 509,906 | ||||||||||
Recruitment services | 3,839,608 | - | - | - | 3,839,608 | |||||||||||||||
Contracted software development | - | - | 1,882,452 | - | 1,882,452 | |||||||||||||||
Consumer advertising and marketing solutions | 130,916 | - | - | - | 130,916 | |||||||||||||||
Total revenues | 3,970,524 | 509,906 | 1,882,452 | - | 6,362,882 | |||||||||||||||
Income (loss) from continuing operations | 372,156 | 257,213 | (919,883 | ) | (1,763,388 | ) | (2,053,902 | ) | ||||||||||||
Depreciation and amortization | 20,589 | 58,556 | 666,912 | - | 746,057 | |||||||||||||||
Income tax expense (benefit) | 15,983 | (4,769 | ) | - | (46,934) | (35,720 | ) | |||||||||||||
Net income (loss) from continuing operations | 361,489 | 262,192 | (944,928 | ) | (1,716,454 | ) | (2,037,701 | ) |
Network | Other | RemoteMore | Overhead | Consolidated | ||||||||||||||||
Nine Months Ended September 30, 2021 | ||||||||||||||||||||
PDN | Corporate | |||||||||||||||||||
Network | Other | RemoteMore | Overhead | Consolidated | ||||||||||||||||
Membership fees and related services | $ | - | $ | 764,470 | $ | - | $ | - | $ | 764,470 | ||||||||||
Recruitment services | 3,695,205 | - | - | - | 3,695,205 | |||||||||||||||
Contracted software development | - | - | 19,010 | - | 19,010 | |||||||||||||||
Consumer advertising and marketing solutions | 149,347 | - | - | - | 149,347 | |||||||||||||||
Total revenues | 3,844,552 | 764,470 | 19,010 | - | 4,628,032 | |||||||||||||||
Income (loss) from continuing operations | 1,298,391 | (585,575 | ) | (34,488 | ) | (2,135,833 | ) | (1,457,507 | ) | |||||||||||
Depreciation and amortization | 9,472 | 78,879 | - | - | 88,351 | |||||||||||||||
Income tax expense (benefit) | 16,837 | (8,011 | ) | - | (27,593 | ) | (18,767 | ) | ||||||||||||
Net income (loss) from continuing operations | 1,286,681 | (577,565 | ) | (34,488 | ) | (2,108,240 | ) | (1,433,612 | ) |
15. Subsequent Events
The Company evaluateshas evaluated subsequent events and transactions that occur afterthrough the balance sheet date up to the date that the condensed consolidated financial statements were issued for potential recognition or disclosure. The Company did not identify any subsequent events that would have required adjustment or disclosure in the consolidated financial statements.
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ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Basis of our financial condition and results of operationsPresentation
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 2021 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“Note Regarding Forward-Looking Statements” for additional information regarding forward-looking statements used insection of 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+(LGBTQ+).
We currently operate in fourthree business segments: (i) Professional Diversitysegments. PDN Network, (“ PDN Network ”), whichour primary business segment, includes online professional networkingjob seeking communities with career resources tailored to the needs of various diverse cultural groups and employers looking to hire members of such groups, (ii) National Associationgroups. Our second business segment consists of Professional Women (“the NAPW Network, ”), a women-only professional networking organization, (iii) Noble Voice operations (“ Noble Voice ”), a career consultationorganization. Our third business segment consists of RemoteMore, which connects companies with reliable, cost-efficient developers with less effort and lead generation service,friction, and (iv) China operations ( “China Operations” ), which focus on providing tools, products and services in China which will assist women, students and business professionals in personal and professional development.
We believe that the combination of our solutions allows us to approach recruiting and professional networking in a unique way and thus create enhanced value for our members and customers.customers by:
● | Helping employers address their workforce diversity needs by connecting them with the right candidates from our diverse job seeking communities such as African Americans, Hispanics, Asians, Veterans, individuals with disabilities and members of the LGBTQ+ community (with the ability to roll out to our other affinities); | |
● | Providing a robust online and in-person network for our women members to make professional and personal connections; and | |
● | Connecting companies with reliable, cost-efficient developers to meet their software needs. |
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 impacted our ability to host in-person events associated with our NAPW Network and we had to use alternative methods such as virtual events to conduct our events. In October 2022, the NAPW network held a hybrid event that consisted of both in-person and virtual participants. In 2023, the NAPW network plans on continuing to hold hybrid events, where applicable.
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, and may have an adverse effect on our business and financial performance.
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In response to mandates and recommendations from federal, state and local authorities, as well as decisions we have made to protect the health and safety of our employees with respect to the COVID-19 pandemic, we temporarily closed our offices and had our employees work remotely. We reopened our offices on April 4, 2022, with a hybrid work schedule. 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 further material impact on our sales and profits. The COVID-19 pandemic could also adversely affect our liquidity and ability to access the capital markets. Uncertainty regarding the duration of the COVID-19 pandemic may adversely impact our ability to raise additional capital, or require additional capital, or require additional reductions in capital expenditures that are otherwise needed to implement our strategies.
Sources of Revenue
We generate revenue from (i) paid membership subscriptions and related services, (ii) lead generation, (iii) recruitment services, (iv) product sales, (v) education(iii) contracted software development, and training and (vi)(iv) consumer advertising and consumer marketing solutions. The following table sets forth our revenues from each 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 | % |
Nine Months Ended September 30, | ||||||||
2022 | 2021 | |||||||
Revenues: | ||||||||
Membership fees and related services | 8.0 | % | 16.4 | % | ||||
Recruitment services | 60.3 | % | 79.9 | % | ||||
Contracted software development | 29.6 | % | 0.5 | % | ||||
Consumer advertising and marketing solutions | 2.1 | % | 3.2 | % |
Membership SubscriptionsFees and Related Services
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,Contracted Software Development. RemoteMore generates revenue constituted approximately 91.4% and 95.0%, respectively, of revenue attributableby providing contracted programmers 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.assist customers with their software solutions through customized software development.
25 |
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.Cost of Revenue
Cost of revenue primarily consists of data and related costs to generate leads for our Noble Voice customers, costs of producing job fair and other events, revenue sharing with partner organizations, costs of producing education and training events, and costs of web hosting and operating our websites for the PDN Network. Costs of producing wall plaques, hosting member conferences and local chapter meetings are also included in the cost of revenue for NAPW Network. Costs of paying outside developers are included in the cost of revenue for RemoteMore.
Nine Months Ended September 30, | ||||||||
2022 | 2021 | |||||||
Cost of revenues: | ||||||||
PDN Network | 37.2 | % | 86.1 | % | ||||
NAPW Network | 7.4 | % | 13.9 | % | ||||
RemoteMore | 55.4 | % | 0.0 | % |
Results of Operations
Revenues
Total Revenues
The following tables set forth our revenue for the periods presented. The period-to-period comparison of financial results is not necessarily indicative of future results.
Three Months Ended September 30 | Change | Change | ||||||||||||||
2022 | 2021 | (Dollars) | (Percent) | |||||||||||||
(in thousands) | ||||||||||||||||
Revenues: | ||||||||||||||||
Membership fees and related services | $ | 153 | $ | 241 | $ | (88 | ) | (36.5 | )% | |||||||
Recruitment services | 1,166 | 1,368 | (202 | ) | (14.8 | )% | ||||||||||
Contracted software development | 757 | 19 | 738 | 3884.2 | % | |||||||||||
Consumer advertising and marketing solutions | 39 | 55 | (16 | ) | (29.1 | )% | ||||||||||
Total revenues | $ | 2,115 | $ | 1,683 | $ | 432 | 25.7 | % |
Total revenues for the three months ended September 30, 2022 increased approximately $432,000, or 25.7%, to approximately $2,115,000 from approximately $1,683,000 during the same period in the prior year. The increase was predominately attributable to approximately $738,000 of contracted software development related to RemoteMore, as compared to the same period in the prior year. Partially offsetting the increase were decreases in the period in recruitment services revenues of approximately $202,000 and an approximate $88,000 decrease in membership fees and related services revenues, as compared to the same period in the prior year.
Nine Months Ended September 30 | Change | Change | ||||||||||||||
2022 | 2021 | (Dollars) | (Percent) | |||||||||||||
(in thousands) | ||||||||||||||||
Revenues: | ||||||||||||||||
Membership fees and related services | $ | 510 | $ | 765 | $ | (255 | ) | (33.3 | )% | |||||||
Recruitment services | 3,840 | 3,695 | 145 | 3.9 | % | |||||||||||
Contracted software development | 1,882 | 19 | 1,863 | 9805.3 | % | |||||||||||
Consumer advertising and marketing solutions | 131 | 149 | (18 | ) | (12.1 | )% | ||||||||||
Total revenues | $ | 6,363 | $ | 4,628 | $ | 1,735 | 37.5 | % |
26 |
Total revenues for the quarter and nine months ended September 30, 2017,2022 increased approximately $1,735,000, or 37.5%, to approximately $6,363,000 from approximately $4,628,000 during the same period in the prior year. The increase was predominately attributable to an approximate $1,863,000 of contracted software development related to RemoteMore, as compared to the same period in the prior year. Also contributing to the increase in the period was an increase in recruitment services revenues of approximately $145,000, partially offset by an approximate $255,000 decrease in membership fees and related services revenues, as compared to the same period in the prior year.
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 | ||||||||||||||
2022 | 2021 | (Dollars) | (Percent) | |||||||||||||
(in thousands) | ||||||||||||||||
PDN Network | $ | 1,206 | $ | 1,424 | $ | (218 | ) | (15.3 | )% | |||||||
NAPW Network | 152 | 240 | (88 | ) | (36.7 | )% | ||||||||||
RemoteMore | 757 | 19 | 738 | 3884.2 | % | |||||||||||
Total revenues | $ | 2,115 | $ | 1,683 | $ | 432 | 25.7 | % |
During the three months ended September 30, 2022, our PDN Network generated approximately $1,206,000 in revenues compared to approximately $1,424,000 in revenues during the three months ended September 30, 2021, a decrease of approximately $218,000 or 15.3 percent. The decrease in revenues was primarily driven by event revenues of approximately $117,000 due to there being 2 fewer local and 1 fewer national events as compared to the same period in the prior year, and approximately $104,000 decline in other diversity recruitment initiatives by our clients.
During the three months ended September 30, 2022, NAPW Network revenues were approximately $152,000, compared to revenues of approximately $240,000 during the same period in the prior year, a decrease of approximately $88,000 or 36.7 percent. The decrease in revenues was primarily due to an approximate $75,000 decrease in renewal membership revenue and approximately $30,000 in new member revenue, as compared to the same period in the prior year. We believe that the membership services that we experienced lossesprovide to our customers continues to represent a discretionary spending item and the services that we provide were postponed by the consumer as we continueda result of the financial and economic impact of COVID-19 and the current economy.
During the three months ended September 30, 2022, RemoteMore revenue was approximately $757,000, compared to revenues of approximately $19,000 during the same period in the prior year, an increase of approximately $738,000. This is due to the current period having a full three months of operations versus the same period in 2021 which only had 10 days of operations from the acquisition date of September 20, 2021.
Nine Months Ended September 30, | Change | Change | ||||||||||||||
2022 | 2021 | (Dollars) | (Percent) | |||||||||||||
(in thousands) | ||||||||||||||||
PDN Network | $ | 3,971 | $ | 3,845 | $ | 126 | 3.3 | % | ||||||||
NAPW Network | 510 | 764 | (254 | ) | (33.2 | )% | ||||||||||
RemoteMore | 1,882 | 19 | 1,863 | 9805.3 | % | |||||||||||
Total revenues | $ | 6,363 | $ | 4,628 | $ | 1,735 | 37.5 | % |
During the nine months ended September 30, 2022, our effortsPDN Network generated approximately $3,971,000 in revenues compared to integrateapproximately $3,845,000 in revenues during the nine months ended September 30, 2021, an increase of approximately $126,000 or 3.3 percent. The increase in revenues was primarily driven by job placement commissions of approximately $163,000, slightly offset by the diversity recruitment initiatives of our clients of approximately $37,000.
During the nine months ended September 30, 2022, NAPW Network revenues were approximately $510,000, compared to revenues of approximately $764,000 during the same period in the prior year, a decrease of approximately $254,000 or 33.2 percent. The decrease in revenues was primarily due to an approximate $204,000 decrease in renewal membership revenue and an approximate decrease of $68,000 in new managementmember revenue, as compared to the same period in the prior year. Partially offsetting the decrease was approximately $18,000 related to other revenue.
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During the nine months ended September 30, 2022, RemoteMore revenue was approximately $1,882,000, compared to revenues of approximately $19,000 during the same period in the prior year, an increase of approximately $1,863,000. This is due to the current period having a full nine months of operations versus the same period in 2021 which only had 10 days of operations from the acquisition date of September 20, 2021.
Costs and China Operations, reduceExpenses
The following tables set forth our costs and streamline our business. 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 | ||||||||||||||
2022 | 2021 | (Dollars) | (Percent) | |||||||||||||
(in thousands) | ||||||||||||||||
Cost and expenses: | ||||||||||||||||
Cost of revenues | $ | 1,229 | $ | 347 | $ | 882 | 254.2 | % | ||||||||
Sales and marketing | 760 | 526 | 234 | 44.5 | % | |||||||||||
General and administrative | 1,003 | 873 | 130 | 15.0 | % | |||||||||||
Depreciation and amortization | 233 | 29 | 204 | 703.4 | % | |||||||||||
Total pre-tax cost and expenses: | $ | 3,225 | $ | 1,775 | $ | 1,450 | 81.8 | % |
Nine Months Ended September 30, | Change | Change | ||||||||||||||
2022 | 2021 | (Dollars) | (Percent) | |||||||||||||
(in thousands) | ||||||||||||||||
Cost and expenses: | ||||||||||||||||
Cost of revenues | $ | 3,023 | $ | 868 | $ | 2,155 | 248.3 | % | ||||||||
Sales and marketing | 2,179 | 1,826 | 353 | 19.3 | % | |||||||||||
General and administrative | 2,469 | 3,303 | (834 | ) | (25.2 | )% | ||||||||||
Depreciation and amortization | 746 | 88 | 658 | 747.7 | % | |||||||||||
Total pre-tax cost and expenses: | $ | 8,417 | $ | 6,085 | $ | 2,332 | 38.3 | % |
Cost of revenues: Cost of revenues during the three months ended September 30, 2022 was approximately $1,229,000, an increase of approximately $882,000, or 254.2 percent, from approximately $347,000 during the same period of the prior year. The increase was predominately attributed to approximately $666,000 of contracted software development costs related to RemoteMore, for which there was no material comparable activity in the same period of the prior year. Also contributing to the increase was approximately $216,000 of costs as a direct result of increased revenues.
Cost of revenues during the nine months ended September 30, 2022 was approximately $3,023,000, an increase of approximately $2,155,000, or 248.3 percent, from approximately $868,000 during the same period of the prior year. The increase was predominately attributed to approximately $1,675,000 of contracted software development costs related to RemoteMore, for which there was no material comparable activity in the same period of the prior year. Also contributing to the increase was approximately $480,000 of costs as a direct result of increased revenues.
Sales and marketing expense: Sales and marketing expense during the three months ended September 30, 2022 was approximately $760,000, an increase of approximately $234,000, or 44.5 percent, from $526,000 during the same period in the prior year.
28 |
Sales and marketing expense during the nine months ended September 30, 2022 was approximately $2,179,000, an increase of approximately $353,000, or 19.3 percent, from $1,826,000 during the same period in the prior year.
General and administrative expense: General and administrative expenses increased by approximately $130,000, or 15.0 percent, to approximately $1,003,000 during the three months ended September 30, 2022, as compared to the same period in the prior year. The increase was predominately due to expenses related to RemoteMore of approximately $79,000, $58,000 in mergers and acquisition expenses, bad debt expense of $48,000 and property rent costs of $26,000, and various other purchased services of approximately $17,000, as compared to the same period in the prior year. Offsetting the increase were decreases in share-based compensation of approximately $92,000, and credit card fees of approximately $22,000, primarily due to a change in credit card processors.
General and administrative expenses decreased by approximately $834,000, or 25.2 percent, to approximately $2,469,000 during the nine months ended September 30, 2022, as compared to the same period in the prior year. The decrease was predominately due to settlement of litigation resulting in a one-time, non-cash gain of approximately $908,000, a result of reductions of comparable payroll related costs of approximately $260,000, of which approximately $58,000 related to discretionary incentive payments made in the prior year as compared to the current period, and $54,000 related to credit card fees, primarily due to a change in credit card processors. Also contributing to the decrease were reductions in other legal expenses and litigation charges of $193,000. Offsetting the reduction in expenses were increases in charges related to RemoteMore of approximately $340,000, property rent costs of approximately $79,000, various other general and administrative expenses of $85,000, and accounting expenses of $77,000.
Depreciation and amortization expense: Depreciation and amortization expense during the three months ended September 30, 2022 was approximately $233,000, an increase of approximately $204,000, compared to approximately $29,000 during the same period in the prior year. The increase was primarily attributable to approximately $205,000 of amortization expense related to RemoteMore’s intangible assets, for which there were no comparable charges in the same period of the prior year, partially offset by assets and intangible assets reaching the end of their useful lives.
Depreciation and amortization expense during the nine months ended September 30, 2022 was approximately $746,000, an increase of approximately $658,000, compared to approximately $88,000 during the same period in the prior year. The increase was primarily attributable to approximately $667,000 of amortization expense related to RemoteMore’s intangible assets, for which there were no comparable charges in the same period of the prior year, partially offset by assets and intangible assets reaching the end of their useful lives.
Costs and Expenses by Segment
The following table sets forth each operating segment’s costs and expenses for the periods presented. The period-to-period comparison is not necessarily indicative of future results.
Three Months Ended September 30, | Change | Change | ||||||||||||||
2022 | 2021 | (Dollars) | (Percent) | |||||||||||||
(in thousands) | ||||||||||||||||
PDN Network | $ | 1,282 | 732 | 550 | 75.1 | % | ||||||||||
NAPW Network | 414 | 408 | 6 | 1.5 | % | |||||||||||
RemoteMore | 1,024 | 52 | 972 | 1869.2 | % | |||||||||||
Corporate Overhead | 505 | 583 | (78 | ) | (13.4 | )% | ||||||||||
Total costs and expenses: | $ | 3,225 | $ | 1,775 | $ | 1,450 | 81.7 | % |
29 |
Nine Months Ended September 30, | Change | Change | ||||||||||||||
2022 | 2021 | (Dollars) | (Percent) | |||||||||||||
(in thousands) | ||||||||||||||||
PDN Network | $ | 3,599 | 2,546 | 1,053 | 41.3 | % | ||||||||||
NAPW Network | 253 | 1,350 | (1,097 | ) | (81.3 | )% | ||||||||||
RemoteMore | 2,802 | 53 | 2,749 | 5186.8 | % | |||||||||||
Corporate Overhead | 1,763 | 2,136 | (373 | ) | (17.5 | )% | ||||||||||
Total costs and expenses: | $ | 8,417 | $ | 6,085 | $ | 2,332 | 38.3 | % |
For the three months ended September 30, 2017, we realized2022, costs and expenses related to our PDN Network segment increased by approximately $550,000, or 75.1%, as compared to the same period in the prior year. The increase is primarily as a net lossresult of increases of approximately $
For the nine months ended September 30, 2017,2022, costs and expenses related to our PDN Network segment increased by approximately $1,052,000, or 41.3%, as compared to the same period in the prior year. The increase is primarily as a result of approximately $418,000 of sales and marketing costs driving the aforementioned increased revenues, general and administrative and other costs of approximately $412,000, and approximately $206,000 related to costs of revenues and as compared to the same period in the prior year.
For the three months ended September 30, 2022, costs and expenses related to the NAPW Network increased by approximately $6,000, or 1.5 percent. The increase is primarily as result of approximately $33,000 of sales and marketing costs and approximately $29,000 related to costs of revenues, as compared to the same period in the prior year. Substantially offsetting the increase was a decrease in general and administrative and other costs of approximately $51,000.
For the nine months ended September 30, 2022, costs and expenses related to the NAPW Network decreased by approximately $1,097,000, or 81.3 percent. The decrease in the period is predominately due to settlement of litigation resulting in a one-time, non-cash gain of approximately $908,000 and reductions of approximately $234,000 of payroll related costs, predominately as a result of cost containment initiatives implemented in the prior year. Partially offsetting the decrease were increases of approximately $104,000 in costs of revenues due to increased conference expenses and member benefits in an effort to increase future revenues, and approximately $61,000 in sales and marketing costs, as compared to the same period in the prior year.
For the three months ended September 30, 2022, cost and expenses related to RemoteMore was approximately $1,024,000, an increase of approximately $972,000, as compared to the same period in the prior year, predominately consisting of contractor costs of approximately $666,000, amortization of intangibles of approximately $205,000, and other operating costs of approximately $150,000, as compared to the same period of the prior year.
For the nine months ended September 30, 2022, cost and expenses related to RemoteMore was approximately $2,802,000, an increase of approximately $2,749,000, as compared to the same period in the prior year, predominately consisting of contractor costs of approximately $1,675,000, amortization of intangibles of approximately $667,000, and other operating costs of approximately $460,000, as compared to the same period of the prior year.
30 |
For the three months ended September 30, 2022, costs and expenses related to Corporate Overhead decreased by approximately $77,000, or 13.2 percent, as compared to the same period in the prior year. The reduction is primarily as a result of decreases in legal costs of approximately $43,000, stock-based compensation costs of approximately $92,000, and other miscellaneous state taxes and filing fees by approximately $45,000. Partially offsetting the reductions were mergers and acquisitions costs of $58,000, payroll related costs of approximately $32,000, and other various costs of approximately $13,000, as compared to the same period in the prior year.
For the nine months ended September 30, 2022, costs and expenses related to Corporate Overhead decreased by approximately $373,000, or 17.5 percent, as compared to the same period in the prior year. The reduction is primarily as a result of decreases in legal expenses of approximately $178,000, payroll related costs by approximately $101,000, of which $57,000 related to discretionary incentive payments made in the prior year for which there were no comparable charges in the current period, and other miscellaneous state taxes and filing fees by approximately $191,000. Partially offsetting the reductions were professional and other services of approximately $77,000, and other various costs of approximately $20,000, as compared to the same period in the prior year.
Income Tax Benefit
Three Months Ended September 30, | Change | Change | ||||||||||||||
2022 | 2021 | (Dollars) | (Percent) | |||||||||||||
(in thousands) | ||||||||||||||||
Income tax expense (benefit) | $ | (26 | ) | $ | (2 | ) | $ | (24 | ) | 1200.0 | % |
Nine Months Ended September 30, | Change | Change | ||||||||||||||
2022 | 2021 | (Dollars) | (Percent) | |||||||||||||
(in thousands) | ||||||||||||||||
Income tax expense (benefit) | $ | (36 | ) | $ | (19 | ) | $ | (17 | ) | 89.5 | % |
During the three months ended September 30, 2022 and 2021, we realizedrecorded income tax benefits of approximately $26,000 and $2,000. The increase in income tax benefit during the current period was primarily due to changes in discrete tax items and in the Company’s net operating losses.
During the nine months ended September 30, 2022 and 2021, we recorded income tax benefits of approximately $36,000 and $19,000. The increase in income tax benefit during the current period was primarily due to changes in discrete tax items and in the Company’s net operating losses.
Net loss from Continuing Operations
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 | ||||||||||||||
2022 | 2021 | (Dollars) | (Percent) | |||||||||||||
(in thousands) | ||||||||||||||||
PDN Network | $ | (75 | ) | 688 | (763 | ) | (110.9 | )% | ||||||||
NAPW Network | (251 | ) | (166 | ) | (85 | ) | (51.2 | )% | ||||||||
RemoteMore | (277 | ) | (34 | ) | (243 | ) | (714.7 | )% | ||||||||
Corporate Overhead | (492 | ) | (576 | ) | 84 | 14.6 | % | |||||||||
Consolidated net loss from continuing operations | $ | (1,095 | ) | $ | (88 | ) | $ | (1,007 | ) | (1144.3 | )% |
31 |
Nine Months Ended September 30, | Change | Change | ||||||||||||||
2022 | 2021 | (Dollars) | (Percent) | |||||||||||||
(in thousands) | ||||||||||||||||
PDN Network | $ | 361 | 1,287 | (926 | ) | (72.0 | )% | |||||||||
NAPW Network | 262 | (578 | ) | 840 | 145.3 | % | ||||||||||
RemoteMore | (945 | ) | (34 | ) | (911 | ) | 2679.4 | % | ||||||||
Corporate Overhead | (1,716 | ) | (2,108 | ) | 392 | 18.6 | % | |||||||||
Consolidated net loss from continuing operations | $ | (2,038 | ) | $ | (1,433 | ) | $ | (605 | ) | (42.2 | )% |
Consolidated Net Loss from Continuing Operations. As the result of the factors discussed above, during the three months ended September 30, 2022, we incurred a net loss of approximately $
Discontinued Operations
In March 2020, our Board decided to suspend all China operations generated by the former CEO, Michael Wang. The results of operations for China operations are presented in the statements of operation and comprehensive loss as loss from discontinued operations.
Operating Results of Discontinued Operations
The following table represents the components of operating results from discontinued operations, which are included in the statements of operations and comprehensive loss for the three and nine months ended September 30, 2022 and 2021:
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Revenues | $ | - | $ | - | - | - | ||||||||||
General, administrative and other expenses | (13 | ) | (11 | ) | (42 | ) | (72 | ) | ||||||||
Loss from discontinued operations before income tax | (13 | ) | (11 | ) | (42 | ) | (72 | ) | ||||||||
Income tax expense (benefit) | - | - | - | - | ||||||||||||
Net loss from discontinued operations | $ | (13 | ) | $ | (11 | ) | (42 | ) | (72 | ) |
32 |
Liquidity and Capital Resources
The following table summarizes our liquidity and capital resources as of September 30, 2022 and December 31, 2021:
September 30, 2022 | December 31, 2021 | |||||||
(in thousands) | ||||||||
Cash and cash equivalents | $ | 1,463 | $ | 3,403 | ||||
Working capital (deficiency) | $ | (351 | ) | $ | 418 |
Our principal sources of liquidity are our cash and cash equivalents, including net proceeds from the issuances of common stock, if any. As of September 30, 2022, we had cash and cash equivalents of $1,462,958 compared to cash and cash equivalents of $3,402,697 at December 31, 2021. We had an accumulated deficit of $(97,351,520) at September 30, 2022. During the nine months ended September 30, 2022, we generated a net loss from continuing operations of $(2,037,701). During the nine months ended September 30, 2022, the Company entered intoused cash in continuing operations of $1,393,734.
We continue to focus on our overall profitability by reducing operating and overhead expenses. We have continued to generate negative cash flows from operations, and we expect to incur net losses for the foreseeable future, especially considering the negative impact COVID-19, the global economic impacts of the Russian invasion of Ukraine and the recessionary and inflationary environments has had and may continue on our liquidity and financial position. These conditions raise substantial doubt about our ability to continue as a stock purchase agreement (the “Purchase Agreement”)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 condensed consolidated financial statements do not include any adjustments that might be necessary if we unable to continue as a going concern.
We are closely monitoring operating costs and capital requirements. Our Management continues to contain and reduce costs, including terminating non-performing employees and eliminating certain positions, replacing and negotiating with Cosmic Forward Ltd. (“CFL”), pursuantcertain vendors, and implementing technology to which,reduce manual time spent on routine operations. 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.
While we believe that our cash and cash equivalents at September 30, 2022 and cash flow from operations should be sufficient to meet our working capital requirements for the Company agreedfiscal year ending December 31, 2022, beyond that time frame our available funds and cash flow from operations may not be sufficient to issuemeet our working capital requirements without the need to increase revenues or raise capital by the issuance of common stock. There can be no assurances that our business plans and sellactions will be successful, that we will generate anticipated revenues, or that unforeseen circumstances similar to CFL (the “Second Share Issuance”),COVID-19 will not require additional funding sources in the future or require an acceleration of plans to conserve liquidity. Future efforts to raise additional funds may not be successful or they may not be available on acceptable terms, if at all.
Our PDN Network sells recruitment services to employers, generally on a 30-to-60-day period or a one-year contract basis. This revenue is also deferred and CFL agreedrecognized over the period of the contract. Our payment terms for PDN Network customers range from 30 to purchase, at a price of $9.60 per share (the “Per Share Price”), upon60 days. We consider the difference between the payment terms and subjectpayment receipts a result of transit time for invoice and payment processing and to the conditions set forth in the Purchase Agreement, 312,500 shares of the Company’s common stock. On January 18, 2017, the Company consummated the Second Share Issuance. Asdate have not experienced any liquidity issues as a result of the completionpayments extending past the specified terms. Our NAPW Network collects membership fees generally at the commencement of the Second Share Issuance, as of January 18, 2017, CFL beneficially owned 54.64%membership term or at renewal periods thereafter. The memberships we sell are for one year and we defer recognition of the Company’s outstanding sharesrevenue from membership sales and renewals and recognize it ratably over the twelve-month period. We also offer monthly membership for IAW USA for which we collect a fee on a monthly basis. RemoteMore generates revenue by providing contracted programmers to assist customers with their software solutions through customized software development. Customers are charged for the period the work is performed and payment terms are typically net 10 days.
33 |
Nine Months Ended September 30, | ||||||||
2022 | 2021 | |||||||
Cash provided by (used in) continued operations | (in thousands) | |||||||
Operating activities | $ | (1,394 | ) | $ | (1,160 | ) | ||
Investing activities | (31 | ) | (1,279 | ) | ||||
Financing activities | (515 | ) | 4,445 | |||||
Effect of exchange rate fluctuations on cash and cash equivalents | 6 | 2 | ||||||
Cash provided by (used in) discontinued operations | (6 | ) | (33 | ) | ||||
Net increase (decrease) in cash and cash equivalents | $ | (1,940 | ) | $ | 1,975 |
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 and may consist 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. As of September 30, 2022 and December 31, 2021, cash and cash equivalents consisted of cash on deposit with banks and investments in money market funds.
Net Cash Used in Operating Activities
Net cash used in operating activities from continuing operations during the nine months ended September 30, 2022, was approximately $1,394,000. We had a net loss from continuing operations of approximately $2,038,000 during the nine months ended September 30, 2022, which included a non-cash litigation settlement reserve of approximately $909,000, stock-based compensation expense of approximately $440,000, depreciation and amortization expense of approximately $746,000, which was partially offset by deferred tax benefit of approximately $36,000 and amortization of right-of-use assets of approximately $8,000. We received $350,000 in cash resulting in a decrease of our Merchant Reserve. Changes in operating assets and liabilities provided approximately $60,000 of cash during the nine months ended September 30, 2022, consisting primarily of decreases in accounts receivable, accounts payable and accrued expenses, partially offset by increases in prepaid expenses and deferred revenues.
Net cash used in operating activities from continuing operations during the nine months ended September 30, 2021, was approximately $1,160,000. We had a net loss of approximately $1,435,000 during the nine months ended September 30, 2021, which included a stock-based compensation expense of approximately $436,000, depreciation of amortization expense of $88,000 and amortization of right-of-use assets of $69,000, which was partially offset by deferred tax benefit of approximately $17,000. Changes in operating assets and liabilities used approximately $755,000 of cash during the nine months ended September 30, 2021, consisting primarily of increases in accounts receivable, accounts payable, deferred revenue and accrued expenses, partially offset by decreases in deferred revenue.
Net Cash Used in Investing Activities
Net cash used in investing activities from continuing operations during the nine months ended September 30, 2022, was approximately $31,000, which consisted of investments in developed technology and computer equipment purchases.
Net cash used in investing activities from continuing operations during the nine months ended September 30, 2021, was $1,279,000, which consisted of payments for investment deposits of $60,000 and $21,000 related to computer equipment purchases.
Net Cash Provided by Financing Activities
Net cash used in financing activities from continuing operations during the nine months ended September 30, 2022 was approximately $515,000 which consisted of the reacquisition of previously issued common stock as a result of the stock buyback plan.
34 |
Net cash provided by financing activities from continuing operations during the nine months ended September 30, 2021 was $4,445,000, which reflected proceeds from the sale of common stock, on a fully diluted basis. The Company received total gross proceeds of $3,000,000 from the Second Share Issuance, or approximately $2,821,000 in net proceeds after payment of transaction-related expenses.
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 | % |
Non-GAAP Financial Measure
Adjusted EBITDA
We believe Adjusted EBITDA provides a meaningful representation of our operating performance that provides useful information to investors regarding our financial condition and results of operations. Adjusted EBITDA is commonly used by financial analysts and others to measure operating performance. Furthermore, management believes that this non-GAAP financial measure may provide investors with additional meaningful comparisons between current results and results of prior periods as they are expected to be reflective of our core ongoing business. However, while we consider Adjusted EBITDA to be an important measure of operating performance, Adjusted EBITDA and other non-GAAP financial measures have limitations, and investors should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP. Further, Adjusted EBITDA, as we define it, may not be comparable to EBITDA, or similarly titled measures, as defined by other companies.
The following table provides a reconciliation of Net Loss to Adjusted EBITDA, the most directly comparable GAAP measure reported in our consolidatednon-GAAP financial statements:
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
(in thousands) | ||||||||||||||||
Net loss | $ | (2,488 | ) | $ | (1,273 | ) | $ | (17,665 | ) | $ | (3,519 | ) | ||||
Stock-based compensation expense | 146 | 118 | 731 | 218 | ||||||||||||
Goodwill impairment charge | - | - | 9,920 | - | ||||||||||||
Litigation Settlement | 155 | - | 155 | 500 | ||||||||||||
Gain on lease cancellation | - | - | - | (424 | ) | |||||||||||
Depreciation and amortization | 807 | 820 | 2,444 | 2,498 | ||||||||||||
Change in fair value of Warrant Liability | - | 401 | - | 401 | ||||||||||||
Interest Expense | - | 216 | 12 | 217 | ||||||||||||
Interest and other income | (4 | ) | - | (9 | ) | (1 | ) | |||||||||
Income tax benefit | (213 | ) | (624 | ) | (1,160 | ) | (1,218 | ) | ||||||||
Adjusted EBITDA | $ | (1,597 | ) | $ | (342 | ) | $ | (5,572 | ) | $ | (1,328 | ) |
Three Months Ended | ||||||||||||||||
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 | ||||||||||||||||
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 | )% |
The decrease was mainly attributable to reductions of the NAPW sales staff while the Company re-tooled its lead-generation and other marketing activities and replaced and re-trained sales staff on new sales practices we expect to lead to improved long-term productivity. During the third quarter, the Company formed a transition team and tasked the team on transitioning NAPW to long-term profitability. The core transition team’s objections are to increase the value for members, enhance membership sales productivity and to develop new methods of deriving revenue. To date the transition team has revamped membership outreach, new membership marketing and reducing indirect labor costs. In 2018 the Company will be investing in increasing women’s networking membership sales and expanding from NAPW (National Association of Professional Women), a national organization to IAW (International Association of Women), an international women’s networking organization. The 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.
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 | )% |
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 | % |
The increase was mainly attributable to a $268,000 general and administrative expense related to our China Operations that were launched in March 2017, a $183,000 rent liability accrual related to the unused space at our Garden City office related to NAPW segment, a $183,000 severance accrual for reduction in force in NAPW segment, and a $115,000 increase in compensation to independent board directors. This was partially offset by a $106,000 decrease in credit card fees due to lower sales and lower credit card rates, a $101,000 decrease in legal expenses, an $83,000 decrease in salaries and benefits, an $83,000 decrease in corporate insurance expenses, and a $52,000 decrease in consulting fees. General and administrative expense for the nine months ended September 30, 2017 was $11,323,000, compared to $8,928,000 for the same period in the prior year, an increase of $2,395,000 or 26.8%. The increase was mainly attributable to a $774,000 increase related to our China Operations that was launched in March 2017, a $616,000 increase in legal fees, a $514,000 increase in stock based compensation, a gain on lease cancellation of $424,000 related to the closing of its Los Angeles, CA office recorded in prior year, and a $364,000 increase in compensation to independent board directors. This was partially offset by a $253,000 decrease in credit card fees due to lower sales volume, and a $92,000 decrease in professional fees.
Three Months Ended | ||||||||||||||
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 | )% |
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 | % |
September 30, | December 31, | ||||||
2017 | 2016 | ||||||
(in thousands) | |||||||
Cash and cash equivalents | $ | 2,822 | $ | 6,069 | |||
Working capital (deficiency) | $ | (1,475 | ) | $ | 1,000 |
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 September 30, | ||||||||
2022 | 2021 | |||||||
(in thousands) | ||||||||
Loss from Continuing Operations | $ | (1,095 | ) | $ | (88 | ) | ||
Stock-based compensation | 34 | 127 | ||||||
Loss attributable to noncontrolling interest | 149 | 19 | ||||||
Depreciation and amortization | 233 | 30 | ||||||
Other (expense) income, net | (1 | ) | (2 | ) | ||||
Income tax expense (benefit) | (25 | ) | (2 | ) | ||||
Adjusted EBITDA | $ | (705 | ) | $ | 84 |
Nine Months Ended September 30, | ||||||||
2022 | 2021 | |||||||
(in thousands) | ||||||||
Loss from Continuing Operations | $ | (2,038 | ) | $ | (1,434 | ) | ||
Stock-based compensation | 440 | 436 | ||||||
Litigation settlement reserve | (909 | ) | 75 | |||||
Loss attributable to noncontrolling interest | 508 | 19 | ||||||
Depreciation and amortization | 746 | 88 | ||||||
Other (expense) income, net | (5 | ) | (5 | ) | ||||
Income tax benefit | (36 | ) | (19 | ) | ||||
Adjusted EBITDA | $ | (1,294 | ) | $ | (840 | ) |
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Off-Balance Sheet Arrangements
Since inception, we have not engaged in any off-balance sheet activities as defined inwithin the meaning of Item 303 of 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 condensed 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 condensed 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 condensed 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 the 2016 AnnualNote 3 to our condensed consolidated financial statements included in Part I, Item I of this Quarterly 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 condensed 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 allowance after all means of collection have been exhausted and the potential for recovery is considered remote.
Goodwill and Intangible Assets
The Company accounts for goodwill and intangible assets in accordance with ASC 350, Intangibles – Goodwill and Other (“ASC 350”). ASC 350 requires that goodwill and other intangibles with indefinite lives should be tested for impairment annually or on an interim basis if events or circumstances indicate that the fair value of an asset has decreased below its carrying value.
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.
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When conducting its annual goodwill impairment assessment, the Company initially performs a qualitative evaluation of whether it is more likely than not that goodwill is impaired. If it is determined by a qualitative evaluation that it is more likely than not that goodwill is impaired, the Company then compares the fair value of the Securities Exchange ActCompany’s reporting unit to its carrying or book value. If the fair value of 1934,the reporting unit exceeds its carrying value, goodwill is not impaired and the Company is not required to perform further testing. If the carrying value of a reporting unit exceeds its fair value, the Company will measure any goodwill impairment losses as amended. Thesethe amount by which the carrying amount of a reporting unit exceeds its fair value, not to exceed the total amount of goodwill allocated to that reporting unit.
Capitalized Technology Costs
We account for capitalized technology costs in accordance with ASC 350-40, Internal-Use Software (“ASC 350-40”). In accordance with ASC 350-40, we capitalize certain external and internal computer software costs incurred during the application development stage. The application development stage generally includes software design and configuration, coding, testing and installation activities. Training and maintenance costs are expensed as incurred, while upgrades and enhancements are capitalized if it is probable that such expenditures will result in additional functionality. Capitalized software costs are amortized over the estimated useful lives of the software assets on a straight-line basis, generally not exceeding three years.
Business Combinations
ASC 805, Business Combinations (“ASC 805”), applies the acquisition method of accounting for business combinations to all acquisitions where the acquirer gains a controlling interest, regardless of whether consideration was exchanged. ASC 805 establishes principles and requirements for how the acquirer a) recognizes and measures in its financial statements concern expectations, beliefs, projections, plansthe identifiable assets acquired, the liabilities assumed, and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. Specifically, this Quarterly Report contains forward-looking statements regarding:
Revenue Recognition
Our principal sources of revenue are recruitment revenue, consumer marketing and consumer advertising revenue, membership subscription fees, and contracted software development. Recruitment revenue includes revenue recognized from direct sales to customers for recruitment services and events, as well as revenue from our direct ecommerce sales. Revenues from recruitment services are recognized when the services are performed, evidence of an arrangement exists, the fee is fixed or determinable and collectability is probable. Our recruitment revenue is derived from agreements through single and multiple job postings, recruitment media, talent recruitment communities, basic and premier corporate memberships, hiring campaign marketing and advertising, e-newsletter marketing and research and outreach services.
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.
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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. We also offer a monthly membership for which we collect fees on a monthly basis and we undertake no obligationrecognize revenue in the same month as the fees are collected. Revenue from related membership services is derived from fees for development and set-up of a member’s personal on-line profile and/or press release announcements. Fees related to update any forward-looking statementthese services are recognized as revenue at the time the on-line profile is complete and press release is distributed.
Revenues generated from RemoteMore consist of contracts entered into to reflectprovide customers with software solutions and are recognized in the impactmonth work is performed.
Revenue Concentration
We are in an alliance with another company to build, host, and manage our job boards and website. This alliance member also sells two of circumstances or events that arise afterour recruitment services products and bills customers, collects fees, and provides customer services. For the datenine months ended September 30, 2022 and 2021, we recorded approximately 11.5% and 10.2% of our recruitment services revenue from this Quarterly Report.
Recent Accounting Pronouncements
See Note 3 to our financial statements.
ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4 – CONTROLS AND PROCEDURES
Evaluation of disclosure controls and Procedures
As of September 30, 2017,2022, our management conducted an evaluation under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures;procedures, as such term is defined inunder Rule 13a-15(e) ofpromulgated under the Securities Exchange Act of 1934, as amended (the “ (“Exchange Act”). We recognize that there are material weaknesses related to, under the supervision of and with the participation of our internal controls. Therefore, ourmanagement, including the Chief Executive Officer and Chief Financial Officer. Based on that evaluation, our management, including the Chief Executive Officer haveand Chief Financial Officer, 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.
There were identified for the year 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 identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during theour third quarter of 2017fiscal 2022, that have materially affected, or are reasonably likely to materially affect, our internal controlscontrol over financial reporting.
PART II
ITEM 1 – LEGAL PROCEEDINGS
We and its wholly-owned subsidiary, NAPW, Inc., are parties to litigation captioned Gauri Ramnath, et al. v. Professional Diversity Network, Inc., et al., No. BC604153 (Los Angeles Superior Ct.), a putative class action filed in January 2016 alleging violations of various California Labor Code (wage & hour) sections. During the first quarter of 2016, the Company executed a settlement agreement, subject to later Court approval, in which the Company agreed in principle to pay $500,000 for a global settlement of the class action. During the first quarter of 2016, the Company also recorded a litigation settlement expense in the amount of $500,000. On November 28, 2016, the Court approved the proposed settlement. In December of 2016 the Company paid the settlement amount in the Court’s fund and the third-party administrator began distributing payments to class members. On August 2, 2017, the Court notified the parties that the case is “reported as complete without the need for a further status conference.” This matter is therefore concluded and will not be further reported.
General Legal Matters
From time to time, the Company and its wholly-owned subsidiary, NAPW, Inc., where employee was allegedly terminated for asserting rights under Section 7is involved in legal matters arising in the ordinary course of the NLRA.business. While the Company disputesbelieves that any rights were impacted,such matters are currently not material, there can be no assurance that matters arising in the NLRB has issued its order requiringordinary course of business for which the Company to take certain remedial actionsis, or could be, involved in the form of posting notices and revising certain policies, as well as to pay the claimant certain back pay and offer reinstatement. The Company has complied with the order in all respects except back pay and reinstatement. The Company disputes the amount of back pay owed to the claimant and disputes that reinstatement is appropriate under the circumstances and an evidentiary hearing on the issue of back pay is currently scheduled for January of 2018. The amount of back pay and other potential liabilities ordered by NLRB is $146,000.
ITEM 1A – RISK FACTORS
In addition to other information set forth in this report, you should carefully consider the trading price ofrisk factors described in Part I, Item 1A, “Risk Factors” in our Common Stock.
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ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Total number of shares purchased | Average price paid per share | Total number of shares purchased as part of publicly announced plans or programs | Maximum number of shares (or approximate dollar value of shares) that may yet be purchased under the plans or programs (in thousands) | |||||||||||||
July 1, 2022— July 31, 2022 | ||||||||||||||||
Stock buyback program (1) | 17,207 | $ | 0.81 | 17,207 | $ | 1,603 | ||||||||||
August 1, 2022 — August 31, 2022 | ||||||||||||||||
Stock buyback program (1) | 90,629 | $ | 0.80 | 90,629 | $ | 1,531 | ||||||||||
September 1, 2022 — September 30, 2022 | ||||||||||||||||
Stock buyback program (1) | 54,053 | $ | 0.79 | 54,053 | $ | 1,485 |
(1) | We have a share repurchase program (“Stock Buyback Plan”) under which we are authorized to purchase up to $2.0 million of our outstanding common shares. The timing and amount of any shares repurchased under the Stock Buyback Plan will depend on a variety of factors, including price, corporate and regulatory requirements, capital availability and other market conditions. The Stock Buyback Plan may be suspended or discontinued at any time without prior notice. No shares have been or will be knowingly purchased from Company insiders or their affiliates. |
We purchased 579,884 shares of our Common Stock. As a result, the trading volume of our Common Stock could be more limited than if our shares were more-widely held. In addition, because we are a relatively small company, the range of investors willing to invest in our shares may be relatively limited. As a result of these factors, it may be more difficult for you to sell your shares of Common Stock at a time and price that you deem appropriate, and could increase the volatility of ourcommon stock price.
2022, at an average cost of approximately $0.89 per share (excluding commissions), for a total of approximately $515,000. These transactions occurred in open market purchases and pursuant to a trading plan under Rule 10b5-1. At September 30, 2022, we had approximately $1,485,000 repurchase authority remaining under the current Stock Buyback Plan. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. MINE SAFETY DISCLOSURE Not applicable. ITEM 5. OTHER INFORMATION None.
ITEM 6. EXHIBITS
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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