UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

———————————

Form 10-Q

———————————

(Mark One)

☒ 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

For the Quarterly Period Ended quarterly period ended September 30, 2017  (OR)


☐Transition Report Pursuant to Section 13 2022

or 15(d) of the Securities Exchange Act of 1934

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Periodtransition period from ________ to________.

to________

Commission file number: 001-35824

———————————

Professional Diversity Network, Inc.

(Exact name of Registrant as Specified in Its Charter)

———————————

Delaware
80-0900177

(State or Other Jurisdiction of

Incorporation or Organization)

80-0900177

(I.R.S. Employer

Identification No.)

801 W. Adams

55 E. Monroe Street, Suite 600, 2120

Chicago, Illinois 60607

60603
(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)

(312)614-0950

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each className of each exchange on which registered
Common Stock, $0.01 par value per shareThe Nasdaq Stock Market LLC

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files)

.

Yes ☒ 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 “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 ☒

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 financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

There were 3,931,83818,409,281 shares outstanding of the registrant’s common stock as of November 6, 2017.

14, 2022.

 

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

2022

TABLE OF CONTENTS

PagePAGE
PART I1
ITEM 1.FINANCIAL STATEMENTS1
ITEM 1. FINANCIAL STATEMENTS3
ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
1724
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
2838
ITEM 4.4 CONTROLS AND PROCEDURES2838
PART II29
PART IIITEM 1.LEGAL PROCEEDINGS29
ITEM 1A.RISK FACTORS29
ITEM 1 LEGAL PROCEEDINGS39
ITEM 2.1A RISK FACTORS
39
ITEM 2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
3040
ITEM 3.3 DEFAULTS UPON SENIOR SECURITIES3040
ITEM 4.4 MINE SAFETY DISCLOSUREDISCLOUSRES3040
ITEM 5.5 OTHER INFORMATION3040
ITEM 6 EXHIBITSITEM 6.41

EXHIBITS302
PART I
ITEM 1.FINANCIAL STATEMENTS
Professional Diversity Network, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
  September 30,  December 31, 
  2017  2016 
  (Unaudited)    
Current Assets:      
Cash and cash equivalents $2,821,729  $6,068,973 
Accounts receivable, net  1,799,013   2,170,529 
Incremental direct costs  241,235   423,023 
Prepaid expenses and other current assets  490,581   957,140 
Total current assets  5,352,558   9,619,665 
         
Property and equipment, net  291,774   277,534 
Capitalized technology, net  141,573   173,368 
Goodwill  10,280,885   20,201,190 
Intangible assets, net  7,035,139   9,183,439 
Merchant reserve  780,849   1,426,927 
Security deposits  239,059   220,754 
Other assets  -   35,000 
Total assets $24,121,837  $41,137,877 
         
Current Liabilities:        
Accounts payable $1,232,510  $2,172,332 
Accrued expenses  1,172,435   962,172 
Deferred revenue  4,422,715   5,485,599 
Total current liabilities  6,827,660   8,620,103 
         
Deferred tax liability  2,492,837   3,653,274 
Deferred rent  60,959   55,718 
Other liabilities  78,481   33,159 
Total liabilities  9,459,937   12,362,254 
         
Commitments and contingencies        
         
Stockholders' Equity        
Common stock, $0.01 par value; 45,000,000 shares authorized; 3,936,399 shares and 3,623,899
 shares issued as of September 30, 2017 and December 31, 2016, respectively; and 3,931,838 shares
and 3,619,338 shares outstanding as of September 30, 2017 and December 31, 2016, respectively
  39,329   36,204 
Additional paid in capital  79,783,969   76,234,772 
Accumulated other comprehensive loss  (1,435)  - 
Accumulated deficit  (65,122,846)  (47,458,236)
Treasury stock, at cost; 1,048 shares at September 30, 2017 and December 31, 2016  (37,117)  (37,117)
Total stockholders' equity  14,661,900   28,775,623 
         
Total liabilities and stockholders' equity $24,121,837  $41,137,877 

Item 1. FINANCIAL STATEMENTS

Professional Diversity Network, Inc. and Subsidiaries

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

  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, $0.01 par value; 45,000,000 shares authorized, 18,989,165 shares and 16,068,300 shares issued as of September 30, 2022 and December 31, 2021, and 18,409,281 and 16,067,252 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; 579,884 shares at September 30, 2022 and 1,048 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.

1
Professional Diversity Network, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited)
  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.

2
4
Professional Diversity Network, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
  
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.

3
Professional Diversity Network, Inc.
Condensed Consolidated Notes to Financial Statements (Unaudited)
1. Description of Business

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.

6

Professional Diversity Network, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1. Basis of Presentation and Description of Business

The accompanying condensed consolidated financial statements have been prepared in conformity with 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:


·NAPW, Inc., a Delaware corporation and wholly-owned subsidiary of the Company and the operator of the National Association of Professional Women (the “NAPW Network” or “NAPW”);
·Noble Voice LLC and Compliant Lead LLC (collectively, “Noble Voice”), both Delaware limited liability companies, each of which is a wholly-owned subsidiary of the Company and together provide career consultation services;
·AETSI, Inc. (“AETSI”), a Delaware corporation and wholly-owned subsidiary of the Company, which was created to facilitate the Company’s prospective U.S.-China education partnerships, expected to begin later in 2017;
·PDN HK International Education Ltd. and PDN HK International Education Information Co. Ltd. (collectively, “PDN Hong Kong”), both Hong Kong limited companies and wholly-owned subsidiaries which were created during the first quarter of 2017 to support the Company’s China expansion; and
·PDN (China) International Culture Development Ltd. Co. (“PDN China”), a China wholly-owned foreign enterprise company and wholly-owned subsidiary created during the first quarter of 2017 to operate the China Operations described below.

for NAPW, Inc., a wholly-owned subsidiary of the Company and the operator of the National Association of Professional Women (the “NAPW Network” or “NAPW”). The PDN Network operates online professional networking communities with career resources specifically tailored to the needs of different diverse cultural groups including: Women, Hispanic-Americans, African-Americans, Asian-Americans, Disabled, Military Professionals, Lesbians, Gay, Bisexual, Transgender and Transgender (LGBT), and Students and Graduates seeking to transition from education to career.Queer (LGBTQ+). The networks’ purposes, among others, are to assist its registered users in their efforts to connect with like-minded individuals, identify career opportunities within the network and connect with prospective employers. The Company’s technology platform is integral to the operation of its business. In addition, PDN, Inc. owns 45.62% of RemoteMore USA, Inc. (“RemoteMore USA” or “RemoteMore”). Due to having significant influence in its guidance and operations, the Company consolidates RemoteMore USA’s operations into its condensed consolidated financial statements.

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.


suspend all China operations. The Company began businessresults of China operations in Chinaare presented in the first quartercondensed consolidated statements of 2017, similar to those in the United States, focusing on providing tools, productsoperations and services which will assist in personal and professional development. The Company intends to cooperate with existing companies and organizations in China to efficiently and promptly deliver valuable products and services to its registered users. The Chinese operations focus on the following areas:

·Women’s Networking, which is the Chinese expansion of the NAPW segment, and is called “The International Association of Women” or “IAW,” the first marketing event for which was held near the end of the second quarter of 2017;
·Secondary Education Services for Chinese Children, which will provide services to assist families in China identify, prepare for and attend secondary education schools in the United States and other countries, with U.S. operations managed by AETSI and China operations managed by PDN China; and
·Education and Training for Accomplished Chinese Business People, through PDN China, which is providing education and training seminars in China, as reflected in the Company’s “China Operations / Education and Training” segment information below.

comprehensive loss as net loss from discontinued operations.

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).


equivalents.

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.

2021. These conditions raise substantial doubt about its ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company’s ability to further implement its business plan, raise capital, and generate revenues. The condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

4
7
Professional Diversity Network, Inc.
Condensed Consolidated Notes to Financial Statements (Unaudited)

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

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

Management believes that its available funds cash on hand and cash 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. 

terms.

3. Summary of Significant Accounting Policies

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

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

GAAP.

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


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

Significant estimates underlying the financial statements 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.

5
Professional Diversity Network, Inc.
Condensed Consolidated Notes to Financial Statements (Unaudited)

Principles of Consolidation– - The accompanying unaudited condensed consolidated financial statements include the accounts of the Company, and its wholly-owned subsidiaries.subsidiaries , and non-wholly-owned subsidiaries that require consolidation per GAAP. All significant intercompany balances and transactions have been eliminated in 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.

8

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.

9

Prior to January 1, 2017, when

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.


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

As

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.


balance sheets.

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


Membership Fees(See Note 5 – Revenue Recognition.)

Deferred revenue includes customer payments which are received prior to performing services and Related Services


Membershiprevenues are recognized upon the completion of these services. Annual membership fees are collected up-front and member benefits become available immediately; however those benefits must remain available over the 12 month membership period. Atat the time of enrollment membership fees are recorded as deferred revenue and are recognized as revenue ratably over the 12 monthmembership period, which are typically for a 12-month membership period. Members who are enrolled

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.

Revenue from related membership services are derived from fees for developmentplaintiffs in the Gatewang Case. On April 26, 2021, the Company concluded that the seizure of such cash assets was a material reduction of Company assets and set-up of a member’s personal on-line profile and/or press release announcements. Fees relatedwas reflected in its condensed consolidated balance sheets subsequent to the occurrence.

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.

6
Professional Diversity Network, Inc.
Condensed Consolidated Notes to Financial Statements (Unaudited)

Lead Generation

Professional Diversity Network provides career opportunities to our registered users. As part of our employment services we interact with over 27,500 job seekers via telephone on a weekly basis. Our Career Advisors suggest job opportunitiesasked for our registered users based on their location and profile. In certain circumstances our Career Advisers offer career support services to our registered users, including resume writing, education opportunities and economic consultations. In certain circumstances we receive compensation from various business partners resulting from our job seeker referrals.return. The Company derives lead generation revenues pursuantplans to arrangements with its business partners. Underpursue all possible legal alternatives to have these arrangements,funds returned to the Company matches its business partners with potential candidates, pursuant to specific parameters defined in each arrangement. The Company invoices on a monthly basis based upon the number of leads provided. Revenues related to lead generation are recognized in the month when the leads are sent to its business partners.

The Company's business partners include educational institutionsbut such as Keypath Education, QuinStreet and Education Dynamics in Noble Voice's traditional, core business, as well as a broad array of corporations such as Avon Products, American Airlines, and Uber, among others.
Recruitment Services
The Company’s recruitment services revenuereturn is derived fromuncertain at this time.

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:

•          On-line job postings to our diversity sites and to our broader network of websites including the National Association for the Advancement of Colored People and the National Urban League
•          OFCCP job promotion and recordation services
•          Diversity job fairs, both in person and virtual fairs
•          Diversity recruitment job advertising services
•          Cost per application, a service that employers can purchase whereby PDN sources qualified candidates and charges only for those applicants who meet the employers’ minimum qualifications
•          Diversity executive staffing services

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

Product Sales and Other Revenue

Products offered to members relate to custom made plaques. Product sales are recognized as deferred revenue at the time the initial order is placed. Revenue is then recognized at the time these products are shipped. The Company’s shipping and handling costsChina operations are included in costa loss from discontinued operations, net of salestax, in the accompanying consolidated statements of operations. For the three and nine months ended September 30, 2022, loss from discontinued operations was approximately $(13,000) and $(42,000) as compared to a loss from discontinued operations of approximately $(11,000) and $(72,000) for the three and nine months ended September 30, 2021.

10

Education

Assets and Training


liabilities of China operations are included in current assets and long-term assets from discontinued operations, and current liabilities and long-term liabilities from discontinued operations. Current assets from discontinued operations were $4,600, as of September 30, 2022 and December 31, 2021, respectively, and long-term assets from discontinued operations were $197,201 at September 30, 2022, compared to $197,595 as of December 31, 2021. As of September 30, 2022, current liabilities from discontinued operations were $483,841, compared to $420,850 as of December 31, 2021.

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.

Consumer Advertisingthree and Marketing Solutions
The Company provides career opportunity services to its various partner organizations through advertisingnine months ended September 30, 2022 and job postings on their websites. The Company works with its partners to develop customized websites and job boards where the partners can generate advertising, job postings and career services to their members, students and alumni. Partner revenue is recognized as jobs are posted to their hosted sites.

The Company's partner organizations include NAACP and National Urban League,VetJobs, among others.
7
Professional Diversity Network, Inc.
Condensed Consolidated Notes to Financial Statements (Unaudited)

2021, net of intercompany eliminations:

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, 2017 and 2016,2022, the Company incurred advertising and marketing expenses of approximately $658,000$347,000 and $657,000, respectively. For$862,000, as compared to approximately $198,000 and $608,000 in the nine months ended September 30, 2017 and 2016,same periods of the Company incurred advertising and marketing expenses of approximately $2,246,000 and $1,842,000, respectively.fiscal 2021. These amounts are included in sales and marketing expenses in the accompanying condensed consolidated statements of comprehensive loss.operations. At September 30, 20172022 and December 31, 2016,2021, there were no prepaid advertising expenses, recorded in the accompanying condensed consolidated balance sheets.

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

Income Taxes - The Company accounts for income taxes in accordance with ASC 740, Income Taxes (“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.

11

ASC 740 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with ASC 740-20 and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. There were no unrecognized tax benefits as of 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.

Net Loss per Share– - The Company computes basic net loss per share by dividing net loss per share available to common stockholders by the weighted average number of common shares outstanding for the period and excludes the effects of any potentially dilutive securities. Diluted earnings per share, if presented, would include the dilution that would occur upon the exercise or conversion of all potentially dilutive securities into common stock using the “treasury stock” and/or “if converted” methods as applicable. The computation of basic net loss per share for the three and nine months ended September 30, 20172022 and 20162021 excludes the potentially dilutive securities summarized in the table below because their inclusion would be anti-dilutive.


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

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share

  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.

In February 2016, the FASB issued new lease accounting guidance ASU No. 2016-02, “Leases” (“ASU 2016-02”). Under the new guidance, at the commencement date, lessees will be required to recognize a lease liability, which is a lessee‘s obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. The new guidance is not applicable for leases with a term of 12 months or less. Lessor accounting is largely unchanged. Public business entities should applyobjective, the amendments in ASU 2016-02this update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. For public business entities that are SEC filers that are Smaller Reporting Companies, the amendments in this update are effective for fiscal years beginning after December 15, 2018,January 2023, including interim periods within those fiscal years. Early application is permitted upon issuance. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.
8
Professional Diversity Network, Inc.
Condensed Consolidated Notes to Financial Statements (Unaudited)

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

In May 2017, the FASB issued ASU 2017-09, “Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting “(“ASU 2017-09”). ASU 2017-09 provides clarity and reduces both (i) diversity in practice and (ii) cost and complexity when applying the guidance in Topic 718, Compensation-Stock Compensation, to a change to the terms or conditions of a share-based payment award. The amendments in ASU 2017-09 provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. ASU 2017-09 is effective for all annual periods, and interim periods within those annual periods, beginning after December 15, 2017, with early adoption permitted. The adoption of ASU 2017-09 is not expected to have an impact on the Company’s financial position or results of operations.
In July 2017, the FASB issued ASU 2017-11, “Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception” (“ASU 2017-11”). ASU 2017-11 eliminates the requirement to consider “down round” features when determining whether certain equity-linked financial instruments or embedded features are indexed to an entity’s own stock. It is effective for annual periods beginning after December 31, 2018. Early adoption is permitted. The Company is currently evaluating the impact of adopting this guidance.new guidance on its financial position, results of operations, statement of comprehensive income, and cash flows, and will adopt the provisions of this statement in the first quarter of fiscal 2023.

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.

12

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 279,720 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.

13
4.

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.

14

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.

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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 
Amortization expense

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.

9
Professional Diversity Network, Inc.
Condensed Consolidated Notes to Financial Statements (Unaudited)

5. Intangible Assets

Intangible assets, net is as follows:

September 30, 2017 
Useful Lives
(Years)
  
Gross
Carrying
Amount
  
Accumulated
Amortization
  
Net Carrying
Amount
 
Long-lived intangible assets:            
Sales Process  10  $3,970,000  $(1,196,514) $2,773,486 
Paid Member Relationships  5   890,000   (536,472)  353,528 
Member Lists  5   8,957,000   (5,399,081)  3,557,919 
Developed Technology  3   978,000   (959,666)  18,334 
Trade Name/Trademarks  4   480,000   (359,861)  120,139 
Customer Relationships  5   280,000   (158,667)  121,333 
      $15,555,000  $(8,610,261)  6,944,739 
Indefinite-lived intangible assets:                
Trade Name              90,400 
                 
Intangible assets, net             $7,035,139 
December 31, 2016 
Useful Lives
(Years)
  
Gross
Carrying
Amount
  
Accumulated
Amortization
  
Net Carrying
Amount
 
Long-lived intangible assets:            
Sales Process  10  $3,970,000  $(898,764) $3,071,236 
Paid Member Relationships  5   890,000   (402,972)  487,028 
Member Lists  5   8,957,000   (4,055,531)  4,901,469 
Developed Technology  3   978,000   (718,166)  259,834 
Trade Name/Trademarks  4   480,000   (269,861)  210,139 
Customer Relationships  5   280,000   (116,667)  163,333 
      $15,555,000  $(6,461,961)  9,093,039 
Indefinite-lived intangible assets:                
Trade Name              90,400 
                 
Intangible assets, net             $9,183,439 

Future annual estimated amortization expense is summarized as follows:

Years ending December 31,   
2017 (three months) $653,933 
2018  2,563,872 
2019  1,846,697 
2020  397,000 
2021  397,000 
2022  397,000 
Thereafter  689,237 
  $6,944,739 
Amortization expensein exchange, the Company issued 1,726,784 shares of $714,000 and $717,000its common stock to Seller in a private placement (the “Consideration Shares”). The Consideration Shares were valued at $1,350,000 in the aggregate based on the volume weighted average price of the common stock of the Company for the three months ended September 30, 201720 trading days immediately prior to the date of the SPA and 2016, respectively, and $2,148,000 and $2,151,000 for the nine months ended September 30, 2017 and 2016, respectively, is recorded in depreciationthe condensed consolidated balance sheet as long-term investments.

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.

10
Professional Diversity Network, Inc.
Condensed Consolidated Notes to Financial Statements (Unaudited)

6. the majority shareholder of Koala Capital Limited, which is the parent company of the Seller (“Koala Capital”), provided the Company with a share charge over 15 percent of the issued share capital of Koala Capital (the “Share Charge”) and Koala Capital provided the Company with a guaranty and indemnity (the “Guarantee”), which Share Charge and Guarantee were granted as security for a number of the Seller’s obligations as set forth therein, including obtaining the lifting of the voluntary suspension of KCL’s virtual financial assets license by the Malta Financial Services Authority by December 31, 2022.

9. Commitments and Contingencies

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


Rent expense, amounting to approximately $268,000 and $258,000 for the three months ended

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

Gatewang Case. The Company has previously disclosed that it and its wholly-owned subsidiary, NAPW, Inc., are parties to litigation captioned Gauri Ramnath, et al. v. Professional Diversity Network, Inc., et al., No. BC604153 (Los Angeles Superior Ct.),classified this entire cash balance as a putative class action filedlong-term asset presented in January 2016 alleging violationsdiscontinued operations (see Note 3 - Summary 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.
Significant Accounting Policies – Discontinued Operations).

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.


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

The Company is a party to a proceeding captioned Wei Aniton v. Professional Diversity Network, Inc., No. 440-2017-04717 (EEOC), filed with the Equal Employment Opportunity Commission (“EEOC”) on July 6, 2017 and alleging violations of Title VII and the Equal Pay Act of 1963, where employee alleges she was discriminateddisruption caused by the Company due to her race and her sex and was paid less than similarly situated white males. On September 20, 2017, the EEOC issued its Notice of Dismissal and Notice of Rights, effectively terminating this matter before the EEOC.
In a letter dated October 12, 2017, White Winston Select Asset Funds (“White Winston”) threatened assertion of a claim against the Company.  The letter alleges that White Winston suffered $2,241,958 in damages as a result of the Company’s alleged conduct that caused a delay in White Winston’s ability to sell shares in the Company during a period when the Company’s stock price was generally falling.  The Company denies liability for any such claim.
pandemic subsides.

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

7.

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 $0.01 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.

11
Professional Diversity Network, Inc.
Condensed Consolidated Notesfully-diluted basis, after giving effect to Financial Statements (Unaudited)
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. The Company retained Aegis Capital Corp. (“Aegis”) as the exclusive placement agent in connection with the transaction. Aegis received a cash placement fee of $144,000 in connection with the transaction. The Company accounted for the fee paid to Aegis as a costconsummation of the transaction resulting in a charge directly to stockholders’ equity.
transactions contemplated by the Purchase Agreement.

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 1,000,000 shares of undesignated preferred stock.

Common Stock – The Company has one class of common stock that CFL, the CFL shareholders and their respective affiliates (collectively, the “CFL Group”) may, directly or indirectly acquire, agree to acquire or publicly propose or offer to acquire fromoutstanding with a total number of shares authorized of 45,000,000. As of September 30, 2022, the Company or pursuant to a tender or exchange offer for anyhad 18,409,281 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 279,720 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 1,726,784 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 579,884 shares of its common shares, for a total of approximately $515,000 at an average cost of approximately $0.89 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.

12. Stock-Based Compensation

Equity Incentive Plans – The Company’s 2013 Equity Compensation Plan (the “2013 Plan”) was adopted for the purpose of providing equity incentives to employees, officers, directors and consultants including options, restricted stock, restricted stock units, stock appreciation rights, other equity awards, annual incentive awards and dividend equivalents. Through a series of amendments to the 2013 Plan, the number of authorized shares available for issuance of common stock under the Plan is 1,500,000 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.


8. Employment Agreements

Katherine Butkevich, formerly Chief Executive Officer of the Company’s wholly-owned subsidiary, NAPW, Inc., was party to an employment contract with the Company dated September 30, 2016.  As the Company previously reported in its August 30, 2017 Form 8-K, Ms. Butkevich notified the Company that she was resigning her employment effective September 18, 2017, thereby terminating the employment contract as of the resignation date.

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

9. Income Taxes
The effective income taxU.S. Treasury rate for the three months ended September 30, 2017expected life at the time of grant, volatility is based on the average long-term implied volatilities of peer companies, the expected life is based on the estimated average of the life of options using the simplified method, and 2016 was 7.9%forfeitures are estimated on the date of grant based on certain historical data. The Company utilizes the simplified method to determine the expected life of its options due to insufficient exercise activity during recent years as a basis from which to estimate future exercise patterns. The expected dividend assumption is based on the Company’s history and 32.9%, respectively, resultingexpectation of dividend payouts.

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.

The effective income tax ratefollowing table summarizes the Company’s stock option activity for the nine months ended September 30, 20172022 and 20162021:

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   7.8  $- 
Granted  -   -   -         - 
Exercised  -   -   -   - 
Forfeited  -   -   -   - 
Outstanding - September 30 2022  66,126  $4.52   7.0  $- 
                 
Exercisable at September 30, 2022  46,126  $5.57   6.3  $- 

        Weighted    
        Average    
     Weighted  Remaining    
     Average  Contractual  Aggregate 
  Number of  Exercise  Life  Intrinsic 
  Options  Price  (in Years)  Value 
Outstanding - January 1, 2021  66,126  $5.24   8.3  $       - 
Granted  30,000   2.10   9.7     
Exercised  -   -   -     
Forfeited  (30,000)  3.69   -     
Outstanding - September 30 2021  66,126  $4.52   8.6  $- 
                 
Exercisable at September 30, 2021  36,126  $6.53   6.6  $- 

Total unrecognized stock-based compensation expense related to unvested stock options at September 30, 2022 was 6.2%approximately $18,500 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

As of September 30, 2022 and 2021, the following is a $1,160,000 and $1,218,000 income tax benefit, respectively. The difference insummary of restricted stock unit activity:

Schedule of Restricted Stock Award Activity

Number of
Shares
Outstanding - January 1, 2022159,525
Granted341,874
Forfeited(27,646)
Vested(335,525)
Outstanding - September 30, 2022138,228

Number of
Shares
Outstanding - January 1, 2021233,875
Granted59,525
Forfeited-
Vested(133,875)
Outstanding - September 30, 2021159,525

During the effective income tax rate for the three monthsperiod ended September 30, 2017, compared2022, the Company granted 27,646 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 $25,000. 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, 27,646 RSUs were forfeited due to a departure of a non-employee director.

In June 2022, the Company granted 138,228 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 $125,000. The RSU award to board members fully vest on the one-year anniversary after the date of grant. The Company also granted 176,000 RSU’s to certain officers and managers with immediate vesting. The aggregate grant date fair value of the combined awards amounted to approximately $159,000.

During the period ended September 30, 2020, the Company granted 300,000 RSUs to the changeCompany’s Chief Executive Officer. The RSU award grant to the CEO vests 1/3 on the grant date and the remaining 2/3 vested equally on the annual grant date anniversary of the award over the remaining two years with the final vesting occurring in the valuation allowance.period ended September 30, 2022. The differenceaggregate grant date fair value of the combined awards amounted to approximately $1,107,000.

The Company recorded non-cash stock-based compensation expense of $439,655 and $435,915 as a component of general and administrative expenses in the 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.

Total unrecognized stock-based compensation expense related to unvested restricted stock at September 30, 2022 was approximately $84,000 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.

2022. The Company has not provided deferred income taxes on the undistributed earnings of its foreign subsidiaries. The amount of such earnings was insignificant. These earnings have been permanently reinvested and the Company does not plan to initiate action that would precipitate the payment of income taxes thereon. It is not practicable to estimate the amount of additional tax that might be payable on the undistributed earnings of its foreign subsidiaries.
12
Professional Diversity Network, Inc.
Condensed Consolidated Notes to Financial Statements (Unaudited)

10. Stock-Based Compensation

Equity Incentive Plans – The Company’s 2013 Equity Compensation Plan (the “2013 Plan”) was adopted for the purpose of providing equity incentives to employees, officers, directors and consultants including options, restricted stock, restricted stock units, stock appreciation rights, other equity awards, annual incentive awards and dividend equivalents. The Company amended the 2013 Plan to increase the number of authorized shares of common stock under the Plan by 390,000 shares, which the Company’s stockholders approved on June 26, 2017. The Company is now authorized to issue 615,000 shares under the amended 2013 Plan.

Stock Options

The following table summarizes the Company’s stock option activity for the nine months ended September 30, 2017:
  
Number of
Options
  
Weighted
Average
Exercise
Price
  
Weighted
Average
Remaining
Contractual
Life
(in Years)
  
Aggregate
Intrinsic
Value
 
Outstanding - December 31, 2016  69,950  $12.07   9.0  $156,975 
Granted  240,000   10.72         
Exercised  -   -         
Forfeited/Canceled/Expired  (25,053)  (13.93)        
Outstanding – September 30, 2017  284,897  $10.77   9.3  $- 
                 
Exercisable – September 30, 2017  124,897  $10.83   9.2  $- 
The Company granted 210,000 and 30,000 stock options to Messrs. Wang and Xiao, respectively, in connection with their employment agreements. These options had an aggregate fair value of $1,060,800, using the Black-Scholes option-pricing model with the following assumptions:

Risk-free interest rate2.13%
Expected dividend yield0.00%
Expected volatility41.78%
Expected term5.5 years
The options are exercisable at an exercise price of $10.72 per share over a ten-year term and vest over two years, with one-third vested upon grant. The Company recorded $88,000 and $560,000 as compensation expense during the three and nine months ended September 30, 2017, respectively, pertaining to these grants.

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

Total unrecognized compensation expense related to unvested stock optionsvaluation allowance at September 30, 2017 amounts to2022 was approximately $501,000 and is expected to be recognized over a remaining weighted average period of 1.4 years.
Warrants

As of September 30, 2017, there were 170,314 warrants outstanding and exercisable, with a weighted average exercise price of $32.44 per share.$9,721,000. The weighted average remaining contractual life ofnet change in the warrants at September 30, 2017 and December 31, 2016 was 3.6 and 4.3 years, respectively, and the aggregate intrinsic value was 0.

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

No compensation cost2022 was recognized for the three and nine months ended September 30, 2017 and 2016 pertaining to warrants.
13
Professional Diversity Network, Inc.
Condensed Consolidated Notes to Financial Statements (Unaudited)

Restricted Stock and Restricted Stock Units

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

A summary of the restricted stock award activity for the nine months ended September 30, 2017 is as follows:
Number of
Shares
Unvested Outstanding at December 31, 20162,778
Granted15,544
Forfeited-
Vested-
Unvested Outstanding at September 30, 201718,322
approximately $120,000.

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. 

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

Beginning in January 2017, the Company operates in the following segments: (A) United States: (i) PDN Network, (ii) NAPW Network and (iii) Noble Voice operations, and (B) China Operations. The segments are categorized based on their business activities and organization. Prior to January 2017, the Company operated solely in the United States in the following segments: (i) PDN Network, (ii) NAPW Network, (iii) RemoteMore (beginning in September 2021) and (iii) Noble Voice operations. (iv) Corporate Overhead. The financial results of China Operations have been reclassified from the Company’s reportable segments to discontinued operations for all periods presented.

The following tables present key financial information 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 
14
2021:

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)

Professional Diversity Network, Inc.
Condensed Consolidated Notes to Financial Statements (Unaudited)22

  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)
15
Professional Diversity Network, Inc.
Condensed Consolidated Notes to Financial Statements (Unaudited)

  December 31, 2016 
Goodwill $339,451  $19,861,739  $-  $20,201,190 
Intangible assets, net  90,400   8,809,706   283,333   9,183,439 
Total assets  7,643,471   31,457,958   2,036,448   41,137,877 
12.

  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
Unless we specify otherwise, all references infiling of this Quarterly Report on Form 10-Q, (the “Quarterly Report”)and determined that there have been no events that have occurred that would require adjustments to our disclosures in the “Company,” “we,” “our,” and “us” refer to Professional Diversity Network, Inc. and itscondensed consolidated subsidiaries.  The following discussion and analysisfinancial 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.

Report on Form 10-Q and Item 1A. Risk Factors of our 2021 Form 10-K for a discussion of these risks and uncertainties.

Overview

We are an operator of professional networks with a focus on diversity, employment, education and training. We use the term “diversity” (or “diverse”) to describe communities, or “affinities,” that are distinct based on a wide array of criteria, including ethnic, national, cultural, racial, religious or gender classification. We serve a variety of such communities, including Women, Hispanic-Americans, African-Americans, Asian-Americans, Disabled, Military Professionals, and Lesbian, Gay, Bisexual and Transgender (LGBT+(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.


Our value proposition is simple: (i) we provide a robust online and in-person network for our women membersempowers software developers to make professional and personal connections for our diverse audiencefind meaningful jobs regardless of women: African Americans, Hispanics, Asians, Veterans, individuals with disabilities and members of the Gay community (with the ability to roll out to our other affinities); (ii) we assist our registered users, or members, in their efforts to connect with like-minded individuals and identify career opportunities within the network; (iii) we help employers address their workforce diversity needs by connecting them with the right candidates; and (iv) we leverage our U.S. expertise and China connections to deliver these values to China, the world’s fastest-growing market. 
In January of 2017, the Company established PDN Hong Kong through its two wholly-owned subsidiaries there and in March of 2017 the Company established PDN China through its subsidiary there.  We are currently executing our strategic plan to build in China entirely new networking, training and education businesses.  We believe that coupling the Company’s expertise in networking and careers with our Chinese executives’ expertise in the China market will provide us with an opportunity for success with our overseas expansion.  During the first two quarters of 2017, we held seven events as part of our education and training business line’s “Shared Economy” summit series, attracting over 7,800 paid attendees.  Additionally, during the second quarter of 2017, we held a selective marketing event to introduce IAW, the PDN China women’s networking business.
In the third quarter of 2017, IPDN China began to transact IAW memberships in China, ranging from RMB 20,000 to RMB200,000 (Approximately $3,000 to $30,000 annual memberships). Additionally IAW China held its first IAW VIP China event at the Women’s Forum Global Meeting, in Paris, France. Also in the third quarter, IPDN China finalized plans and secured commitments to hold its largest education and training event of the year. The event will be held on December 2, 2017 in Beijing, China, “The International Capital Leadership Summit”. Mr. Bruce Aust, Vice Chairman of the Nasdaq Exchange will be featured at the event.
Through the third quarter of 2017, our PDN Network, NAPW Network, Noble Voice and China Operations businesses represented 14.1%, 49.3%, 30.7% and 5.9% of our revenues, respectively.  As of September 30, 2017, we had approximately 10.0 million registered users in our PDN Network; approximately 952,000 registered users, or members, in the NAPW Network; and over 1,000 companies utilizing our products and services in our combined PDN Network and Noble Voice operations. location.

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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17

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%
Paid

  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.  Services. We offer paid membership subscriptions through our NAPW Network, a women-only professional networking organization, operated by our wholly-owned subsidiary. Members gain access to networking opportunities through a members-only website at www.napw.comwww.iawomen.com and “virtual” eChapter events which occur in a webcast setting as well as through in-person networking at approximately 190100 local chapters nationwide, additional career and networking events such as the National Networking Summit Series, Power Networking Events and the PDN Network events. NAPW members also receive ancillary (non-networking) benefits such as educational discounts, shopping, and other membership perks. Upgraded packages include (i)The basic package is the VIP membership,Initiator level, which provides members with additional promotional and publicity toolsonline benefits only. Upgrades to an Innovator membership include the Initiator benefits as well as freemembership in local chapters, and access (including guest) to live in-person events. The most comprehensive level, the National Networking SummitsInfluencer, provides all the aforementioned benefits plus admission to exclusive “live” events and free continuing education programsexpanded opportunities for marketing and (ii)promotion, including the creation and distribution of a press release, package, which provides members with the opportunity to work withis prepared by professional writers to publish personalized press releases and thereby secure valuable online presence.sent over major newswires. Additionally, all memberships offer educational programs with discounts or at no cost, based on the membership level. NAPW Membership is renewable and fees are payable on an annual or monthly basis, with the first annual fee payable at the commencement of the membership. We offer to new purchasers of our NAPW Membership subscriptions represented approximately 99.2% and 98.6%, respectively,memberships the opportunity to purchase a commemorative wall plaque at the time of revenue attributablepurchase. They may purchase up to the NAPW Network business segment for the three months ended September 30, 2017 and 2016, and 98.8% and 96.0%, respectively, for the nine months ended September 30, 2017 and 2016.


Lead Generation.   We monetize our career consultations conducted by our Noble Voice segment by generating and selling value-added leads to our strategic partners who provide continuing education and career services.  We also generate revenue from sales of data not used in the lead generation process.  Lead generation sales represented 100% of the revenue attributable to the Noble Voice business segment for the three and nine months ended September 30, 2017 and 2016.

two plaques at that time.

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, semanticcontingent search technology and paid access to,hiring, and placement in, or advertising around our career and networking events.fairs. The majority of recruitment services revenue comes from job recruitment advertising. We also offer to businesses subject to the regulations and requirements of the Equal Employment Opportunity Office of Federal Contract Compliance Program (“OFCCP ”)”) our OFCCP compliance product, which combines diversity recruitment advertising with job postings and compliance services.  Recruitment advertising

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.

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Product Sales.  We offer to new purchasers of our NAPW Network memberships the opportunity to purchase up to two commemorative wall plaques at the time of membership purchase.  Product sales represented approximately 0.8% and 1.4%, respectively, of revenue attributable to the NAPW Network business segment for the three months ended September 30, 2017 and 2016, and 1.2% and 4.0%, respectively, of revenue attributable to the NAPW Network business segment for the nine months ended September 30, 2017 and 2016.
Education and Training.  In March of 2017 we began our China Operations by creating a Shared Economy summit series designed to provide education and training to Chinese business people.  Our initial event was a paid event which generated revenue through paid event admission fees.  Education and training represented 100% of the revenue attributable to China Operations for the three months ended September 30, 2017.  Because China Operations first began in March of 2017 there is no period-over-period comparison.

Consumer Advertising and Consumer Marketing Solutions. We work with partner organizations to provide them with integrated job boards on their websites which offer their members or customers the ability to post recruitment advertising and job openings. We generate revenue from fees charged for those postings.  Consumer advertising and marketing solutions represented approximately 8.6% and 5.0%, respectively, of the revenue attributable to the PDN Network business segment for the three months ended September 30, 2017 and 2106. For the nine months ended September 30, 2017 and 2016, consumer advertising and consumer marketing solutions revenue constituted approximately 8.7% and 7.2%, respectively, of the revenue attributable to the PDN Network business segment.

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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 %

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Financial Overview
During

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.

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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 %

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  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 $2,489,000, a $1,216,000 increase from the comparable prior year period.  This increase in net loss was primarily driven by a decrease$246,000 of $1,578,000 in NAPW segment revenues from membership fees, related services and product sales period-over-period, partially offset by a decrease of $788,000 in overall sales and marketing expenses. costs, general and administrative and other costs of approximately $202,000, and approximately $102,000 related to costs of revenues, as compared to the same period in the prior year.

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)%

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  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 $17,666,000, a $14,147,000 increase$1,095,000 from the comparable prior year period.  This increase in net loss is primarily related to goodwill impairment charge of $9,920,000, the decrease in membership fees and related services revenue,continuing operations, an increase in stock-based compensation, andthe net loss of approximately $1,007,000 or 1144.3 percent, compared to a net loss of approximately $88,000 during the three months ended September 30, 2021. During the nine months ended September 30, 2022, we incurred a net loss of approximately $2,038,000 from continuing operations, an increase in legal expenses.the net loss of approximately $605,000 or 42.2 percent, compared to a net loss of approximately $1,433,000 during the same period in the prior year.

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)

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Recent Events
On January 13, 2017,

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.

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  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.

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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.


Key Metrics
We believe that one of the key metrics in evaluating and measuring our performance is the number of registered users or members. We offer free memberships and in our NAPW segment we also offer a paid membership, one that provides a greater level of services and networking potential. The vast majority of our registered users are non-paid members. We define a registered user as an individual job seeker who affirmatively visited one of PDN Network’s properties, opted into an affinity group and provided us with demographic or contact information enabling us to match him or her with employers and/or jobs (“PDN Network registered user”).  We believe that a higher number of registered users will result in increased sales of our products and services, as employers will have access to a larger pool of professional talent. 
We define a member as a consumer who has viewed our marketing material, opted into membership in the NAPW Network, provided demographic information and engaged in an onboarding call with a membership coordinator (the “NAPW Network member”). NAPW Network total membership is therefore comprised of members who paid for additional services (“Paid Members”) as well as members who opted into the NAPW Network and have not yet paid for additional services (“Unpaid Members”).  The number of Unpaid Members at the NAPW Network segment is significantly higher than the number of Paid Members. We believe that a higher number of NAPW Network Unpaid Members will result in increased conversions to Paid Members, which will further translate into increased revenues through membership subscriptions. 

The following table sets forth the number of registered users on our PDN Network and total membership on our NAPW Network as of the periods presented:
 As of September 30, Change 
 2017 2016 (Percent) 
 (in thousands)   
PDN Network Registered Users (1)  9,975   8,951   11.4%
NAPW Network Total Membership (2)  952   880   8.2%
(1)
The number of registered users may be higher than the number of actual users due to various factors.  For more information, see “Risk Factors—The reported number of our registered users is higher than the number of actual individual users, and a substantial majority of our visits are generated by a minority of our users  ” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016 (the “Annual Report”).
(2)Includes both Paid Members and Unpaid Members.
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stock.

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)
Results of Operations
Revenues

Total Revenues
The following tables set forth our revenues for the periods presented. The period-to-period comparison of financial results is not necessarily indicative of future results.
 Three Months Ended     
 September 30, Change Change 
 2017 2016 (Dollars) (Percent) 
 (in thousands)     
Revenues        
Membership fees and related services $2,205  $3,748  $(1,543)  (41.2)%
Lead generation  1,370   1,554   (184)  (11.8)%
Recruitment services  694   955   (261)  (27.3)%
Products sales and other  18   53   (35)  (66.0)%
Education and training  69   -   69   100.0%
Consumer advertising and marketing solutions  65   50   15   30.0%
Total revenues $4,421  $6,360  $(1,939)  (30.5)%
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 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)%
Total revenues decreased $1,939,000, or 30.5% for the three months ended September 30, 2017, compared to the same prior year period, and $5,234,000, or 25.5%, for the nine months ended September 30, 2017, compared to the same prior year period, due primarily to decrease in membership fees and products sales as the management focuses on cost reduction efforts, including the reductioninformation in the salesforce.
Revenuestables that follow are reconciled to comparable information presented using GAAP, derived by Segment
The following table sets forth each operating segment’s revenuesadjusting amounts determined in accordance with GAAP for the periods presented. The period-to-period comparison is not necessarily indicative of future results.
 Three Months Ended     
 September 30, Change Change 
 2017  2016 (Dollars) (Percent) 
 (in thousands)     
NAPW Network $2,223  $3,801  $(1,578)  (41.5)%
PDN Network  759   1,005   (246)  (24.5)%
Noble Voice  1,370   1,554   (184)  (11.8)%
China  69   -   69   100.0%
Total revenues $4,421  $6,360  $(1,939)  (30.5)%
 Nine Months Ended     
 September 30, Change Change 
 2017  2016 (Dollars) (Percent) 
 (in thousands)     
NAPW Network $7,556  $13,592  $(6,036)  (44.4)%
PDN Network  2,166   2,472   (306)  (12.4)%
Noble Voice  4,699   4,490   209   4.7%
China  899   -   899   100.0%
Total revenues $15,320  $20,554  $(5,234)  (25.5)%
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During the three months ended September 30, 2017, our NAPW Network generated $2,223,000 in revenue from membership fees and related services and product sales, compared to $3,801,000 for the same periodcertain items presented in the prior year, a decrease of $1,578,000, or 41.5%.  During the nine months ended September 30, 2017, our NAPW Network generated $7,556,000 in revenue from membership fees and related services and product sales and other, compared to $13,592,000 for the same period in the prior year, a decrease of $6,036,000, or 44.4%. accompanying selected operating statement data.

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.

During the three months ended September 30, 2017, our PDN Network generated $759,000 in revenue, compared to $1,005,000 for the same period in the prior year, a decrease of $246,000, or 24.5%. During the nine months ended September 30, 2017, our PDN Network generated $2,166,000 in revenue, compared to $2,472,000 for the same period in the prior year, a decrease of $306,000, or 12.4%. While Q1 2017 saw a modest uptick in sales and revenue generation over the prior year’s performance, Q2, and Q3 experienced a decline.  The sales team experienced a reduction in staff with a corresponding drop in revenue generation.  Additionally, sales strategy and operational changes implemented in Q2 are expected to result in an increase in revenue during Q4 and beyond.
During the three months ended September 30, 2017, our Noble Voice business generated $1,370,000 of lead generation revenue, compared to $1,554,000 for the same period in the prior year, a decrease of $184,000 or 11.8%. The decrease was caused by an unexpected loss of a business partner at the end of Q2, which disrupted our business and resulted in a reduction in staff while the business re-strategized. During the nine months ended September 30, 2017, our Noble Voice business generated $4,699,000 of lead generation revenue, compared to $4,490,000 for the same period in the prior year, an increase of $209,000 or 4.7%. The increase was mainly attributable to sales increase in the first half of 2017 due to an improvement in the private education marketplace, coupled with strategic internal initiatives to increase volume and better lead quality.

We started our operations in China in Q1 2017. During the three months ended September 30, 2017, China Operations generated $69,000 of revenue. During the nine months ended September 30, 2017, China Operations generated $899,000 of revenue. During the third quarter of 2017, we developed 18 IAW members with total membership fees of $278,000, which we recognize ratably over the membership period (ranging from 12 to 36 months).
Costs and Expenses
The following tables set forth our costs and expenses for the periods presented. The period-to-period comparison of financial results is not necessarily indicative of future results.

 Three Months Ended     
 September 30, Change Change 
 2017 2016 (Dollars) (Percent) 
 (in thousands)     
Costs and expenses:        
Cost of revenue$658 $745 $(87) (11.7)%
Sales and marketing 2,276  3,064  (788) (25.7)%
General and administrative 3,237  3,011  226  7.5%
Litigation settlement 155  -  155  100.0%
Depreciation and amortization 807  820  (13) (1.6)%
Total costs and expenses$7,133 $7,640 $(507) (6.6)%
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During the three months ended September 30, 2017, total costs and expenses were $7,133,000, compared to $7,640,000 for same period in the prior year, a decrease of $507,000 or 6.6%. The decrease is mainly attributable to $788,000 or 25.7% decrease in sales and marketing expense mostly due to reduction in sales force, a decrease of $87,000 or 11.7% in cost of revenue, and a slight decrease of $13,000 or 1.6% in depreciation and amortization. The decrease in expenses was partially offset by an decrease of $226,000 or 7.5% in general and administrative expense, and $155,000 litigation settlement expenses in Q3 2017, of which $146,000 was accrued for the potential back pay related to the “NLRB” legal proceeding (please refer to “Legal Proceedings” for details).

 Nine Months Ended     
 September 30, Change Change 
 2017 2016 (Dollars) (Percent) 
 (in thousands)     
Costs and expenses:        
Cost of revenue$2,193 $2,434 $(241) (9.9)%
Sales and marketing 8,115  10,314  (2,199) (21.3)%
General and administrative 11,323  8,928  2,395  26.8%
Litigation settlement 155  500  (345) (69.0)%
Goodwill impairment charge 9,920  -  9,920  100.0%
Depreciation and amortization 2,444  2,498  (54) (2.2)%
Total costs and expenses$34,150 $24,674 $9,476  38.4%
During the nine months ended September 30, 2017, total costs and expenses were $34,150,000, compared to $24,674,000 for the same period in the prior year, and increase of $9,476,000, or 38.4%. The increase is primarily a result of goodwill impairment charge of $9,920,000, an increase of $2,395,000 or 26.8% in general and administrative expense, partially offset by a decrease of $2,199,000 or 21.3% in sales and marketing, a decrease of $345,000 litigation settlement, a decrease of $241,000 or 9.9% in cost of revenue and a decrease of $54,000 or 2.2% in depreciation and amortization.

Cost of revenue: Cost of revenues during the three months ended September 30, 2017 were $658,000, compared to $745,000 for the same period in the prior year, a decrease of $87,000, or 11.7%, mainly attributable to a decrease of $85,000 in the PDN segment and a decrease of $44,000 in the Noble Voice segment due to decline in revenue, partially offset by an increase of $70,000 related to our China Operations that was launched in March 2017. Cost of revenues during the nine months ended September 30, 2017 were $2,193,000, compared to $2,434,000 for the same period in the prior year, a decrease of $241,000, or 9.9%, mainly attributable to a decrease of $271,000 in the PDN segment as a result of improved efficiencies in spending, and a decrease of $221,000 in the Noble Voice segment as a result of improved efficiencies in lead data sourcing and spending, partially offset by an increase of $338,000 related to our China Operations that was launched in March 2017.

Sales and marketing expense: Sales and marketing expense during the three months ended September 30, 2017 were $2,276,000, compared to $3,064,000 for the same period in the prior year, a decrease of $788,000, or 25.7%. Sales and marketing during the nine months ended September 30, 2017 were $8,115,000, compared to $10,314,000 for the same period in the prior year, a decrease of $2,199,000, or 21.3%. The decreasesadjustments for the three and nine months ended September 30, 2017 are primarily due2021 relate to reduction in the NAPW segment sales force from 64 sales representatives as of September 30, 2016 to 51 as of September 30, 2017. 
Generalstock-based compensation, litigation settlement reserves, depreciation and administrativeamortization, interest and other income and income tax expense: General and administrative expense for the three months ended September 30, 2017 was $3,237,000, compared to $3,011,000 for the same period in the prior year, an increase of 226,000 or 7.5% (benefit).

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.

Litigation settlement: Litigation settlementadjustments for the three and nine months ended September 30, 2017 represents primarily $146,000 expense that was accrued for the potential back-pay related2022 relate to the “NLRB” legal proceeding (please refer to “Legal Proceedings” for details). Litigationstock-based compensation, litigation settlement for the nine months ended September 30, 2016 represents the expense related to a $500,000 settlement of a class action lawsuit that was recorded during the first quarter of 2016.
Goodwill impairment charge: As a result of the recurring operating losses incurred in NAPW since its acquisition in September 2014, the Company undertook a review of the carrying amount of its goodwill as of June 30, 2017. Accordingly, the Company recorded a goodwill impairment charge of $9,920,000 for the nine months ended September 30, 2017. No goodwill impairment charge was recorded during the three and nine months ended September 30, 2016.

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

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

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

The effective income tax rate for the three months ended September 30, 2017 and 2016 was 7.9% and 32.9%, respectively, resulting in a $213,000 and $624,000 income tax benefit, respectively. The effective income tax rate for the nine months ended September 30, 2017 and 2016 was 6.2% and 25.7%, respectively, resulting in a $1,160,000 and $1,218,000 income tax benefit, respectively. The difference in the effective income tax rate for the three months ended September 30, 2017, compared to the three months ended September 30, 2017, is mainly attributable to the change in the valuation allowance. The difference in the effective income tax rate for the nine months ended September 30, 2017, compared to the nine months ended September 30, 2017, is mainly attributable to the impairment charge recognized on NAPW’s goodwill and the change in the valuation allowance. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred income tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based on the consideration of these items, management has determined that enough uncertainty exists relative to the realization of the deferred income tax asset balances to warrant the application of a valuation allowance as of September 30, 2017 and December 31, 2016.
Net Loss
The following table sets forth each operating segment’s net loss for the periods presented. The period-to-period comparison is not necessarily indicative of future results.
 Three Months Ended       
 September 30,  Change  Change 
 2017  2016  (Dollars)  (Percent) 
 (in thousands)       
NAPW Network$$(1,528) $(604) $(924)  153.0%
PDN Network (218)  (513)  295   (57.5)%
Noble Voice (419)  (156)  (263)  168.6%
China (324)  -   (324)  100.0%
Consolidated Net Loss$(2,489) $(1,273) $(1,216)  95.5%

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

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

During the three and nine months ended September 30, 2017, we incurred a net loss of $1,528,000 and $14,026,000, respectively, attributable to the NAPW Network segment, compared to net loss of $604,000 and $1,616,000 for the three and nine months ended September 30, 2016, respectively. The increase in net loss for the three months ended September 30, 2017 was primarily driven by a decrease of $1,578,000 in NAPW segment revenues from membership fees, related services and product sales period-over-period, partially offset by a decrease of $734,000 in sales and marketing expenses. The $12,410,000 increase in net loss for the nine months ended September 30, 2017 was primarily driven by a decrease of $6,036,000 in NAPW segment revenues from membership fees, related services and product sales period-over-period, along with NAPW segment goodwill impairment charge of $9,920,000, and partially offset by a decrease of $2,479,000 in sales and marketing expenses.


During the three months ended September 30, 2017, we incurred a net loss of $218,000, attributable to the PDN Network segment, compared to net loss of $513,000 for the three months ended September 30, 2016, a decrease of $295,000, or 57.5%. The decrease in net loss is mainly a result of $216,000noncontrolling interest, expense, and a loss of $401,000 as a result of change in fair value of warrant liability, both recorded during three months ended September 30, 2016, partially offset by a $246,000 decrease in revenues. During the nine months ended September 30, 2017, we incurred a net loss of $1,865,000, compared to net loss of $1,083,000 for the nine months ended September 30, 2016, an increase of $782,000, or 72.2%. The increase in net loss was primarily attributable to $616,000 increase in non recurring legal expense, $513,000 increase in stock based compensation, along with a $306,000 decrease in revenues, partially offset by a $216,000 interest expense, and $401,000 change in fair value of warrant liability, both recorded during three months ended September 30, 2016.

During the three and nine months ended September 30, 2017, we incurred a net loss of $419,000 and $1,358,000, respectively, attributable to the Noble Voice segment, compared to $156,000 and $820,000 for the three and nine months ended September 30, 2016, respectively. The increase in net loss was primarily attributable to by higher corporate overhead allocation.
Liquidity and Capital Resources
The following table summarizes our liquidity and capital resources as of September 30, 2017 and December 31, 2016, respectively, and is intended to supplement the more detailed discussion that follows:
 September 30,  December 31, 
2017  2016 
 (in thousands) 
Cash and cash equivalents$2,822  $6,069 
Working capital (deficiency)$(1,475) $1,000 
Our principal sources of liquidity are our cash and cash equivalents, including the net proceeds from the recent issuances of Common Stock to CFL. As of September 30, 2017 and December 31, 2016, we had working capital (deficiency) of approximately $(1,475,000) and $1,000,000.  During the nine months ended September 30, 2017, we generated a net loss of approximately $17,665,000 (including a non-cash impairment charge of $9,920,000), used cash in operations of approximately $6,454,000, which includes $1,450,000 paid to LinkedIn related to litigation that was settled in 2016, and we expect that we will continue to generate operating losses for the foreseeable future. 

We are closely monitoring operating costs and capital requirements and have developed an operating plan for 2017. We have had cost reductions in the areas of staffing levels and operating budgets.
On November 7, 2016, we consummated the issuance and sale of 1,777,417 shares of Common Stock to CFL, at a price of $9.60 per share. We received total gross proceeds of approximately $17.1 million from the Share Issuance, or $14.1 million after giving effect to the payment for 312,500 shares of Common Stock tendered and not withdrawn in the Tender Offer. We received approximately $9.0 million in net proceeds from the Share Issuance, after repayment of outstanding indebtedness and the payment of transaction-related expenses at the closing.
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On January 18, 2017, we sold 312,500 shares of Common Stock to CFL at a price of $9.60 per share, for total gross proceeds of $3,000,000, or $2,821,000 after giving effect to the payment of transaction-related expenses.

We currently anticipate that our available funds and cash generated from operations will be sufficient to meet our working capital requirements through November of 2018.  Since the Company expects that it will continue to generate operating losses for the mid-term, the Company may require additional funding sources or need to further decrease expenses in order 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.

We collect NAPW Network membership fees generally at the commencement of the membership term or at renewal periods thereafter. The memberships we sell are for one year and we defer recognition of the revenue from membership sales and renewals and recognize it ratably over the twelve month period. Our PDN Network also sells recruitment services to employers, generally on a one year contract basis. This revenue is also deferred and recognized over the life of the contract. Our payment terms for PDN Network and Noble Voice customers range from 30 to 60 days. We consider the difference between the payment terms and payment receipts a result of transit time for invoice and payment processing and to date have not experienced any liquidity issues as a result of the payments extending past the specified terms. Cash and cash equivalents and short term investments consist primarily of cash on deposit with banks and investments in money market funds, corporate and municipal debt and U.S. government and U.S. government agency securities. 
 Nine Months Ended 
 September 30, 
 2017  2016 
 (in thousands) 
Cash provided by (used in):     
Operating activities$(6,454) $(2,489)
Investing activities (294)  694 
Financing activities 3,502   239 
Effect of exchange rate fluctuations on cash and cash equivalents (1)  - 
Net decrease in cash and cash equivalents$(3,247) $(1,556)

Net Cash Used in Operating Activities

For the nine months ended September 30, 2017, net cash used in operating activities was $6,454,000. We had a net loss of $17,665,000, a deferred income tax benefit of $1,160,000, which was offset by non-cash NAPW goodwill impairment charge of $9,920,000, depreciation and amortization, of $2,444,000interest and stock-based compensationother income and income tax expense of $731,000. Changes in operating assets and liabilities used $879,000 of cash during the nine months ended September 30, 2017, consisting primarily of decreases in deferred revenue and accounts payable, partially offset by increases in accrued expenses and decreases in accounts receivable and prepayments.(benefit).

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

Net Cash (Used in) Provided by Investing Activities
Net cash used in investing activities for the nine months ended September 30, 2017 was $294,000, consisting of $123,000 invested to develop technology, $154,000 in purchases of property and equipment, partially offset by $18,000 of returned security deposits.

Net cash provided by investing activities for the nine months ended September 30, 2016 was $694,000, consisting of $500,000 of proceeds from the maturities of short-term investments and $194,000 of returned security deposits.
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Net Cash Provided by Financing Activities
Net cash provided by financing activities during the nine months ended September 30, 2017 was $3,502,000, consisting of the $3,000,000 in gross proceeds from the January 18, 2017 issuance, $646,000 refund of merchant reserve, partially offset by the $144,000 payment of offering costs to third-party professionals.

Net cash provided by financing activities during the nine months ended September 30, 2016 was $239,000, consisting of $1,943,000 of proceeds drawn on our Master Credit Facility, partially offset by $488,000 of costs related to securing that facility, payment of $1,049,000 of costs related to the CFL Transaction and $166,000 due to the increase in the merchant reserve for NAPW Network.

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

Pursuant to the provisions of the Jumpstart Our Business Startups Act (the “JOBS Act”), as an “emerging growth company,” we may delay adoption of new or revised accounting standards applicable to public companies until the earlier of the date that (i) we are no longer an emerging growth company or (ii) we affirmatively and irrevocably opt out of the extended transition period for complying with such new or revised accounting standards.  We have elected to take advantage of the benefits of this extended transition period.  Our consolidated financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.  Upon issuance of new or revised accounting standards that apply to our consolidated financial statements, we will disclose the date on which adoption is required for non-emerging growth companies and the date on which we will adopt the recently issued accounting guidelines.

Our management’s discussion and analysis of financial condition and results of operations is based on our 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.

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

While our significant accounting policies and estimates as compared to the critical accounting policies and 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.

Special Note Regarding Forward-Looking Statements
This Quarterly Report contains “forward-looking statements” within the meaning of Section 27A

Accounts Receivable

Our policy is to reserve for uncollectible accounts based on our best estimate of the Securities 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:

·our beliefs regarding our ability to create enhanced value for our members and customers;
·our beliefs regarding the relation between the number of members or registered users and our revenues;
·our expectations regarding future changes in our salesforce;
·our expectations regarding the changes in revenues in 2017, 2018 and 2019;
·our expectations regarding future increases in sales and marketing costs and general and administrative expenses; and
·our beliefs regarding our liquidity requirements, the availability of cash and capital resources to fund our business in the future and intended use of liquidity.
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These forward-looking statements reflect our current views about future events and are subject to risks, uncertainties and assumptions.  We wish to caution readers that certain important factors may have affected and couldany non-controlling interest in the future affect our actual resultsacquiree; b) recognizes and could cause actual resultsmeasures the goodwill acquired in the business combination or a gain from a bargain purchase; and c) determines what information to differ significantlydisclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. Accounting for acquisitions requires the Company to recognize, separately from those expressed in any forward-looking statement.  The most important factors that could prevent us from achieving our goals, and causegoodwill, the assumptions underlying forward-looking statementsassets acquired and the actual results to differ materially from those expressed in or implied by those forward-looking statements include, but are not limited to, the following:
·our ability to raise funds in the future to support operations failure to realize synergies and other financial benefits from mergers and acquisitions within expected time frames, including increases in expected costs or difficulties related to integration of merger and acquisition partners;
·inability to identify and successfully negotiate and complete additional combinations with potential merger or acquisition partners or to successfully integrate such businesses;
·our history of operating losses;
·we may not be able to reverse the significant decline in our revenues;
·our limited operating history in a new and unproven market;
·increasing competition in the market for online professional networks;
·our ability to comply with increasing governmental regulation and other legal obligations related to privacy;
·our ability to adapt to changing technologies and social trends and preferences;
·our ability to attract and retain a sales and marketing team, management and other key personnel and the ability of that team to execute on the Company’s business strategies and plans;
·our ability to obtain and maintain protection for our intellectual property;
·any future litigation regarding our business, including intellectual property claims;
·general and economic business conditions; and
·legal and regulatory developments.
The foregoing list of important factors may not include all such factors.  You should consult other disclosures made by the Company (such as in our other filings with the SEC or in company press releases) for additional factors, risks and uncertainties that may cause actual results to differ materially from those projected by the Company.  Please refer to Part II, Item 1A, “Risk Factors” of this Quarterly Report and to Part I, Item 1A, “Risk Factors” of our 2016 Annual Report for additional information regarding factors that could affect our results of operations, financial condition and cash flow.  You should consider these factors, risks and uncertainties when evaluating any forward-looking statements and you should not place undue reliance on any forward-looking statement.  Forward-looking statements represent our viewsliabilities assumed at their acquisition-date fair values. Goodwill as of the acquisition date is measured as the excess of this Quarterly Report,consideration transferred and the net of the acquisition-date fair values of the assets acquired and the liabilities assumed. While the Company uses its best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date, the estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the condensed consolidated statements of comprehensive loss.

Revenue Recognition

Our principal sources of revenue are recruitment revenue, consumer marketing and consumer advertising revenue, membership subscription fees, and 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.

ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
alliance sales relationship.

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
Disclosure Controls

ITEM 4 – CONTROLS AND PROCEDURES

Evaluation of disclosure controls and Procedures

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.

Changes in Internal Control over Financial Reporting
During the third quarter of 2017, we continued to undertake certain initiatives to improve and remediate material weaknesses related to our internal control over financial reporting thaton September 30, 2022.

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.

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We anticipate that the actions described above and resulting improvements in controls will strengthen the Company’s internal control over financial reporting and will, over time, address the related material weaknesses.  However, because many of the controls in the Company’s system of internal controls rely extensively on manual review and approval, the successful operation of these controls may be required for several quarters prior to management being able to conclude that the material weaknesses have been remediated.
PART II

ITEM 1.LEGAL PROCEEDINGS38

The Company has previously disclosed that it

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.

The Company and itsour wholly-owned subsidiary, NAPW, Inc., are parties to a proceeding captioned In reDeborah Bayne, et al. vs. NAPW, Inc. and Professional Diversity Network, Cases 31-CA-159810 and 31-CA-162904,Inc., No. 18-cv-3591 (E.D.N.Y.), filed with the National Labor Relations Board (“NLRB”) inon June 201520, 2018 and alleging violations of the NationalFair Labor RelationsStandards Act (“NLRA”)and certain provisions of the New York Labor Law. Plaintiffs are seeking monetary damages and equitable relief. We dispute that we or our subsidiary violated the applicable laws or that either entity has any liability and intend to vigorously defend against these claims. The matter is in the final stages of discovery, and we have completed depositions of relevant witnesses. During the first quarter of 2020, we recorded a $450,000 litigation settlement reserve in the event of an unfavorable outcome in this proceeding. In November 2020, both parties entered into mediation proceedings, but a settlement was not reached. While the COVID-19 pandemic has caused delays to the litigation, it is expected that these delays will decrease as the disruption caused by the pandemic subsides.

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.


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

The Company is a party to a proceeding captioned Wei Aniton v. Professional Diversity Network, Inc., No. 440-2017-04717 (EEOC), filed with the Equal Employment Opportunity Commission (“EEOC”) on July 6, 2017 and alleging violations of Title VII and the Equal Pay Act of 1963, where employee alleges she was discriminated by the Company due to her race and her sex and was paid less than similarly situated white males. On September 20, 2017, the EEOC issued its Notice of Dismissal and Notice of Rights, effectively terminating this matter before the EEOC.
In a letter dated October 12, 2017, White Winston Select Asset Funds (“White Winston”) threatened assertion of a claim against the Company.  The letter alleges that White Winston suffered $2,241,958 in damages as a result of the Company’s alleged conduct that caused a delay in White Winston’s ability to sell shares in the Company during a period when the Company’s stock price was generally falling.  The Company denies liability for any such claim.
ITEM 1A.RISK FACTORS
The information presented below updates, and should be read in conjunction with, the risk factors and information disclosed in our 2016 Annual Report.
The proceeds from the January 2017 Share Issuance may not be sufficient to implement our productivity improvement initiatives.

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

CFL beneficially owns 54.64% of our outstanding shares of Common Stock on a fully diluted basis.  Five out of nine members of our Board of Directors are nominated by CFL. CFL may not exercise its rights as our controlling stockholder in a manner consistent with the interests of our other stockholders. By virtue of its ownership of a majority of our Common Stock and the power to designate the majority of our Board of Directors, CFL is in a position to influence the Company’s actions for its own benefit.
Public sales of a substantial number of shares of our Common Stock by CFL could cause our stock price to fall.

CFL beneficially owns 54.64% of our outstanding shares of Common Stock on a fully diluted basis.  Pursuant to the Stockholders’ Agreement, dated November 7, 2016, by and among  the Company, CFL and CFL shareholders, CFL, CFL shareholders and their respective affiliates (collectively, the “ CFL Group ”) are subject to a one-year lock-up with respect to all shares of Common Stock owned by members of the CFL Group, subject to certain exceptions.  However, after the one-year period, it may generally sell its shares in the public markets, subject to applicable securities laws.  Furthermore, we have granted CFL and the CFL shareholders certain registration rights that provide them the ability to register for resale, from time to time and in accordance with the terms of the registration rights agreement, all shares of Common Stock owned by members of the CFL Group, subject to certain exceptions.  Sales of a substantial number of shares of our Common Stock in the public market or the perception that these sales might occur, could depress the market price of our Common Stock and could have a material adverse effect on its business, financial condition or results of operations.

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.

Because we have a majority stockholder, our public float is more limited2021 Annual Report on Form 10-K, which could impact your abilitymaterially affect our business, financial condition or future results. Additional risks and uncertainties not currently known to sell your sharesus or that we currently deem to be immaterial also may materially and could result in increased volatility inadversely affect our stock price.business, financial condition and/or operating results.

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CFL beneficially owns 54.64% of the

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.

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
We did not sell any equity securities in transactions that were not registered under the Securities Act of 1933 during the three monthsnine-month period ended September 30, 2017.
ITEM 3.2022, 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.

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None.

ITEM 6. EXHIBITS

ITEM 4.10.1MINE SAFETY DISCLOSUREStock Purchase Agreement, dated September 27, 2022 between Professional Diversity Network, Inc. and Koala Malta Limited (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed September 30, 2022).
10.2Shareholders’ Agreement, dated September 27, 2022, among Professional Diversity Network, Inc., Koala Malta Limited and Koala Crypto Limited (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed September 30, 2022).
10.3Charge over Shares, dated September 27, 2022, relating to Koala Crypto Limited (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed September 30, 2022).
10.4Guarantee and Indemnity, dated September 27, 2022, by Koala Capital Limited (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed September 30, 2022).
Not applicable.

ITEM 5.31.1OTHER INFORMATION
None.
ITEM 6.EXHIBITS
31.1
Certification of Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a) or Rule 15d- 14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2
Certification of Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a) or Rule 15d- 14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.101.INSINSInline XBRL Instance Document
101.101.SCHSCHInline XBRL Taxonomy Extension Schema Document
101.101.CALCALInline XBRL Taxonomy Extension Calculation Linkbase Document
101.101.DEFDEFInline XBRL Taxonomy Extension Definition Linkbase Document
101.101.LABLABInline XBRL Taxonomy Extension Labels Linkbase Document
101.101.PREPREInline XBRL Taxonomy Extension Presentation Linkbase Document
104Cover Page Interactive Data File (embedded within the Inline XBRL document)

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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.

PROFESSIONAL DIVERSITY NETWORK, INC.
Date: November 14, 2022By:/s/ Larry Aichler
Name:Larry Aichler
Date:            November 13, 2017           By:Title:/s/ Jiangping (Gary) Xiao
Name:Jiangping (Gary) Xiao
Title:
Chief Financial Officer

(On behalf of the Registrant and as principal financial
officer and principal accounting officer)
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31
EXHIBIT INDEX

31.1
Certification of Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a) or Rule 15d- 14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2
Certification of Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a) or Rule 15d- 14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS XBRL Instance Document
101.SCH XBRL Taxonomy Extension Schema Document
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF XBRL Taxonomy Extension Definition Linkbase Document
101.LAB XBRL Taxonomy Extension Labels Linkbase Document
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document
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