UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

~~[X]~~☒

QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, ~~2020~~2021

~~[ ]~~☐

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

For the transition period from ________ to________

Commission file number: 001-35824

Professional Diversity Network, Inc.

(Exact name of Registrant as Specified in Its Charter)

Delaware		80-0900177
(State or Other Jurisdiction of Incorporation or Organization)		(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 Code)

(312) 614-0950

(Registrant’s telephone number, including area code)

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

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

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

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ~~[ ]~~☐ No ~~[X]~~☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes ~~[ ]~~☐ No ~~[X]~~☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ~~[X]~~☒ 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 ~~[X]~~☒ 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 filer,” “accelerated filer” and “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check One):

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

There were ~~12,819,843~~ 15,069,485shares outstanding of the registrant’s common stock as of August ~~13, 2020.~~16, 2021.

Note Regarding Forward-Looking Statements

This Quarterly Report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements concern expectations, beliefs, projections, plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. Specifically, this Quarterly Report contains forward-looking statements regarding:

	●	our beliefs regarding our ability to capture and capitalize on market trends;
	●	our expectations on the future growth and financial health of the online diversity recruitment industry and the industry participants, and the drivers of such growth;
	●	our expectations regarding continued membership growth;
	●	our beliefs regarding the increased value derived from the synergies among our segments; and
	●	our beliefs regarding our liquidity requirements, the availability of cash and capital resources to fund our business in the future and intended use of liquidity.

These forward-looking statements reflect our current views about future events and are subject to risks, uncertainties and assumptions. We wish to caution readers that certain important factors may have affected and could in the future affect our actual results and could cause actual results to differ significantly from those expressed in any forward-looking statement. The most important factors that could prevent us from achieving our goals, and cause the assumptions underlying forward-looking statements and the actual results to differ materially from those expressed in or implied by those forward-looking statements include, but are not limited to, the following:

	●	our ability to raise funds in the future to support operations failure to realize synergies and other financial benefits from mergers and acquisitions within expected time frames, including increases in expected costs or difficulties related to integration of merger and acquisition partners;
	●	inability to identify and successfully negotiate and complete additional combinations with potential merger or acquisition partners or to successfully integrate such businesses;
	●	our history of operating losses;
	●	our limited operating history in a new and unproven market;
	●	increasing competition in the market for online professional networks;
	●	our ability to comply with increasing governmental regulation and other legal obligations related to privacy;
	●	our ability to adapt to changing technologies and social trends and preferences;
	●	our ability to attract and retain a sales and marketing team, management and other key personnel and the ability of that team to execute on the Company’s business strategies and plans;
	●	our ability to obtain and maintain intellectual property protection for our intellectual property;
	●	any future litigation regarding our business, including intellectual property claims;
	●	general and economic business conditions; and
	●	legal and regulatory developments.

The foregoing list of important factors may not include all such factors. You should consult other disclosures made by the Company (such as in our other filings with the SEC or in company press releases) for additional factors, risks and uncertainties that may cause actual results to differ materially from those projected by the Company. Please refer to Part I, Item 1A, “Risk Factors” of our ~~2019~~2020 Annual Report for additional information regarding factors that could affect our results of operations, financial condition and cash flow. You should consider these factors, risks and uncertainties when evaluating any forward-looking statements and you should not place undue reliance on any forward-looking statement. Forward-looking statements represent our views as of the date of this Quarterly Report, and we undertake no obligation to update any forward-looking statement to reflect the impact of circumstances or events that arise after the date of this Quarterly Report.

PROFESSIONAL DIVERSITY NETWORK, INC.

FORM 10-Q

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, ~~2020~~2021

TABLE OF CONTENTS

	PAGE
PART I

ITEM 1. FINANCIAL STATEMENTS	4
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	2325
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	3538
ITEM 4 CONTROLS AND PROCEDURES	3538

PART II

ITEM 1 LEGAL PROCEEDINGS	3641
ITEM 1A RISK FACTORS	3741
ITEM 2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	3742
ITEM 3 DEFAULTS UPON SENIOR SECURITIES	3742
ITEM 4 MINE SAFETY DISCLOUSRES	3742
ITEM 5 OTHER INFORMATION	3742
ITEM 6 EXHIBITS	3742

Item 1. FINANCIAL STATEMENTS

Professional Diversity Network, Inc. and Subsidiaries

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

June 30, 2021 December 31, 2020
(Unaudited)
Current Assets:
Cash and cash equivalents $ 2,507,585 $ 2,117,569
Accounts receivable, net 1,078,826 1,005,482
Incremental direct costs 39,102 36,212
Prepaid expense and other current assets 383,021 355,260
Current assets from discontinued operations 4,600 6,898
Total current assets 4,013,134 3,521,421

Property and equipment, net 12,532 10,382
Capitalized technology, net 30,540 25,867
Goodwill 339,451 339,451
Intangible assets, net 338,074 376,178
Right-of-use assets 457,492 487,677
Merchant reserve 380,849 760,849
Security deposits 126,340 66,340
Long-term assets from discontinued operations 205,813 3,085,178
Total assets $ 5,904,225 $ 8,673,343

Current Liabilities:
Accounts payable $ 376,142 $ 728,379
Accrued expenses 1,672,077 1,626,164
Deferred revenue 2,223,384 1,901,129
Lease liability, current portion 77,100 46,526
Current liabilities from discontinued operations 402,203 375,276
Total current liabilities 4,750,906 4,677,474

Lease liability, non-current portion 448,932 463,998
Deferred tax liability 169,416 186,039
Total liabilities 5,369,254 5,327,511

Commitments and contingencies - -

Stockholders’ Equity
Common stock, $0.01 par value; 45,000,000 shares authorized, 13,598,897 shares and 12,820,891 shares issued as of June 30, 2021 and December 31, 2020, and 13,597,849 and 12,819,843 shares outstanding as of June 30, 2021 and December 31, 2020. 135,989 128,198
Additional paid in capital 94,861,394 95,985,080
Accumulated other comprehensive income 3,853 292,506
Accumulated deficit (94,429,148 ) (93,022,835 )
Treasury stock, at cost; 1,048 shares at June 30, 2021 and December 31, 2020 (37,117 ) (37,117 )
Total stockholders’ equity 534,971 3,345,832
Total liabilities and stockholders’ equity $ 5,904,225 $ 8,673,343
June 30, December 31,
2020 2019
(Unaudited)
Current Assets:
Cash and cash equivalents $ 858,875 $ 633,615
Accounts receivable, net 453,112 720,750
Incremental direct costs 16,876 33,258
Prepaid expense and other current assets 365,640 240,763
Current assets from discontinued operations 3,940 75,996
Total current assets 1,698,443 1,704,382

Property and equipment, net 8,546 21,188
Capitalized technology, net 54,177 95,884
Goodwill 339,451 339,451
Intangible assets, net 414,281 452,385
Right-of-use assets 14,326 93,251
Merchant reserve 760,849 760,849
Security deposits 15,033 15,033
Long-term assets from discontinued operations 2,846,658 3,109,200
Total assets $ 6,151,764 $ 6,591,623

Current Liabilities:
Accounts payable $ 856,976 $ 796,137
Accrued expenses 1,633,789 654,169
Deferred revenue 1,321,125 1,699,001
Short-term loan 162,770 -
Lease liability, current portion 16,016 105,083
Current liabilities from discontinued operations 323,276 564,044
Total current liabilities 4,313,952 3,818,434

Long-term loan 488,308 -
Deferred tax liability 202,833 221,254
Total liabilities 5,005,093 4,039,688

Commitments and contingencies

Stockholders’ Equity
Common stock, $0.01 par value; 45,000,000 shares authorized, 11,339,407 shares and 8,928,611 shares issued as of June 30, 2020 and December 31, 2019, and 11,338,359 and 8,927,563 shares outstanding as of June 30, 2020 and December 31, 2019 113,384 89,286
Additional paid in capital 93,000,285 91,126,784
Accumulated other comprehensive income 72,347 44,242
Accumulated deficit (92,002,228 ) (88,671,260 )
Treasury stock, at cost; 1,048 shares at June 30, 2020 and December 31, 2019 (37,117 ) (37,117 )
Total stockholders’ equity 1,146,671 2,551,935
Total liabilities and stockholders’ equity $ 6,151,764 $ 6,591,623
The accompanying notes are an integral part of these ~~condensed~~ consolidated financial statements.
4

Professional Diversity Network, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited)
2021 2020
Six Months Ended June 30,
2021 2020
Revenues:
Membership fees and related services $ 521,083 $ 737,239
Recruitment services 2,326,765 1,138,920
Products sales and other 3,339 3,330
Consumer advertising and marketing solutions 93,830 54,638
Total revenues 2,945,017 1,934,127

Costs and expenses:
Cost of revenues 521,201 343,397
Sales and marketing 1,300,499 984,075
General and administrative 2,429,639 3,734,923
Depreciation and amortization 58,683 99,849
Total costs and expenses 4,310,022 5,162,244

Loss from continuing operations (1,365,005 ) (3,228,117 )

Other income (expense)
Interest and other income 2,735 6,214
Other income (expense), net 2,735 6,214

Loss before income tax benefit (1,362,270 ) (3,221,903 )
Income tax benefit (17,043 ) (18,421 )
Loss from continuing operations (1,345,227 ) (3,203,482 )
Loss from discontinued operations (61,086 ) (127,486 )
Net loss $ (1,406,313 ) $ (3,330,968 )

Other comprehensive loss:
Net loss $ (1,406,313 ) $ (3,330,968 )
Foreign currency translation adjustment (288,653 ) 28,105
Comprehensive loss: $ (1,694,966 ) $ (3,302,863 )

Basic and diluted loss per share:
Continuing operations $ (0.10 ) $ (0.32 )
Discontinued operations $ (0.00 ) $ (0.01 )
Net loss $ (0.10 ) $ (0.33 )

Weighted average outstanding shares used in computing net loss per common share:
Basic and diluted 13,368,449 9,951,759
Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
Revenues:
Membership fees and related services $ 353,408 $ 633,914 $ 737,239 $ 1,428,453
Recruitment services 572,233 651,046 1,138,920 1,125,306
Products sales and other 1,899 1,143 3,330 3,955
Consumer advertising and marketing solutions 24,290 38,059 54,638 73,775
Total revenues 951,830 1,324,162 1,934,127 2,631,489

Costs and expenses:
Cost of revenues 169,920 226,925 343,397 410,584
Sales and marketing 459,106 469,377 984,075 1,165,144
General and administrative 2,074,069 1,174,289 3,734,923 2,252,189
Depreciation and amortization 47,848 217,334 99,849 434,517
Total costs and expenses 2,750,943 2,087,925 5,162,244 4,262,434

Loss from continuing operations (1,799,113 ) (763,763 ) (3,228,117 ) (1,630,945 )

Other income (expense)
Interest expense - (11,599 ) - (14,182 )
Interest and other income 5,550 376,068 6,214 376,068
Other income (expense), net 5,550 364,469 6,214 361,886

Loss before income tax benefit (1,793,563 ) (399,294 ) (3,221,903 ) (1,269,059 )
Income tax benefit (12,512 ) (10,236 ) (18,421 ) (75,869 )
Loss from continuing operations (1,781,051 ) (389,058 ) (3,203,482 ) (1,193,190 )
Loss from discontinued operations (57,821 ) (382,176 ) (127,486 ) (737,413 )
Net loss $ (1,838,872 ) $ (771,234 ) $ (3,330,968 ) $ (1,930,603 )

Other comprehensive loss:
Net loss $ (1,838,872 ) $ (771,234 ) $ (3,330,968 ) $ (1,930,603 )
Foreign currency translation adjustment (11,768 ) (9,349 ) 28,105 13,686
Comprehensive loss: $ (1,850,640 ) $ (780,583 ) $ (3,302,863 ) $ (1,916,917 )

Basic and diluted loss per share:
Continuing operations $ (0.16 ) $ (0.08 ) $ (0.32 ) $ (0.23 )
Discontinued operations $ (0.01 ) $ (0.08 ) $ (0.01 ) $ (0.14 )
Net loss $ (0.17 ) $ (0.16 ) $ (0.33 ) $ (0.37 )

Weighted average outstanding shares used in computing net loss per common share:
Basic and diluted 10,933,614 5,074,480 9,951,759 5,117,098
The accompanying notes are an integral part of these ~~condensed~~ consolidated financial statements.
5

Professional Diversity Network, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~OPERATIONS AND COMPREHENSIVE LOSS (Unaudited)
2021 2020
Three Months Ended June 30,
2021 2020
Revenues:
Membership fees and related services $ 257,878 $ 353,408
Recruitment services 1,151,685 572,233
Products sales and other 1,908 1,899
Consumer advertising and marketing solutions 48,694 24,290
Total revenues 1,460,165 951,830

Costs and expenses:
Cost of revenues 260,047 169,920
Sales and marketing 600,784 459,106
General and administrative 1,111,786 2,074,069
Depreciation and amortization 29,076 47,848
Total costs and expenses 2,001,693 2,750,943

Loss from continuing operations (541,528 ) (1,799,113 )

Other income (expense)
Interest and other income 1,850 5,550
Other income (expense), net 1,850 5,550

Loss before income tax expense (benefit) (539,678 ) (1,793,563 )
Income tax expense (benefit) 49,934 (12,512 )
Loss from continuing operations (589,612 ) (1,781,051 )
Loss from discontinued operations (46,012 ) (57,821 )
Net loss $ (635,624 ) $ (1,838,872 )

Other comprehensive loss:
Net loss $ (635,624 ) $ (1,838,872 )
Foreign currency translation adjustment 3,466 (11,768 )
Comprehensive loss: $ (632,158 ) $ (1,850,640 )

Basic and diluted loss per share:
Continuing operations $ (0.04 ) $ (0.16 )
Discontinued operations $ (0.00 ) $ (0.01 )
Net loss $ (0.04 ) $ (0.17 )

Weighted average outstanding shares used in computing net loss per common share:
Basic and diluted 13,472,385 10,933,614
Six Months Ended June 30,
2020 2019
Cash flows from operating activities:
Loss from continuing operations $ (3,203,482 ) $ (1,193,190 )
Adjustments to reconcile net loss from continuing operations to net cash used in operating activities - continuing operations:
Depreciation and amortization 99,849 434,517
Deferred tax benefit (18,421 ) (77,444 )
Amortization of right-of-use asset 78,925 75,271
Accretion of lease liability 2,217 5,872
Stock-based compensation expense 397,599 98,689
Litigation settlement reserve 708,422 -
Write-off of accounts payable - (375,997 )
Write-off of accounts payable
Write-off of property and equipment - 1,385
Recovery of bad debt expense - (2,025 )
Payment of lease obligations (91,284 ) (88,421 )
Changes in operating assets and liabilities, net of effects of discontinued operations: - -
Accounts receivable 267,638 386,898
Prepaid expenses and other current assets (124,877 ) 29,685
Incremental direct costs 16,382 (20,345 )
Accounts payable 60,839 (224,536 )
Accrued expenses 271,198 (99,631 )
Deferred revenue (377,876 ) (432,597 )
Net cash used in operating activities - continuing operations (1,912,871 ) (1,481,869 )
Net cash provided by operating actvities - discontinued operations 44,178 406,414
Net cash used in operating activities (1,868,693 ) (1,075,455 )

Cash flows from investing activities:
Costs incurred to develop technology (3,701 ) (2,500 )
Purchases of property and equipment (3,695 ) -
Net cash used in investing activities - continuing operations (7,396 ) (2,500 )
Net cash used in investing actvities - discontinued operations - -
Net cash provided used in investing activities (7,396 ) (2,500 )

Cash flows from financing activities:
Proceeds from the sale of common stock 1,500,000 1,597,815
Proceeds from short-term loan 651,078 -
Proceeds from short-term loan - related party 400,000
Repayment from short-term loan - related party (200,000 )
Repayment of note payable - related party - (292,882 )
Proceeds from line of credit - related party - 292,882
Net cash provided by financing activities - continuing operations 2,151,078 1,797,815
Net cash provided by (used in) financing actvities - discontinued operations - -
Net cash provided by financing activities 2,151,078 1,797,815

Effect of exchange rate fluctuations on cash and cash equivalents (49,729 ) 13,686
Net increase in cash and cash equivalents 225,260 733,546
Cash, cash equivalents, beginning of period 633,615 105,670
Cash and cash equivalents, end of period 858,875 839,216

Supplemental disclosures of other cash flow information:
Cash paid for income taxes $ - $ 8,594
The accompanying notes are an integral part of these ~~condensed~~ consolidated financial statements.
6

Professional Diversity Network, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (Unaudited)
Shares Amount Capital Deficit Shares Amount Income (Loss) Equity
Accumulated
Additional Other Total
Common Stock Paid in Accumulated Treasury Stock Comprehensive Stockholders’
Shares Amount Capital Deficit Shares Amount Income (Loss) Equity
Balance at January 1, 2021 12,819,843 $ 128,198 $ 95,985,080 $ (93,022,835 ) 1,048 $ (37,117 ) $ 292,506 $ 3,345,832

Sale of common stock 500,000 5,000 995,000 - - - - 1,000,000
Issuance of common stock 279,054 2,791 163,709 - - - - 166,500
Share-based compensation - - 309,329 - - - - 309,329
Adjustment from discontinued operations (2,591,724 ) (2,591,724 )
Translation adjustments - - - - - - (288,653 ) (288,653 )
Net loss - - - (1,406,313 ) - - - (1,406,313 )
Balance at June 30, 2021 13,598,897 $ 135,989 $ 94,861,394 $ (94,429,148 ) 1,048 $ (37,117 ) $ 3,853 $
534,971

Accumulated Accumulated
Additional Other Total Additional Other Total
Common Stock Paid in Accumulated Treasury Stock Comprehensive Stockholders’ Common Stock Paid in Accumulated Treasury Stock Comprehensive Stockholders’
Shares Amount Capital Deficit Shares Amount Income (Loss) Equity Shares Amount Capital Deficit Shares Amount Income (Loss) Equity
Balance at January 1, 2020 8,928,611 $ 89,286 $ 91,126,784 $ (88,671,260 ) 1,048.0 $ (37,117 ) $ 44,242 $ 2,551,935 8,928,611 $ 89,286 $ 91,126,784 $ (88,671,260 ) 1,048 $ (37,117 ) $ 44,242 $ 2,551,935

Sale of common stock 2,251,737 22,518 1,477,482 - - - - 1,500,000 2,251,737 22,518 1,477,482 - - - - 1,500,000
Issuance of vested restricted shares 158,011 1,580 (1,580 ) - - - - -
Issuance of common stock 158,011 1,580 (1,580 ) - - - - -
Share-based compensation - - 397,599 - - - - 397,599 - - 397,599 - - - - 397,599
Translation adjustments - - - - - - 28,105 28,105 - - - - - - 28,105 28,105
Net loss - - - (3,330,968 ) - - - (3,330,968 ) - - - (3,330,968 ) - - - (3,330,968 )
Balance at June 30, 2020 11,338,359 $ 113,384 $ 93,000,285 $ (92,002,228 ) 1,048 $ (37,117 ) $ 72,347 $ 1,146,671 11,338,359 $ 113,384 $ 93,000,285 $ (92,002,228 ) 1,048 $ (37,117 ) $ 72,347 $ 1,146,671
Common Stock Additional
Paid in Accumulated Treasury Stock Comprehensive Stockholders’
Shares Amount Capital Deficit Shares Amount Income (Loss) Equity
Balance at January 1, 2019 4,856,213 $ 48,562 $ 83,728,903 $ (84,826,796 ) 1,048 $ (37,117 ) $ (24,340 ) $ (1,110,788 )

Sale of common stock 737,031 7,370 1,590,445 - - - - 1,597,815
Conversion of note payable - related party 209,205 2,092 497,908 500,000
Issuance of common stock for settlement of acounts payable 30,640 306 98,664 98,970
Issuance of vested restricted shares 27,761 278 (278 ) -
Share-based compensation - - 98,689 - - - - 98,689
Translation adjustments - - - - - - 13,686 13,686
Net loss - - - (1,930,603 ) - - - (1,930,603 )
Balance at June 30, 2019 5,860,850 $ 58,608 $ 86,014,331 $ (86,757,399 ) 1,048 $ (37,117 ) $ (10,654 ) $ (732,231 )
The accompanying notes are an integral part of these ~~condensed~~ consolidated financial statements.
7

Professional Diversity Network, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
2021 2020
Six Months Ended June 30,
2021 2020
Cash flows from operating activities:
Loss from continuing operations $ (1,345,227 ) $ (3,203,482 )
Adjustments to reconcile net loss from continuing operations to net cash used in operating activities - continuing operations:
Depreciation and amortization 51,818 99,849
Deferred tax benefit (17,043 ) (18,421 )
Amortization of right-of-use asset 45,693 78,925
Accretion of lease liability - 2,217
Stock-based compensation expense 309,328 397,599
Litigation settlement reserve 75,000 708,422
Payment of lease obligations - (91,284 )
Reduction of merchant reserve 380,000 -
Changes in operating assets and liabilities, net of effects of discontinued operations:
Accounts receivable (73,344 ) 267,638
Prepaid expenses and other current assets (27,341 ) (124,877 )
Incremental direct costs (2,890 ) 16,382
Accounts payable (352,236 ) 60,839
Accrued expenses (29,086 ) 271,198
Deferred revenue 322,255 (377,876 )
Net cash used in operating activities - continuing operations (663,073 ) (1,912,871 )
Net cash provided by operating activities - discontinued operations (318 ) 44,178
Net cash used in operating activities (663,391 ) (1,868,693 )

Cash flows from investing activities:
Costs incurred to develop technology - (3,701 )
Purchases of property and equipment (20,357 ) (3,695 )
Payments for investment deposits
(60,000
) -
Net cash used in investing activities - continuing operations (80,357 ) (7,396 )
Net cash used in investing activities - discontinued operations - -
Net cash provided used in investing activities (80,357 ) (7,396 )

Cash flows from financing activities:
Proceeds from the sale of common stock 1,166,500 1,500,000
Proceeds from short-term loan - 651,078
Net cash provided by financing activities - continuing operations 1,166,500 2,151,078
Net cash provided by financing activities 1,166,500 2,151,078

Effect of exchange rate fluctuations on cash and cash equivalents (32,556 ) (49,729 )
Net increase (decrease) in cash and cash equivalents 390,016 225,260
Cash, cash equivalents, beginning of period 2,117,569 633,615
Cash and cash equivalents, end of period 2,507,585 858,875

Supplemental disclosures of other cash flow information:
Cash paid for income taxes $ - $ -
The accompanying notes are an integral part of these consolidated financial statements.
8
Professional Diversity Network, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. Basis of Presentation and Description of Business
The accompanying condensed consolidated financial statements have been prepared in conformity with U.S. GAAP pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) for interim financial information. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. 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 consolidated financial statements and notes thereto included in our ~~2019~~2020 Form 10-K.
Professional Diversity Network, Inc. is both the operator of the Professional Diversity Network (the “Company,” “we,” “our,” “us,” “PDN Network,” “PDN” or the “Professional Diversity Network”) and a holding company for NAPW, Inc., a 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)~~Queer (LGBTQ), and Students and Graduates seeking to transition from education to career. The networks’ purposes, among others, are to assist its registered users in their efforts to connect with like-minded individuals, identify career opportunities within the network and connect with prospective employers. The Company’s technology platform is integral to the operation of its business. The NAPW Network is networking organization for professional women, whereby its members can develop their professional networks, further their education and skills, and promote their business and career accomplishments. NAPW provides its members with opportunities to network and develop valuable business relationships with other professionals through its website, as well as at events hosted at its local chapters across the country.
In March 2020, our Board of Directors decided to suspend all China operations generated by the former CEO, Michael Wang. The results of China operations are presented in the ~~condensed~~ consolidated statements of operations and comprehensive loss as net loss from discontinued operations. On March 19, 2020, Jiangxi PDN Culture Media Co., Ltd. (“Jiangxi PDN”), a company established under the laws of the People’s Republic of China and a variable interest entity (VIE) controlled by Professional Diversity Network, Inc. (“PDN”), issued a Notice of Termination of the Agreement of Acquisition and Equity Transfer (the “Termination”). This Notice was exercised under Jiangxi PDN’s unilateral right and was delivered on March 19, 2020. Under the terms of the Termination, no additional due diligence shall be completed, any materials shall be returned to the respective owners, and there shall be no breakup fee or penalty associated with this Termination. We expect no further involvement in this matter.
2. Going Concern and Management’s Plans
At June 30, ~~2020,~~2021, the Company’s principal sources of liquidity were its cash and cash equivalents and the net proceeds from the sale of common stock during the ~~six months ended June 30, 2020.~~first quarter of 2021.
The Company had an accumulated deficit of ($~~92,002,228)~~ 94,429,148) at June 30, ~~2020.~~2021. During the three and six months ended June 30, ~~2020,~~2021, the Company generated a net loss from continuing operations of ($~~1,781,051)~~ 589,612) and ($~~3,203,482), and~~1,345,227). During the six months ended June 30, 2021, the Company used cash in continuing operations ~~for the six months~~ of ~~$1,912,871.~~ $663,073. At June 30, ~~2020,~~2021, the Company had a cash balance of ~~$858,875.~~$2,507,585. Total revenues were approximately ~~$952,000~~ $2,945,000 and ~~$1,934,000~~ $1,934,000 for the ~~three and~~ six months ended June 30, ~~2020.~~2021 and 2020, respectively. Total revenues were approximately $1,460,000 and $952,000 for the three months ended June 30, 2021 and 2020, respectively. The Company had a working capital deficiency from continuing operations of approximately ($~~2,616,000)~~ 738,000) and ($~~2,114,000)~~1,156,000) at June 30, ~~2020~~2021 and December 31, ~~2019.~~2020, respectively. These conditions raise substantial doubt about ~~the Company’s~~its ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company’s ability to further implement its business plan, raise capital, and generate revenues. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
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Management believes that its available cash on hand and cash flow from operations may not be sufficient to meet our working capital requirements for the ~~next twelve months.~~twelve-month period subsequent to the issuance of our financial statements. In order to accomplish our business plan objectives, the Company will need to continue its cost reduction efforts, increase revenues, raising capital through the issuance of common stock, or through a strategic merger or acquisition. However, there can be no assurances that our business plans and actions will be successful, that we will generate anticipated revenues, or that unforeseen circumstances will not require additional funding sources in the future or ~~impact~~effectuate plans to conserve liquidity. Future efforts to improve liquidity through the issuance of our common stock may not be successful or ~~if available,~~ they may not be ~~negotiable~~available on acceptable ~~terms.~~terms, if at all.
On June 26, 2020, the Company entered into an agreement with an existing investor, Malven Group Limited, in connection with the purchase of 312,500 shares of common stock of the Company at a price of $3.20 per share for gross proceeds of $1,000,000. The closing date of the transaction was June 29, 2020 and the gross proceeds of $1,000,000 were received in July 2020.
~~On July 27, 2020,~~February 1, 2021, the Company entered into a ~~Securities Purchase Agreement (the “Agreement”)~~private placement with ~~three institutional accredited investors. Pursuant to the Agreement,~~Ms. Yiran Gu, in which the Company ~~offered and~~ sold ~~1,481,484~~ 500,000 shares of its common stock at a price per share ~~price~~ of ~~$1.35~~ $2.00 for gross proceeds of ~~approximately $2,000,000~~$1,000,000.
On July 9, 2021 the Company closed the registered direct offering, pursuant to which certain institutional accredited investors purchased 1,470,588 shares of the Company’s ~~Registration Statement on Form S-3 (Registration Statement No. 333-227249) (the “Transaction”). The Transaction closed on July 29, 2020 and the Company received net~~common stock, par value $0.01 per share, at a per share price equal to $1.70 for gross proceeds of ~~$1,814,353, after deducting financial advisory, legal and escrow related fees.~~$2,499,999.60.
3. Summary of Significant Accounting Policies
Principles of Consolidation -- The accompanying condensed consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries and a variable interest entity. All significant intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates – The preparation of 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 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 financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future intervening events. Accordingly, the actual results could differ significantly from estimates.
Significant estimates underlying the financial statements include the fair value of acquired assets and liabilities associated with acquisitions; the assessment of goodwill for impairment, intangible assets and long-lived assets for impairment; allowances for doubtful accounts and assumptions related to the valuation allowances on deferred taxes, impact of applying the revised federal tax rates on deferred taxes, the valuation of stock-based compensation and the valuation of stock warrants.
Principles of Consolidation- The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. 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 June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the allowance for doubtful accounts was ~~$41,007~~ approximately $189,000 and ~~$20,007.~~$157,000, respectively.
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Incremental Direct Costs- Incremental direct costs incurred in connection with enrolling members in the NAPW Network consist of sales commissions paid to the Company’s direct sales agents. Incremental direct costs associated with the PDN Network consists of commissions paid to third-party agencies. Commissions associated with the NAPW Network are deferred and amortized over the term of the membership, which is a 12-month period and agency commissions associated with the PDN Network are deferred and amortized over the membership service period. Total incremental direct costs related to the NAPW and PDN Network amounted to approximately $69,000and $52,000 during the six months ended June 30, 2021 and 2020, and approximately $34,000and $23,000 during the three months ended June 30, ~~2020~~2021 and ~~2019 was $23,000 and $28,000. During the six months ended June 30, 2020 and 2019, total incremental direct costs related to the NAPW and PDN Network was $52,000 and $62,000.~~2020.
~~PDN Network sales commission agency commission over service capitalized~~
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 six months ended June 30, 2021 and 2020 was approximately $18,000and $51,000and for three months ended June 30, 2021 and 2020 was approximately $8,000 and $25,000, and is recorded in depreciation and amortization expense in the accompanying consolidated statements of operations.
Lease Obligations- The Company leases office space and equipment under various operating lease agreements, including an office for its corporate headquarters, as well as office spaces for its events business, sales and administrative offices under non-cancelable lease arrangements that provide for payments on a graduated basis with various expiration dates.
On September 23, 2020, the Company entered into a new office lease agreement for its corporate headquarters. The office lease is for 4,902 square feet of office space and the lease term is for 84months, 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 consolidated statements of operations.
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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 Company’s reporting unit to its carrying or book value. If the fair value of the reporting unit exceeds its carrying value, goodwill is not impaired and the Company is not required to perform further testing. If the carrying value of a reporting unit exceeds its fair value, the Company will measure any goodwill impairment losses as the amount by which the carrying amount of a reporting unit exceeds its fair value, not to exceed the total amount of goodwill allocated to that reporting unit.
Treasury Stock– Treasury stock is recorded at cost as a reduction of stockholders’ equity in the accompanying balance sheets.
~~Revenue Recognition~~ – Revenue is recognized when all of the following conditions exist: (1) persuasive evidence of an arrangement exists, (2) services are performed, (3) the sales price is fixed or determinable, and (4) collectability is reasonably assured.
~~Membership Fees and Related Services~~
Membership fees are collected up-front and member benefits become available immediately; however those benefits must remain available over the 12-month membership period. At the time of enrollment, membership fees are recorded as deferred revenue and are recognized as revenue ratably over the 12-month membership period. Members who are enrolled in this plan may cancel their membership in the program at any time and receive a partial refund (amount remaining in deferred revenue) or due to consumer protection legislation, a full refund based on the policies of the member’s credit card company.
~~We also offer a monthly membership for which we collect fees on a monthly basis and we recognize revenue in the same month as we collect the monthly fees.~~
Revenue from related membership services are derived from fees for development and set-up of a member’s personal on-line profile and/or press release announcements. Fees related to these services are recognized as revenue at the time the on-line profile is complete and press release is distributed.
~~Deferred Revenue~~ – Deferred revenue includes customer deposits received prior to performing services which are recognized as revenue when revenue recognition criteria are met, and membership fees for annual memberships that are collected at the time of enrollment and are recognized as revenue ratably over the 12-month membership period.
~~Recruitment Services~~
The Company’s recruitment services revenue is derived from the Company’s agreements through single and multiple job postings, recruitment media, talent recruitment communities, basic and premier corporate memberships, hiring campaign marketing and advertising, e-newsletter marketing and research and outreach services. Recruitment revenue includes revenue recognized from direct sales to customers for recruitment services and events, as well as revenue from the Company’s direct e-commerce sales. Direct sales to customers are most typically a twelve-month 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, National Urban League and over 20 other partner organizations
● ~~OFCCP job promotion and recordation services~~
● ~~Diversity job fairs, both in person and virtual fairs~~
● ~~Diversity recruitment job advertising services~~
● ~~Cost per application, a service that employers can purchase whereby PDN sources qualified candidates and charges only for those applicants who meet the employers’ minimum qualifications~~
● ~~Diversity executive staffing services~~
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~~Product Sales and Other Revenue~~
Products offered to members relate to custom made plaques. Product sales are recognized as deferred revenue at the time the initial order is placed. Revenue is then recognized at the time these products are shipped. The Company’s shipping and handling costs are included in cost of sales in the accompanying consolidated statements of operations.
~~Education and Training~~
~~The Company works with its business partners to provide education and training seminars to business people in China. Revenues are recognized in the month when the seminar takes place.~~
~~Consumer Advertising and Marketing Solutions~~
The Company provides career opportunity services to its various partner organizations through advertising and job postings on their websites. The Company works with its partners to develop customized websites and job boards where the partners can generate advertising, job postings and career services to their members, students and alumni. Consumer advertising and marketing solutions 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.~~
Discontinued Operations
China Operations
~~On November 25,~~The Company previously disclosed in its Form 10-K for the year ending December 31, 2019 ~~PDN China received a Seizure Decision Notice~~ (the ~~“Notice”~~“2019 10-K”) ~~from the Yuexiu District Branch of the Police Department of Guangzhou City, the People’s Republic of China. The Notice stated~~and subsequently that ~~it is necessary to seize~~ 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 ~~(“Michael Wang”) is affiliated, who~~ was ~~subsequently held in custody~~affiliated. A subsequent investigation led by ~~the local police department.~~
In response to such events, on December 12, 2019 the Company’s Board of Directors (the “Board”) established the Special Committee to investigate the situation, and ‎retained the international law firm of King & Wood Mallesons (“KWM”) to assist the Special Committee in connection with the Special Committee’s investigationa special committee of the Company’s operations in the People’s Republic of China and related events, ‎ in collaboration with the Company’s external auditor Ciro E. Adams CPA LLC. KWM conducted extensive research into public records in China, and interviewed the relevant divisions of the Public Security Bureau in China and any related witnesses in relation to the operations and specific transactions that had some relationship to the Gatewang entities. On April 16, 2020, based upon the information obtained, the investigation teamBoard concluded that it did not find any evidence that the Company or PDN China has engaged in ~~any~~the criminal activity of illegal ~~fund raising~~fund-raising as alleged against Gatewang. The Company subsequently discontinued all of its operations in China.
The ~~Investigation~~Company also ~~revealed~~previously disclosed in the 2019 Form 10-K that three entities and two ‎individuals (the “Payors”), who appeared to be related to Gatewang, collectively paid RMB 14.25 million to PDN China on behalf of ‎EGBT Foundation Ltd., a private placement investor that purchased ‎1,265,823 shares ofalthough the Company’s common stock (approximately 11.6%) in September 2019 (the “EGBT Transaction”)‎. To the knowledge of the Investigation team, the bank account holding the proceeds of ‎the EGBT Transaction is still frozen by the Chinese authorities. The seizure of PDN ~~‎China office~~‎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 judgment in favor of the ~~local police was lifted on March 23, 2020. These funds, approximately $2.89 million dollars (USD) continue~~plaintiffs in the Gatewang Case. On April 26, 2021, the Company concluded that the seizure of such cash assets is a material reduction of Company assets required to be ~~subject~~reported by this filing. The Company has reflected the seizure of these cash funds in its Consolidated Balance Sheets as of June 30, 2021.
The Company has asserted its claim to these funds as the genuine owner to the ~~PRC government’s jurisdiction. If the source of~~Chinese officials and asked for their return. The Company plans to pursue all possible legal alternatives to have these funds ~~is actually (or perceived~~returned to ~~be) connected to Gatewang, the Chinese authorities may not unfreeze PDN China’s bank account. If and when the bank account is unfrozen,~~ the Company ~~will consider whether the EGBT Transaction needs to be unwound or further documented to be in full compliance with applicable law.~~but such return is uncertain at this time.
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The Company’s operations in China have been suspended since December 2019. On March 4, 2020 the Board decided to discontinue all of the Company’s operations in the People’s Republic of China, namely PDN (China) International Culture Development Co. Ltd.‎, a wholly owned subsidiary of ‎the Company, Jiangxi PDN Culture Media Co., Ltd. (“PDN Jiangxi”), a variable interest entity ‎‎controlled by of the Company‎, and the joint venture between PDN Jiangxi, Guangzhou ‎Zengcheng District Zhili Education ‎Training Center, and Guangzhou Angye Education ‎Consulting Co. Ltd.‎
All historical operating results for the Company’s China operations are included in a loss from discontinued operations, net of tax, in the accompanying statement of operations. For the three and six months ended June 30, ~~2020,~~2021, loss from discontinued operations was approximately ~~($58,000)~~ $46,000 and ~~($127,000),~~$61,000 as compared to a loss from discontinued operations of ~~($382,000)~~ approximately $58,000 and ~~($737,000)~~ $127,000 for the three and six months ended June 30, ~~2019.~~2020.
Assets and liabilities of China operations are now included in current assets and long-term assets from discontinued operations, and current liabilities and long-term liabilities from discontinued operations. ~~As of June 30, 2020, current~~Current assets from discontinued operations were approximately ~~$4,000, compared to approximately $76,000~~$4,600 and $6,900, as of June 30, 2021 and December 31, ~~2019,~~2020, respectively, and long-term assets from discontinued operations were approximately ~~$2,847,000~~ $206,000 at June 30, ~~2020,~~2021, compared to approximately ~~$3,109,000~~ $3,085,000 as of December 31, ~~2019.~~2020. As of June 30, ~~2020,~~2021, current liabilities from discontinued operations were approximately ~~$323,000,~~$402,000, compared to approximately ~~$564,000~~ $375,000 as of December 31, ~~2019.~~2020.
Operating Results of Discontinued Operations
The following table represents the components of gross operating results from discontinued operations, ~~as presented~~which are included in the statements of operations and comprehensive loss for the three and six months ended June 30, ~~2020~~2021 and ~~2019:~~2020:
Schedule of Operating Results of Discontinued Operations
2021 2020 2021 2020
Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020

Revenues $ - $ - $ - $ -

Cost of Sales 18,201 7,787 20,517 15,143
Depreciation and amortization - 1,676 - 1,676
Sales and marketing - 80,425 - 105,114
General and administrative 20,728 (37,620 ) 30,198 -
Non-operating expense 10,372 5,553 10,372 5,553
Loss from discontinued operations before income tax (49,301 ) (57,821 ) (61,087 ) (127,486 )
Income tax expense (benefit) - - - -
Net loss from discontinued operations $ (49,301 ) $ (57,821 ) $ (61,087 ) $ (127,486 )
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Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019

Revenues $ - $ 2,305 $ - $ 41,483

Cost of Sales 7,787 13,027 15,143 29,625
Depreciation and amortization 1,676 4,207 1,676 8,446
Sales and marketing 80,425 69,424 105,114 154,404
General and administrative (37,620 ) 300,251 - 583,299
Non-operating (expense) income (5,553 ) 9,811 (5,553 ) 4,261
Loss from discontinued operations before income tax (57,821 ) (374,793 ) (127,486 ) (730,030 )
Income tax expense - 7,383 - 7,383
Net loss from discontinued operations $ (57,821 ) $ (382,176 ) $ (127,486 ) $ (737,413 )
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 six months ended June 30, ~~2020 and 2019,~~2021, the Company incurred advertising and marketing expenses of approximately ~~$179,691~~ $217,000 and ~~$98,419. For~~$410,000, as compared to approximately $180,000and $337,000 in the ~~six months ended June 30, 2020 and 2019, advertising and marketing expenses were $337,343 and $235,347.~~same periods of the fiscal 2020. These amounts are included in sales and marketing expenses in the accompanying statements of operations. At June 30, 2021 and December 31, 2020, there were no prepaid advertising expenses recorded in the accompanying 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.
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Income Taxes -- The Company accounts for income taxes in accordance with ASC 740, Income Taxes, which requires that the Company recognize deferred tax liabilities and assets based on the differences between the financial statement basis and tax basis of assets and liabilities, using enacted tax rates in effect for the year in which the differences are expected to reverse. The Company estimates the degree to which tax assets and credit carryforwards will result in a benefit based on expected profitability by tax jurisdiction. A valuation allowance for such tax assets and loss carryforwards is provided when it is determined to be more likely than not that the benefit of such deferred tax asset will not be realized in future periods. If it becomes more likely than not that a tax asset will be used, the related valuation allowance on such assets would be reduced.
ASC 740 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with ASC 740-20 and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. There were no unrecognized tax benefits as of ~~June 30, 2020.~~March 31, 2021. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
The Company may be subject to potential income tax examinations by federal or state authorities. These potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal and state tax laws. Management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months. Tax years that remain open for assessment for federal and state tax purposes include the years ended December 31, ~~2016~~2017 through ~~2019.~~2020.
The Company’s policy for recording interest and penalties associated with audits is to record such expense as a component of income tax expense. There were no 0amounts accrued for penalties or interest as of June 30, ~~2020.~~2021.
Fair Value of Financial Assets and Liabilities -- Financial instruments, including cash and cash equivalents, short-term investments and accounts payable, are carried at cost. Management believes that the recorded amounts approximate fair value due to the short-term nature of these instruments.
Net Loss per Share -- The Company computes basic net loss per share by dividing net loss 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 six months ended June 30, ~~2020~~2021 and ~~2019~~2020 excludes the potentially dilutive securities summarized in the table below because their inclusion would be anti-dilutive.
Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share
As of June 30,
2021 2020

Warrants to purchase common stock 125,000 125,000
Stock options 36,126 66,126
Unvested restricted stock 159,524 206,775
Total dilutive securities 320,650 397,901
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As of June 30,
2020 2019

Warrants to purchase common stock 125,000 153,907
Stock options 66,126 319,126
Unvested restricted stock 206,775 66,593
Total dilutive securities 397,901 539,626
Recent Accounting Pronouncements
In December 2019, the ~~Financial Accounting Standards Board (“FASB”)~~FASB issued ASU 2019-12, Income Taxes ~~(ASU 2019-02)~~(Topic 740): Simplifying the Accounting for Income Taxes (ASU 2019-12) which simplifies the accounting for income taxes by removing certain exceptions ~~related~~for investments, intraperiod allocations, and interim calculations, and adds guidance to reduce the complexity of applying Topic 740. This ASU was effective for the Company on January 1, 2021. The adoption of ASU 2019-12 did not have a material impact to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and by clarifying and amending existing guidance in order to improve consistent application of and simplify GAAP for other areas of Topic 740. ASU 2019-12 is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2020. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the adoption of this pronouncement guidance.Company’s consolidated financial statements.
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In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This update provides optional expedients and exceptions for applying generally accepted accounting principles to certain contract modification and hedging relationships that reference London Inter-bank Offered Rate (LIBOR) or another reference rate expected to be discontinued. The guidance is effective upon issuance and generally can be applied through December 31, 2022. The Company is currently evaluating the potential impact of this ASU on its condensed consolidated financial statements.
4. Revenue Recognition
The Company recognizes revenue under the core principle of 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 standalone 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. Any variable consideration is estimated by the Company based on the expected value approach. The Company will then estimate variable consideration for a particular type of performance obligation, such method is consistently applied. The Company will constrain estimates of variable consideration based on its expectation of recovery from the customer. 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.
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. The Company has adopted the practical expedient and does not adjust for the promised amount of consideration for the effects of a significant financing component if it expects, at contract inception, that the period between when the entity transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less.
15

~~4. Capitalized Technology~~
Nature of Goods and Services
The following is a description of principal activities from which the Company generates its revenue:
Membership Fees and Related Services
Membership fees of longer than one month are collected up-front and member benefits become available immediately; however those benefits must remain available over the 12-month membership period. At the time of enrollment, membership fees are recorded as deferred revenue and are recognized as revenue ratably over the 12-month membership period. Members who are enrolled in this plan may cancel their membership in the program at any time and receive a partial refund (amount remaining in deferred revenue) or due to consumer protection legislation, a full refund based on the policies of the member’s credit card company.
The Company also offers monthly memberships for which it collects fees on a monthly basis and recognizes revenue in the same month as the fees are collected.
Revenue from related membership services are derived from fees for development and set-up of a member’s personal on-line profile and/or press release announcements. Fees related to these services are recognized as revenue at the time the on-line profile is complete and press release is distributed.
Recruitment Services
The Company’s recruitment services revenue is derived from the Company’s agreements through single and multiple job postings, recruitment media, talent recruitment communities, basic and premier corporate memberships, hiring campaign marketing and advertising, e-newsletter marketing and research and outreach services. 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 National Association for the Advancement of Colored People, National Urban League, Kappa Alpha Psi, Phi Beta Sigma and many other partner organizations;
● OFCCP job promotion and recordation services;
● Diversity job fairs, both in person and virtual fairs;
● Diversity recruitment job advertising services;
● Cost per application, a service that employers can purchase whereby PDN sources qualified candidates and charges only for those applicants who meet the employers’ minimum qualifications; and
● Diversity executive staffing services.
Product Sales and Other Revenue
Products offered to members relate to custom made plaques. Product sales are recognized as deferred revenue at the time the initial order is placed. Revenue is then recognized at the time these products are shipped. The Company’s shipping and handling costs are included in cost of sales in the accompanying consolidated statements of operations.
Consumer Advertising and Marketing Solutions
The Company provides career opportunity services to its various partner organizations through advertising and job postings on their websites. The Company works with its partners to develop customized websites and job boards where the partners can generate advertising, job postings and career services to their members, students and alumni. Consumer advertising and marketing solutions revenue is recognized as jobs are posted to their hosted sites.
16

~~Capitalized Technology, net~~
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 ~~follows:~~described in Note 12 - Segment Reporting.
June 30, December 31,
2020 2019
Capitalized cost:
Balance, beginning of period $ 2,165,545 $ 2,163,044
Additional capitalized cost 3,700 2,501
Balance, end of period 2,169,245 2,165,545

Accumulated amortization:
Balance, beginning of period $ 2,104,740 $ 1,968,213
Provision for amortization 10,328 101,448
Balance, end of period 2,115,068 2,069,661
Capitalized Technology, net 54,177 95,884
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 0recorded contract assets as of June 30, 2021.
Consideration received in advance from customers is recorded as a contract liability, if a contract exists under ASC 606, until services are delivered or obligations are met and revenue is earned. Contract liability represents the excess of amounts invoiced over amounts recognized as revenues. Contract liabilities to be recognized in the succeeding twelve-month period are classified as current contract liabilities and the remaining amounts, if any, are classified as non-current contract liabilities. Contract liabilities of approximately $2,223,000 are included in current deferred revenues, on the Consolidated Balance Sheets as of June 30, 2021. For the three months ended June 30, ~~2020~~2021, we recognized revenue associated with contract liabilities of approximately $869,000 that were included in the contract liabilities balance at the beginning of the period.
Transaction price allocated to the remaining performance obligations
The Company applies the optional exemptions and ~~2019,~~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.
The Company has also elected to not disclose transaction price allocated to unsatisfied performance obligations for which variable consideration is allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied promise to transfer a distinct good or service for event related promises for those contracts that contain percentage of the sales. The fees are variable for this type of contract, and the uncertainty related to the final fee, is resolved within the current year.
5. Capitalized Technology
Capitalized Technology, net is as follows:
Schedule of Capitalized Technology
June 30, 2021 December 31, 2020
Capitalized cost:
Balance, beginning of period $ 2,169,245 $ 2,169,245
Additional capitalized cost 23,569 -
Balance, end of period 2,192,814 2,169,245

Accumulated amortization:
Balance, beginning of period $ 2,143,378 $ 2,130,037
Provision for amortization 18,896 13,341
Balance, end of period 2,162,274 2,143,378
Capitalized Technology, net 30,540 25,867
For the three months ended June 30, 2021 and 2020, amortization expense was approximately ~~$3,700~~ $9,100 and ~~$25,000,~~$3,700, and was approximately ~~$10,000~~ $18,900and ~~$51,000~~ $10,000for the six months ended June 30, ~~2020~~2021 and ~~2019.~~2020, Amortization of capitalized technology is recorded in depreciation and amortization expense in the accompanying statements of operations.
17

5.
6. Intangible Assets
Intangible assets, net was as follows:
Schedule of Intangible Assets
Gross
Useful
Lives

Gross
Carrying
Accumulated Net Carrying
Useful Lives Carrying Accumulated Net Carrying
June 30, 2020 (Years) Amount Amortization Amount
June 30, 2021 (Years) Amount Amortization Amount
Long-lived intangible assets:
Sales Process 10 $ 2,130,956 $ (1,807,075 ) $ 323,881 10 $ 2,130,956 $ (1,883,282 ) $ 247,674
Paid Member Relationships 5 803,472 (803,472 ) - 5 803,472 (803,472 ) -
Member Lists 5 8,086,181 (8,086,181 ) - 5 8,086,181 (8,086,181 ) -
Developed Technology 3 648,000 (648,000 ) - 3 648,000 (648,000 ) -
Trade Name/Trademarks 4 440,000 (440,000 ) - 4 440,000 (440,000 ) -
12,108,609 (11,784,728 ) 323,881 12,108,609 (11,860,935 ) 247,674
Indefinite-lived intangible assets:
Trade name 90,400 90,400
Intangible assets, net $ 414,281 $ 338,074
15

Useful
Lives

Gross
Carrying
Accumulated Net Carrying
December 31, 2020 (Years) Amount Amortization Amount
Long-lived intangible assets:
Sales Process 10 $ 2,130,956 $ (1,845,178 ) $ 285,778
Paid Member Relationships 5 803,472 (803,472 ) -
Member Lists 5 8,086,181 (8,086,181 ) -
Developed Technology 3 648,000 (648,000 ) -
Trade Name/Trademarks 4 440,000 (440,000 ) -
12,108,609 (11,822,831 ) 285,778
Indefinite-lived intangible assets:
Trade name 90,400
Intangible assets, net $ 376,178
Gross
Useful Lives Carrying Accumulated Net Carrying
December 31, 2019 (Years) Amount Amortization Amount
Long-lived intangible assets:
Sales Process 10 $ 2,130,956 $ (1,768,971 ) $ 361,985
Paid Member Relationships 5 803,472 (803,472 ) -
Member Lists 5 8,086,181 (8,086,181 ) -
Developed Technology 3 648,000 (648,000 ) -
Trade Name/Trademarks 4 440,000 (440,000 ) -
12,108,609 (11,746,624 ) 361,985
Indefinite-lived intangible assets:
Trade name 90,400
Intangible assets, net $ 452,385
As of June 30, ~~2020,~~2021, estimated amortization expense in future fiscal years is summarized as follows:
Schedule of Future Annual Estimated Amortization Expense
Year ended December 31,
Remaining of 2020 $ 38,103
2021 76,207
Remaining of 2021 $ 38,104
2022 76,207 76,207
2023 76,207 76,207
2024 and thereafter 57,157
$ 323,881
2024 57,156
Net Carrying Amount $ 247,674
For the three months ended June 30, ~~2020~~2021 and ~~2019,~~2020, amortization expense was approximately ~~$19,000~~$19,000, and ~~$183,000. For~~for the six months ended June 30, 2021 and 2020 ~~and 2019,~~ amortization ~~expenses~~expense was ~~$38,000 and $366,000.~~approximately $38,000. Intangible amortization expense is recorded in depreciation and amortization expense in the accompanying statements of operations.
~~6. Revolving Credit Facility – Related Party~~
On November 16, 2018, the Company entered into a revolving credit facility agreement with GNet Tech Holdings Public Limited Company (GNet), “), under which we can draw up to GBP £1,500,000 (approximately $2,000,000). Interest is payable on any outstanding principal balance at a rate equal to the LIBOR rate plus 4%. Amounts drawn under this facility are payable at the end of one, three, or six months periods at the election of the Company. On January 14, 2019, the Company drew $293,000 under this facility and repaid it on June 7, 2019. On May 31, 2020, the revolving credit facility expired and the Company did not renew this credit facility.
7. ~~Loan~~
The CARES Act was enacted on March 27, 2020. Among the provisions contained in the CARES Act was the creation of the Paycheck Protection Program (“PPP”) that provides for under the Small Business Administration (“SBA”) Section 7(a) loans for qualified small businesses. PPP loan proceeds are available to be used to pay for payroll costs, including salaries, commissions, and similar compensation, group health care benefits, and paid leaves, rent, utilities and interest on certain other outstanding debt. The amount that will be forgiven will be calculated in part with reference to the Company’s full-time headcount during the eight-week period following the funding of the PPP loan. The Company applied for the PPP loan and on May 5, 2020, the Company received total proceeds of $651,077 from the SBA. In accordance with the loan forgiveness requirements under the CARES Act, the Company intends to use the proceeds from the PPP Loan primarily for payroll costs, rent and utilities.
The Company will be applying for loan forgiveness during the third quarter of 2020 and anticipates that 100% of the PPP Loan will be forgiven by the SBA. Until such time as the PPP Loan is fully or partially forgiven, the Company has recorded the receipts under the PPP Loan as a short-term and long-term loan in its condensed consolidated balance sheets.
16
~~8. Accrued Liabilities~~
~~As of June 30, 2020 and December 31, 2019, accrued liabilities consisted of the following:~~
As of
June 30, December 31,
2020 2019

Litigation reserve $ 1,246,002 $ 348,000
Accrued payroll 137,193 72,166
Accrued legal fees 80,208 69,896
Accrued Board of Director fees 57,378 50,364
Accrued revenue sharing agreements 49,939 43,844
Other 63,069 69,899
Total accrued liabilities $ 1,633,789 $ 654,169
9. Commitments and Contingencies
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.
As of June 30, ~~2020,~~2021, right of use assets ~~were $14,326~~ and current lease obligations were ~~$16,016.~~$457,492 and $77,100, respectively.
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Other - PDN China’s bank account with balance of approximately ~~$2.89 million~~ $203,000 was frozen by Guangzhou Police due to ~~the~~ Gatewang Case. The Company has classified this entire cash balance as a long-term asset ~~and is classified~~presented in discontinued ~~operations.~~operations (see footnote 3. Summary of Significant Accounting Policies – Discontinued Operations).
Legal Proceedings
In a letter dated October 12, 2017, White Winston Select Asset Funds (“White Winston”) threatened to assert claims against the Company in excess of $2 $2 million based on White Winston’s contention that the Company’s conduct delayed White Winston’s ability to sell shares in the Company during a period when the Company’s stock price was generally falling. On ~~April 30, 2018,~~October 28, 2020, the Company and White Winston ~~filed~~reached a ~~lawsuit, entitled White Winston Select Asset Funds, LLC v. Professional Diversity Network, Inc., No. 18-cv-10844, (the “Federal Action”)~~settlement agreement, in the United States District Court for the District of Massachusetts, asserting federal jurisdiction based on diversity of citizenship. The four-count complaint in the Federal Action alleged that White Winston is entitled to recover compensatory damages of $1,708,233, plus attorneys’ fees, treble damages and other amounts. White Winston served the complaint on July 12, 2018, andwhich the Company ~~moved to dismiss~~made a cash payment of $250,000 on October 29, 2020 and a second cash payment of $350,000 was paid on February 16, 2021. In addition, the ~~entire action for failure to state a claim. On October 15, 2018, prior to addressing the motion to dismiss, the Court~~Company issued an order noting that White Winston (which is a limited liability company) had failed to allege the citizenship of its members and ordered White Winston to show cause that complete diversity exists between the parties and that the Court had jurisdiction. On October 23, 2018, White Winston dismissed the Federal Action without prejudice. On December 18, 2018, White Winston filed a complaint in Massachusetts Superior Court in Suffolk County in Boston alleging the same claims and rights to relief as in the Federal Action. The Company has moved to once again to dismiss the complaint in its entirety for failure to state a claim. The entire motion package, comprised150,000 shares of the Company’s motion to dismiss and accompanying memorandum, White Winston’s opposition, and the Company’s reply brief, were filed with the court on Monday, March 25, 2019. This motion was not granted. We have since then substantially completed all of the discovery process and will begin expert witness disclosures. The Company denies liability for all claims and has entered into settlement negotiations.common stock in January 2021.
17
NAPW (as leasee) is a defendant in a Nassau County (NY) Supreme Court ~~case, whereby~~case. TL Franklin Avenue Plaza LLC (as lessor) has sued ~~NAPW Case index No. LT-000421/2018, with respect to NAPW’s former Garden City NY Premises. NAPW had surrendered the Premises to the Landlord,~~ and ~~the Landlord has~~ obtained a judgment against NAPW in the amount of $746,142.41. As a result of the judgement order, the Company recorded a $780,000 litigation settlement reserve in the second quarter of 2020, which reflected the judgement order in addition to imputed interest costs and legal fees.[NAPW Case index No. LT-000421/2018; NAPW’s former Garden City, NY, office.] NAPW ~~is currently negotiating a settlement with the Landlord.~~has reserved for this judgment.
The Company and its wholly-owned subsidiary, NAPW, Inc., are parties to a proceeding captioned Deborah Bayne, et al. vs. NAPW, Inc. and Professional Diversity Network, Inc., No. 18-cv-3591 (E.D.N.Y.), filed on June 20, 2018 and alleging violations of the Fair Labor Standards Act and certain provisions of the New York Labor Law. The Company disputes that it or its subsidiary violated the applicable laws or that either entity has any liability and intends to vigorously defend against these claims. The matter is in the final stages of discovery and we have completed depositions of relevant witnesses. During the first quarter of 2020, the Company recorded a ~~$450,000~~ $450,000 litigation settlement reserve in the event of an unfavorable outcome in this proceeding. ~~The Company~~In November 2020, both parties entered into mediation proceedings but a settlement was not reached. This matter is ~~engaged~~scheduled to go to trial in ~~settlement discussions.~~2021.
~~We are also generally subject to legal proceedings and litigation arising in the ordinary course of business.~~
General Legal Matters
From time to time, the Company is involved in legal matters arising in the ordinary course of business. While the Company believes that such matters are currently not material, there can be no assurance that matters arising in the ordinary course of business for which the Company is, or could be, involved in litigation, will not have a material adverse effect on its business, financial condition or results of operations.
~~10.~~ 8. CFL Transaction
On August 12, 2016, the Company entered into a stock purchase agreement (the “Purchase Agreement”), with CFL, a Republic of Seychelles company wholly-owned by a group of Chinese investors. Pursuant to the Purchase Agreement, the Company agreed to issue and sell to CFL, ~~(the “Share Issuance and Sale”),~~ and CFL agreed to purchase, ~~at a price of $9.60 per share (the “Per Share Price”),~~ upon the terms and subject to the conditions set forth in the Purchase Agreement, a number of shares of the Company’s common stock, par value ~~$0.01~~ $0.01 per share (the “Common Stock”), such that CFL will hold shares of Common Stock equal to approximately ~~51%~~51% of the outstanding shares of Common Stock, determined on a fully-diluted basis, after giving effect to the consummation of the transactions contemplated by the Purchase ~~Agreement, including the Tender Offer described below (the “CFL Transaction”).~~Agreement.
On November 7, 2016, the Company consummated the Share Issuance and Sale of 1,777,417 shares of its common stock to CFL at a price of $9.60 per share, pursuant to the terms of the Purchase Agreement, dated August 12, 2016. In addition, on November 7, 2016, the Company completed the purchase of 312,500 shares of its common stock at a price of $9.60 per share, net to the seller in cash, pursuant to the Tender Offer. The Company received approximately $9,000,000 in net proceeds from the Share Issuance and Sale, after the payment for the shares repurchased in the Tender Offer, the repayment of all amounts outstanding under the Master Credit Facility and the payment of transaction-related expenses.
At the closing of the CFL Transaction, the Company entered into a Stockholders’ Agreement, dated November 7, 2016 (the “Stockholders’ Agreement”) with CFL and each of its shareholders: Maoji (Michael) Wang, Jingbo Song, Yong Xiong Zheng and Nan Kou (the “CFL Shareholders”). The Stockholders’ Agreement sets forth the agreement of the Company, CFL and the CFL Shareholders relating to board representation rights, transfer restrictions, standstill provisions, voting, registration rights and other matters following the closing of the Share Issuance and ~~Sale (see Note 13).~~Sale.
~~On November 15, 2019,~~As of June 30, 2021, CFL ~~purchased additional 1,142,857~~beneficially holds shares of Common Stock equal to approximately 25.5% of the ~~Company’s common stock for $1.75 per share for gross proceeds~~outstanding shares of ~~$2,000,000 from an existing shareholder.~~Common Stock of the Company.
1819

~~11.~~
9. Stockholders’ Equity
Preferred Stock – The Company has no preferred stock issued. The Company’s amended and restated certificate of incorporation and amended and restated bylaws include provisions that allow the Company’s Board of Directors to issue, without further action by the stockholders, up to 1,000,000shares of undesignated preferred stock.
Common Stock – The Company has one class of common stock outstanding with a total number of shares authorized of ~~45,000,000.~~45,000,000. As of June 30, ~~2020,~~2021, the Company had ~~11,338,359~~ 13,598,897 shares of common stock outstanding.
~~On March 22, 2020,~~In January 2021, the Company ~~entered into an agreement with Malven Group Limited, a company established under the laws~~issued 150,000 shares of the ~~British Virgin Islands, in connection with the purchase of 1,939,237 shares of~~Company’s common stock to White Winston as a result of ~~the Company at~~ a ~~price of $0.7735 per share for gross proceeds of $1,500,000. The closing of the transaction took place on March 30, 2020.~~settlement agreement (see note 7. Commitments and Contingencies).
On ~~June 26, 2020,~~February 1, 2021, the Company entered into a ~~second agreement~~private placement with ~~Malven Group Limited,~~Ms. Yiran Gu, in ~~connection with~~which the ~~purchase of 312,500~~ Company sold 500,000 shares of its common stock ~~of the Company~~ at a price ~~of $3.20~~ per share of $2.00 for gross proceeds of ~~$1,000,000. The closing~~$1,000,000.
On July 9, 2021, the Company closed the registered direct offering, pursuant to which certain institutional accredited investors purchased 1,470,588 shares of the ~~transaction took place on June 29, 2020, however, all the~~Company’s common stock, par value $0.01 per share, at a per share price equal to $1.70 for gross proceeds from this sale were not received until July 24, 2020. The resulting increase in Stockholders’ Equity from this stock sale is reflected when the proceeds were received. See Note 15. Subsequent Events.of $2,499,999.60.
~~12.~~ 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~~Through a series of amendments to the 2013 Plan, ~~to increase~~ the number of authorized shares available for issuance of common stock under the Plan increased from 225,000 shares to ~~615,000 shares, which the Company’s stockholders approved on June 26, 2017.~~915,000 shares. The Company further amended the 2013 Plan to increase the number of authorized shares of common stock under the Plan by ~~300,000~~ 585,000 shares, which the Company’s stockholders approved and ratified on ~~November 8, 2018.~~June 14, 2021. The Company is now authorized to issue ~~915,000~~ 1,500,000 shares under the amended 2013 Plan.
Stock Options
The fair value of options is estimated on the date of grant using the Black-Scholes option pricing model. The valuation determined by the Black-Scholes pricing model is affected by the Company’s stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors. The ~~risk free~~risk-free rate is based on the U.S. Treasury rate for the expected life at the time of grant, volatility is based on the average long-term implied volatilities of peer companies, the expected life is based on the estimated average of the life of options using the simplified method, and 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 expectation of dividend payouts.
Forfeitures are required to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.
1920

The following table summarizes the Company’s stock option activity for the six months ended June 30, ~~2020~~2021 and ~~2019:~~2020:
Schedule of Stock Option Activity
Weighted Average Weighted
Weighted Remaining Average
Average Contractual Aggregate Weighted Remaining
Number of Exercise Life Intrinsic Average Contractual Aggregate
Options Price (in Years) Value Number of Exercise Life Intrinsic
Outstanding - January 1, 2020 295,793 $ 8.88 7.5 $ -
Options Price (in Years) Value
Outstanding - January 1, 2021 66,126 $ 5.24 8.3 $ -
Granted 30,000 3.69 10.0 30,000 2.10 3.9
Exercised - - - - - -
Forfeited (259,667 ) 9.21 - (20,000 ) 3.69 -
Outstanding - June 30, 2020 66,126 $ 5.24 8.8 $ -
Outstanding - June 30 2021 76,126 $ 4.41 8.4 $ -

Exercisable at June 30, 2020 26,126 $ 8.18 7.5 $ -
Exercisable at June 30, 2021 26,126 $ 8.18 6.5 $ -
Weighted Weighted Average Weighted
Average Remaining Contractual Aggregate Average
Number of Exercise Life Intrinsic Weighted Remaining
Options Price (in Years) Value Average Contractual Aggregate
Outstanding - January 1, 2019 499,439 $ 6.94 $ 9.0 $ -
Number of Exercise Life Intrinsic
Options Price (in Years) Value
Outstanding - January 1, 2020 295,793 $ 8.88 $ 7.5 $ -
Granted 30,000 2.23 - 30,000 3.69 10.0
Exercised - - - - - -
Forfeited (210,313 ) 3.98 - (259,667 ) 9.21 -
Outstanding - June 30, 2019 319,126 $ 8.44 8.1 $ 8,400
Outstanding - June 30, 2020 66,126 $ 5.24 8.8 $ 8,400

Exercisable at June 30, 2019 252,459 $ 9.97 7.8 $ 2,800
Exercisable at June 30, 2020 26,126 $ 8.18 7.8 $ 2,800
The fair value of stock options granted during the six months ended June 30, 2020 were estimated on the date of grant using the Black-Scholes option pricing model. The fair value of stock options is being amortized on a straight-line basis over the requisite service period of the awards. The fair value of share options were estimated using the following assumptions:
Six Months Ended
June 30, 2020
Expected dividend yield -
Risk-free interest rate 0.33 %
Expected volatility 111.55 %
Expected term (in years) 5.75
Grant-date fair value of stock options awarded $ 3.03
~~During the six months ended June 30, 2020, vested stock options of 259,667 with a weighted average exercise price of $9.21 were forfeited.~~ Total unrecognized pre-tax stock-based compensation expense related to unvested stock options at June 30, ~~2020~~2021 was ~~$102,297, which is expected to be recognized through the second quarter of 2023.~~approximately $0.
~~Warrants~~
Warrants
As of June 30, ~~2020~~2021 and December 31, ~~2019,~~ 2020, 125,000 warrants were outstanding and exercisable with an exercise price of ~~$20.00~~ $20.00 per share. The aggregate intrinsic value was $0 $0 and the warrants are scheduled to expire on December ~~27, 2021.~~30, 2021.
2021

Restricted Stock
As of June 30, ~~2020~~2021 and ~~2019,~~2020, the following is a summary of restricted stock activity:
Schedule of Restricted Stock Award Activity
Number of
Shares
Outstanding - January 1, 2021 233,875
Granted 59,524
Forfeited -
Vested (133,875 )
Outstanding - June 30, 2021 159,524
Number of
Shares
Outstanding - January 1, 2020 27,319
Granted ~~306,775~~333,875
Forfeited -
Vested (127,319 )
Outstanding - June 30, 2020 ~~206,775~~233,875
~~Number of~~
~~Shares~~
~~Outstanding - January 1, 2019~~ ~~60,651~~
~~Granted~~ ~~47,568~~
~~Forfeited~~ ~~(13,865~~ )
~~Vested~~ ~~(27,761~~ )
~~Outstanding - June 30, 2019~~ ~~66,593~~
During the six months ended June 30, 2020, 127,319 in restricted stock units vested. During the six months ended June 30, 2020, 306,775 restricted stock units were granted, of which 100,000 restricted stock units vested upon date of grant.
Additionally, the Company ~~recorded~~ had no non-cash pre-tax stock-based compensation expense ~~of $374,397 and $72,570~~recorded for the ~~six~~three months ended June 30, 2021 and 2020, ~~and June 30, 2019,~~respectively, as a component of general and administrative expenses in the accompanying statements of operations, pertaining to restricted stock.
Total unrecognized pre-tax stock-based compensation expense related to unvested restricted stock at June 30, ~~2020~~2021 was ~~$757,603 and is expected to be recognized through the second quarter of 2022.~~$0.
~~13.~~ 11. Income Taxes
The Company’s quarterly income tax provision is based upon an estimated annual income tax rate. The Company’s quarterly provision for income taxes also includes the tax impact of discrete items, if any, including changes in judgment about valuation allowances and effects of changes in tax laws or rates, in the interim period in which they occur.
During the three months ended June 30, ~~2020~~2021 and ~~2019,~~2020, the Company recorded income tax expense of $49,934 and a benefit for income tax ~~from continuing operations~~ of ~~$12,512 and $10,236.~~approximately $12,512, respectively. For the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, the Company recorded a benefit for income tax of ~~$18,421~~ $17,043 and ~~$75,869.~~$18,421. The ~~increase~~decrease in income tax benefit during the current six-month period, and resulting in income tax expense for the current three-month period, was primarily due to an increase in discrete tax ~~item~~items associated with ~~stock-based compensation expense in addition to a reduction in our valuation allowance~~
~~The valuation allowance at June 30, 2020 was approximately $8,263,000. The net change~~litigation settlement reserves and changes in the ~~valuation allowance during the three months ended June 30, 2020 was an increase of approximately $562,000.~~ Company’s net operating losses.
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 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 June 30, ~~2020.~~2021. The valuation allowance at June 30, 2021 was approximately $8,890,000. The net change in the valuation allowance during the six months ended June 30, 2021 was an increase of approximately $253,000.
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~~14.~~
12. Segment Information
~~Beginning on May 26, 2018, the~~The Company operated in the following segments: (A) United States: (i) PDN Network and (ii) NAPW Network, (B) China Operations, and (C) Corporate Overhead. The segments are categorized based on their business activities and organization. On March 4, 2020, the Company’s Board of Directors decided to suspend all China operations. As of December 31, 2019, the Company operatedoperates in the following segments: (i) ~~NAPW~~PDN Network, (ii) ~~PDN~~NAPW Network and (iii) Corporate Overhead. ~~Accordingly, all~~The financial results ~~for Noble Voice and~~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 June 30, ~~2020~~2021 and December 31, ~~2019~~2020 and results of operations for the three and six months ended June 30, ~~2020~~2021 and ~~2019:~~2020:
Schedule of Segment Information
Three Months Ended June 30, 2021
PDN NAPW Corporate
Network Network Overhead Consolidated
Membership fees and related services $ - $ 257,878 $ - $ 257,878
Recruitment services 1,151,685 - - 1,151,685
Products sales and other - 1,908 - 1,908
Consumer advertising and marketing solutions 48,694 - - 48,694
Total revenues 1,200,379 259,786 - 1,460,165
Income (loss) from continuing operations 293,211 (171,460 ) (663,279 ) (541,528 )
Depreciation and amortization 2,419 26,657 - 29,076
Income tax (benefit) expense (18,675 ) 14,885 53,724 49,934
Net loss from continuing operations 313,443 (186,051 ) (717,003 ) (589,612 )
As of June 30, 2021
Goodwill $ 339,451 $ - $ - $ 339,451
Intangibles assets, net 90,400 247,674 - 338,074
Assets from continuing operations 4,927,004 766,808 - 5,693,812
Three Months Ended June 30, 2020
PDN NAPW Corporate
Network Network Overhead Consolidated
Membership fees and related services $ - $ 353,408 $ - $ 353,408
Recruitment services 572,233 - - 572,233
Products sales and other - 1,899 - 1,899
Consumer advertising and marketing solutions 24,290 - - 24,290
Total revenues 596,523 355,307 - 951,830
Loss from continuing operations (82,526 ) (370,196 ) (1,346,391 ) (1,799,113 )
Depreciation and amortization 11,835 36,013 - 47,848
Income tax benefit (121 ) (2,201 ) (10,190 ) (12,512 )
Net loss from continuing operations (76,855 ) (367,995 ) (1,336,201 ) (1,781,051 )
As of December 31, 2020
Goodwill $ 339,451 $ - $ - $ 339,451
Intangibles assets, net 90,400 323,881 - 414,281
Assets from continuing operations 2,103,830 1,197,336 - 3,301,166
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Three Months Ended June 30, 2020 Six Months Ended June 30, 2020 Six Months Ended June 30, 2021
PDN NAPW Corporate PDN NAPW Corporate PDN NAPW Corporate
Network Network Overhead Consolidated Network Network Overhead Consolidated Network Network Overhead Consolidated
Membership fees and related services $ - $ 353,408 $ - $ 353,408 $ - $ 737,239 $ - $ 737,239 $ - $ 521,083 $ - $ 521,083
Recruitment services 572,233 - - 572,233 1,138,920 - - 1,138,920 2,326,765 - - 2,326,765
Products sales and other - 1,899 - 1,899 - 3,330 - 3,330 - 3,339 - 3,339
Consumer advertising and marketing solutions 24,290 - - 24,290 54,638 - - 54,638 93,830 - - 93,830
Total revenues 596,523 355,307 - 951,830 1,193,558 740,569 - 1,934,127 2,420,595 524,422 - 2,945,017
Loss from continuing operations (82,526 ) (370,196 ) (1,346,391 ) (1,799,113 ) (232,550 ) (438,306 ) (2,557,261 ) (3,228,117 )
Income (loss) from continuing operations 606,035 (417,879 ) (1,553,159 ) (1,365,005 )
Depreciation and amortization 11,835 36,013 - 47,848 26,510 73,339 - 99,849 3,597 55,086 - 58,683
Income tax benefit (121 ) (2,201 ) (10,190 ) (12,512 ) (1,072 ) (2,608 ) (14,741 ) (18,421 )
Net loss from continuing operations (76,855 ) (367,995 ) (1,336,201 ) (1,781,051 ) (225,264 ) (435,698 ) (2,542,520 ) (3,203,482 )
Income tax expense (benefit) 9,431 (5,735 ) (20,739 ) (17,043 )
Net income (loss) from continuing operations 599,338 (412,144 ) (1,532,420 ) (1,345,227 )
As of June 30, 2020
Goodwill $ 339,451 $ - $ - $ 339,451
Intangibles assets, net 90,400 323,881 - 414,281
Assets from continuing operations 2,103,830 1,197,336 - 3,301,166

Six Months Ended June 30, 2020
PDN NAPW Corporate
Network Network Overhead Consolidated
Membership fees and related services $ - $ 737,239 $ - $ 737,239
Recruitment services 1,138,920 - - 1,138,920
Products sales and other - 3,330 - 3,330
Consumer advertising and marketing solutions 54,638 - - 54,638
Total revenues 1,193,558 740,569 - 1,934,127
Loss from continuing operations (232,550 ) (438,306 ) (2,557,261 ) (3,228,117 )
Depreciation and amortization 26,510 73,339 - 99,849
Income tax benefit (1,072 ) (2,608 ) (14,741 ) (18,421 )
Net loss from continuing operations (225,264 ) (435,698 ) (2,542,520 ) (3,203,482 )
Three Months Ended June 30, 2019 Six Months Ended June 30, 2019
PDN NAPW Corporate PDN NAPW Corporate
Network Network Overhead Consolidated Network Network Overhead Consolidated
Membership fees and related services $ - $ 633,914 $ - $ 633,914 $ - $ 1,428,453 $ - $ 1,428,453
Recruitment services 651,046 - - 651,046 1,125,306 - - 1,125,306
Products sales and other - 1,143 - 1,143 - 3,955 - 3,955
Consumer advertising and marketing solutions 38,059 - - 38,059 73,775 - - 73,775
Total revenues 689,105 635,057 - 1,324,162 1,199,081 1,432,408 - 2,631,489
Loss from continuing operations (19,545 ) (44,245 ) (699,973 ) (763,763 ) (191,021 ) (151,976 ) (1,287,948 ) (1,630,945 )
Depreciation and amortization 15,891 201,443 - 217,334 31,632 402,885 - 434,517
Income tax benefit 24,110 (1,037 ) (33,309 ) (10,236 ) 10,975 (9,166 ) (77,678 ) (75,869 )
Net loss from continuing operations 320,814 (43,208 ) (666,664 ) (389,058 ) 159,890 (142,810 ) (1,210,270 ) (1,193,190 )
As of December 31, 2019
Goodwill $ 339,451 $ - $ - $ 339,451
Intangibles assets, net 90,400 361,985 - 452,385
Assets from continuing operations 2,151,734 1,254,693 - 3,406,427
~~15.~~ 13. Subsequent Events
~~On June 26, 2020, the Company~~In March 2021, IPDN entered into a ~~second~~stock purchase agreement ~~with~~("Stock Purchase Agreement") to purchase a significant equity stake in RemoteMore USA Inc. (“RemoteMore”), a Delaware corporation. According to an arrangement reached by the parties, IPDN made an initial refundable deposit of $60,000.00 to RemoteMore to facilitate the completion of the transaction. In August 2021, based on milestones achieved in the negotiations, IPDN completed the purchase of all preferred stock in RemoteMore, constituting 5.625% of all outstanding stock of RemoteMore, for $180,000.00. At the same time, IPDN made an additional refundable deposit of $300,000.00 to RemoteMore to further facilitate the completion of the transaction. RemoteMore will use the deposits towards closing costs. If the transaction closes as planned, these deposits will be counted towards the purchase price provided in the Stock Purchase Agreement. If the transaction for whatever reasons is not closed, RemoteMore shall refund these deposits to IPDN.
On July 9, 2021, the Company closed the registered direct offering, pursuant to which certain institutional ~~investor for the sale of 312,500~~ accredited investors purchased 1,470,588 shares of the Company’s common stock, ~~of the Company at a price of $3.20~~ par value $0.01 per share, ~~for net proceeds of $1,000,000. The closing of this transaction took place on June 29, 2020, however, all the proceeds from this sale were not received until July 24, 2020.~~
~~On July 27, 2020, the Company entered into a Securities Purchase Agreement with three institutional accredited investors. The Company sold 1,481,484 shares of its common stock~~ at a per share price ~~of $1.35 and received net~~equal to $1.70 for gross proceeds of ~~$1,814,353 on July 27, 2020.~~
Net proceeds from common stock sales received in July 2020:
June 29, 2020, stock sale $ 1,000,000
July 27, 2020, stock sale 1,814,353
Total $ 2,814,353
~~The resulting increase in Stockholders’ Equity from this stock sale is reflected in the financial statements when the proceeds are received.~~
~~With the receipt of the above net proceeds, the Company has regained compliance with NASDAQ listing requirements. NASDAQ will continue to monitor the Company’s ongoing compliance with~~$2,499,999.60. As a result, the stockholders’ equity ~~requirement, and, if at the time~~ of ~~its next periodic report~~ the Company ~~does not~~as of July 9, 2021 is approximately $2.9 million. On July 15, 2021, the Nasdaq has determined that the Company complies with the Nasdaq Listing Rule 5550(b)(1) requires listed companies to maintain stockholders’ equity of at least $2.5 million. However, the Company needs to evidence compliance ~~the Company~~upon filing its future reports or it may be subject to delisting.
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ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Basis of Presentation
This MD&A should be read in conjunction with the accompanying condensed consolidated financial statements and the notes thereto, and the audited consolidated financial statements and notes thereto included in our ~~2019~~2020 Form 10-K.
Forward-looking statements in this MD&A are not guarantees of future performance and may involve risks and uncertainties that could cause actual results to differ materially from those projected. Refer to the “Forward-Looking Statements” section of this MD&A and Item 1A. Risk Factors of our ~~2019~~2020 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+).
We currently operate in two business segments: (i) Professional Diversity Network (“PDN Network”), which includes online professional networking communities with career resources tailored to the needs of various diverse cultural groups and employers looking to hire members of such groups, and (ii) National Association of Professional Women (“NAPW Network”), a women-only professional networking organization. On March 4, 2020 the Board decided to discontinue all of the Company’s operations in the People’s Republic of China, ( “China Operations”), which focused on providing tools, products and services in China to assist women, students and business professionals in personal and professional development.
Our value proposition is simple: (i) we provide a robust online and in-person network for our women members to make professional and personal connections for our diverse audience of women: African Americans, Hispanics, Asians, Veterans, individuals with disabilities and members of the ~~gay~~LGBT+ community (with the ability to roll out to our other affinities); (ii) we assist our registered users, or members, in their efforts to connect with like-minded individuals and identify career opportunities within the network; and (iii) we help employers address their workforce diversity needs by connecting them with the right candidates.
~~Impact~~On March 4, 2020, our Board of ~~COVID-19~~
~~During~~Directors (the “Board”) decided to discontinue all operations in China. The resolution approved by the Board does not contemplate a sale of the business unit or a sale of any assets to a third-party for its China operations, but to effectively cease operations, which will commence during the second quarter of ~~2020,~~2020. Accordingly, all historical financial results associated with the ~~outbreak~~China operations have been reclassified to discontinued operations and current and prior period financial results have been reclassified. China operations were previously disclosed as a reportable operating segment as “China Operations”.
25
Impact of COVID-19
The COVID-19 pandemic has negatively impacted the ~~novel coronavirus (COVID-19) continued to result in disruptions to~~global economy, disrupted consumer spending and global supply chains and created significant volatility and disruption of financial markets. The COVID-19 pandemic may have an adverse effect on our business and ~~operations.~~financial performance. The extent of the impact of the COVID-19 pandemic, including our ability to execute our business strategies as planned, will depend on future developments, including the duration and severity of the pandemic, which are highly uncertain and cannot be predicted. In ~~March 2020,~~response to mandates and recommendations from federal, state and local authorities, as well as decisions we ~~began~~have made to ~~experience reductions in new memberships~~protect the health and ~~enrollment renewals~~safety of our employees with respect to the COVID-19 pandemic, we temporarily closed our offices and had our employees work remotely. We may face more closure requirements and other operation restrictions for prolonged periods of time due to, ~~COVID-19 as customers deferred our services due to financial~~among other factors, evolving and ~~economic concerns and this trend continued into the second quarter. Additionally, revenues associated with our events business were cancelled due to~~stringent public health directives, quarantine policies, social distancing measures, ~~currently~~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.
The extent of the impact of COVID-19 on our business and financial results will also depend on future developments, including the duration and spread of the pandemic, the implementation or recurrence of shelter in place ~~as well as travel restrictions. We have transitioned out events business to online events for~~or similar orders in the remainder of the year and we have seen positive results from the events during the second quarter in terms of enrollment and sponsorship. We anticipate that there will continue to be a general business and customer financial uncertainty for the remainder of the year, which may negatively impact new and existing customers and will continue to result in a reduction in expected revenues and an increase in our operating costs. However, we believe that our existing cash balances will provide us the necessary capital to navigate the COVID-19 pandemic.future.
Sources of Revenue
We generate revenue from (i) paid membership subscriptions and related services, (ii) recruitment services, (iii) product sales, (iv) education and training and (v) consumer advertising and consumer marketing solutions. The following table sets forth our revenues from each product as a percentage of total revenue for the periods presented. The period-to-period comparison of financial results is not necessarily indicative of future results.
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Paid Membership Subscriptions and Related Services. Paid Membership Subscriptions and Related Services. We offer paid membership subscriptions through our NAPW Network, a women-only professional networking organization, operated by our wholly-owned subsidiary. Members gain access to networking opportunities through a members-only website at www.iawomen.com and “virtual” ~~eChapter~~networking events which occur in a webcast setting as well as through in-person networking at approximately 100 local chapters nationwide, additional career and networking events such as HERizonInsights and the ~~National Networking Summit Series, Power Networking Events~~Leadership Lab and the PDN Network events. NAPW members also receive ancillary (non-networking) benefits such as educational discounts, shopping, and other membership perks. The basic package is the Initiator level, which provides ~~online benefits only.~~access to networking events and member programming. Upgrades to an Innovator membership include the Initiator benefits as well ~~as membership in local chapters,~~enhanced education and ~~access to live in-person events.~~mentorship. The most comprehensive level, the Influencer, provides all the aforementioned benefits plus admission to exclusive “live” events and expanded opportunities for marketing and promotion, including the creation and distribution of a press release, which is prepared by professional writers and sent over major newswires. Additionally, all memberships offer ~~educational programs with~~ discounts ~~or at no cost, based on~~through the ~~membership level.~~IAW Perks program and preferred partners. NAPW Membership is renewable and fees are payable on an annual or monthly basis, with the first fee payable at the commencement of the membership.
As part of the launch of IAW in the United States, the Company began to offer a monthly membership option in January 2018, in addition to an annual membership option. While this has increased the number of new members registering, membership revenue is received on a monthly rather than an annual basis. ~~The new IAW is focused on delivering member benefits and providing value to those who join as paid members.~~
Recruitment Services. We provide recruitment services through PDN Network to medium and large employers seeking to diversify their employment ranks. Our recruitment services include recruitment advertising, job postings, semantic search technology and paid access to, and placement in, or advertising around our career and networking events. The majority of recruitment services revenue comes from job recruitment advertising. We also offer to businesses subject to the regulations and requirements of the Equal Employment Opportunity Office of Federal Contract Compliance Program (“OFCCP”) our OFCCP compliance product, which combines diversity recruitment advertising with job postings and compliance services.
26

Product Sales. We offer to new purchasers of our NAPW memberships the opportunity to purchase a commemorative wall plaque at the time of purchase. They may purchase up to two plaques at that time.
Consumer Advertising and Consumer Marketing Solutions. We work with partner organizations to provide them with integrated job boards on their websites which offer their members or customers the ability to post recruitment advertising and job openings. We generate revenue from fees charged for those postings.
Cost of Revenue
Cost of revenue primarily consists of costs of producing job fair and other events, revenue sharing with partner organizations, 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.
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.
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The following table provides a reconciliation of net loss from continuing operations to Adjusted EBITDA for the three and six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, the most directly comparable GAAP measure reported in our consolidated financial statements:
Three Months Ended June 30,
2021 2020
(in thousands)
Loss from Continuing Operations $ (590 ) $ (1,781 )
Stock-based compensation 203 378
Litigation settlement reserve 75 258
Depreciation and amortization 29 48
Interest and other income (2 ) (6 )
Income tax expense (benefit) 50 (13 )
Adjusted EBITDA $ (235 ) $ (1,116 )
Six Months Ended June 30,
2021 2020
(in thousands)
Loss from Continuing Operations $ (1,345 ) $ (3,203 )
Stock-based compensation 309 398
Litigation settlement reserve 75 708
Depreciation and amortization 59 100
Interest and other income (3 ) (6 )
Income tax benefit (17 ) (18 )
Adjusted EBITDA $ (922 ) $ (2,021 )
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Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
(in thousands) (in thousands)
Loss from Continuing Operations $ (1,781 ) $ (389 ) $ (3,203 ) $ (1,193 )
Stock-based compensation 378 90 398 99
Litigation settlement reserve 258 - 708 -
Depreciation and amortization 48 217 100 435
Interest expense - 12 - 14
Interest and other income (6 ) (376 ) (6 ) (376 )
Income tax benefit (13 ) (10 ) (18 ) (76 )
Adjusted EBITDA $ (1,116 ) $ (456 ) $ (2,021 ) $ (1,097 )
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 June 30, Change Change Three Months Ended June 30 Change Change
2020 2019 (Dollars) (Percent) 2021 2020 (Dollars) (Percent)
(in thousands) (in thousands)
Revenues:
Membership fees and related services $ 354 $ 634 $ (280 ) -44.2 % $ 258 $ 354 $ (96 ) (27.1 )%
Recruitment services 572 651 (79 ) -12.1 % 1,152 572 580 101.4 %
Products sales and other 2 1 1 100.0 % 2 2 - - %
Consumer advertising and marketing solutions 24 38 (14 ) -36.8 % 49 24 25 104.2 %
Total revenues $ 952 $ 1,324 $ (372 ) -28.1 % $ 1,461 $ 952 $ 509 53.5 %
Total revenues ~~decreased $372,000, or 28.1%, from $1,324,000 during~~for the three months ended June 30, ~~2019,~~2021 increased approximately $509,000, or 53.5%, to approximately $1,461,000 from approximately $952,000 during the ~~three months ended June 30, 2020.~~same period in the prior year. The ~~decrease~~increase was ~~primarily~~predominately attributable to ~~a $280,000 decline~~an approximate $580,000 increase in ~~new~~recruitment services revenues in the current period, partially offset by an approximate $95,000 decrease in membership fees and related services revenues, ~~in addition to a $79,000 decline in recruitment revenues during the three months ended June 30, 2020. Due~~as compared to the ~~COVID-19 pandemic, we continued to see a decline~~same period in ~~our new membership fees as our customers have delayed new membership enrollment.~~the prior year.
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Six Months Ended June 30 Change Change
2021 2020 (Dollars) (Percent)
(in thousands)
Revenues:
Membership fees and related services $ 521 $ 737 $ (216 ) (29.3 )%
Recruitment services 2,327 1,139 1,188 104.3 %
Products sales and other 3 3 - - %
Consumer advertising and marketing solutions 94 55 39 70.9 %
Total revenues $ 2,945 $ 1,934 $ 1,011 52.3 %
Six Months Ended June 30, Change Change
2020 2019 (Dollars) (Percent)
(in thousands)
Revenues:
Membership fees and related services $ 737 $ 1,428 $ (691 ) -48.4 %
Recruitment services 1,139 1,125 14 1.2 %
Products sales and other 3 4 (1 ) -25.0 %
Consumer advertising and marketing solutions 55 74 (19 ) -25.7 %
Total revenues $ 1,934 $ 2,631 $ (697 ) -26.5 %
Total revenues ~~decreased $697,000, or 26.5%, from $2,631,000 during~~for the six months ended June 30, ~~2019,~~2021 increased approximately $1,000,000, or 52.3%, to approximately $2,945,000 from approximately $1,934,000 during the ~~six months ended June 30, 2020.~~same period in the prior year. The ~~decrease~~increase was ~~primarily~~predominately attributable to ~~a $691,000 or 48.4% decline~~an approximate $1,200,000 increase in ~~new~~recruitment services revenues in the current period, partially offset by an approximate $216,000 decrease in membership fees and related services revenues, ~~and was primarily attributable~~as compared to ~~a delay or postponement of existing membership enrollments due to COVID-19.~~the same period in the prior year.
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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 June 30, Change Change Three Months Ended June 30, Change Change
2020 2019 (Dollars) (Percent) 2021 2020 (Dollars) (Percent)
(in thousands) (in thousands)
PDN Network $ 597 $ 689 $ (92 ) -13.4 % $ 1,201 $ 597 $ 604 101.5 %
NAPW Network 355 635 (280 ) -44.1 % 260 355 (95 ) (26.8 )%
Total revenues $ 952 $ 1,324 $ (372 ) -28.1 % $ 1,461 $ 952 $ 509 53.5 %
During the three months ended June 30, ~~2020,~~2021, our PDN Network generated ~~$597,000~~approximately $1,201,000 in revenues compared to ~~$689,000~~approximately $596,000 in revenues during the three months ended June 30, ~~2019,~~2020, an increase of approximately $605,000 or 101.5 percent. The increase in revenues was predominately driven by continued improvements in our e-commerce platform and new sales collaborations, higher new client acquisitions and a significant increase in diversity recruitment initiatives by our clients
During the three months ended June 30, 2021, our NAPW Network revenues were approximately $260,000, compared to revenues of approximately $356,000 during the same period in the prior year, a decrease of ~~$92,000~~approximately $96,000 or ~~13.4%.~~27.0 percent. The decrease in revenues was primarily due to a continued decrease in ~~recruitment revenues generated in~~legacy membership retention rates and the ~~current period.~~continued effects of COVID-19 as new membership enrollment slowly returns.
Six Months Ended June 30, Change Change
2021 2020 (Dollars) (Percent)
(in thousands)
PDN Network $ 2,421 $ 1,193 $ 1,228 102.9 %
NAPW Network 524 741 (217 ) (29.3 )%
Total revenues $ 2,945 $ 1,934 $ 1,011 52.3 %
During the ~~three~~six months ended June 30, 2021, our PDN Network generated approximately $2,421,000 in revenues compared to approximately $1,193,000 in revenues during the six months ended June 30, 2020, an increase of approximately $1,228,000 or 102.9 percent. The increase in revenues was predominately driven by continued improvements in our e-commerce platform and new sales collaborations, higher new client acquisitions and a significant increase in diversity recruitment initiatives by our clients
During the six months ended June 30, 2021, our NAPW Network revenues were ~~$355,000,~~approximately $524,000, compared to revenues of ~~$635,000~~approximately $741,000 during the ~~three months ended June 30, 2019,~~same period in the prior year, a decrease of ~~$280,000~~approximately $217,000 or ~~44.1%.~~29.3 percent. The decrease in revenues was primarily due toa continued decrease in legacy membership retention rates and the continued effects of COVID-19 as new membership enrollment ~~significantly declined as we~~slowly returns. We believe that the membership services that we provide to our ~~customer has~~customers turned into a discretionary spending item during 2020 and the first six months of 2021 and the services that we provide were postponed as a ~~result.~~result of the financial and economic impact of COVID-19.
Six Months Ended June 30, Change Change
2020 2019 (Dollars) (Percent)
(in thousands)
PDN Network $ 1,193 $ 1,199 $ (6 ) -0.5 %
NAPW Network 741 1,432 (691 ) -48.3 %
Total revenues $ 1,934 $ 2,631 $ (697 ) -26.5 %
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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 June 30, Change Change Three Months Ended June 30, Change Change
2020 2019 (Dollars) (Percent) 2021 2020 (Dollars) (Percent)
(in thousands) (in thousands)
Cost and expenses:
Cost of revenues $ 170 $ 227 $ (57 ) -25.1 % $ 260 $ 170 $ 90 52.9 %
Sales and marketing 459 470 (11 ) -2.3 % 600 459 141 30.7 %
General and administrative 2,074 1,174 900 76.7 % 1,112 2,074 (962 ) (46.4 )%
Depreciation and amortization 48 217 (169 ) -77.9 % 29 48 (19 ) (39.6 )%
Total cost and expenses: $ 2,751 $ 2,088 $ 663 31.8 %
Total pre-tax cost and expenses: $ 2,001 $ 2,751 $ (750 ) (27.3 )%
Six Months Ended June 30, Change Change
2021 2020 (Dollars) (Percent)
(in thousands)
Cost and expenses:
Cost of revenues $ 521 $ 343 $ 178 51.9 %
Sales and marketing 1,300 984 316 32.1 %
General and administrative 2,430 3,735 (1,305 ) (34.9 )%
Depreciation and amortization 59 100 (41 ) (41.0 )%
Total pre-tax cost and expenses: $ 4,310 $ 5,162 $ (852 ) (16.5 )%
~~Total costs and expenses increased~~Cost of revenues: Cost of revenues during the three months ended June 30, ~~2020 to $2,751,000 compared to $2,088,000~~2021 was approximately $260,000, an increase of approximately $90,000, or 52.9 percent, from approximately $170,000 during the same period of the prior year, as a direct result of increased revenues of approximately 53.4 percent. Cost of revenues during the six months ended June 30, 2021 was approximately $521,000, an increase of approximately $178,000, or 51.9 percent, from approximately $343,000 during the same period in the prior year, as a direct result of increased revenues of approximately 52.3 percent.
Sales and marketing expense: Sales and marketing expense during the three months ended June 30, ~~2019.~~2021 was approximately $600,000, an increase of approximately $141,000, or 30.7 percent, from $459,000 during the same period in the prior year. The increase ~~was primarily the result of higher stock-based compensation expense of $280,000 primarily as~~is a result of ~~restricted stock unit awards granted during the second quarter of the current period, a litigation settlement reserve of $258,000, $450,000 in higher legal~~sales and ~~accounting fees, partially offset by lower intangible amortization~~marketing costs driving increased revenues. Sales and marketing expense ~~of $164,000. The litigation settlement reserve is reflected in our Corporate Overhead segment in general and administrative expenses.~~
Six Months Ended June 30, Change Change
2020 2019 (Dollars) (Percent)
(in thousands)
Cost and expenses:
Cost of revenues $ 343 $ 410 $ (67 ) -16.3 %
Sales and marketing 984 1,165 (181 ) -15.5 %
General and administrative 3,735 2,252 1,483 65.9 %
Depreciation and amortization 100 435 (335 ) -77.0 %
Total cost and expenses: $ 5,162 $ 4,262 $ 900 21.1 %
~~Total costs and expenses increased~~ during the six months ended June 30, ~~2020~~2021 was approximately $1,300,000, an increase of approximately $316,000, or 36.3 percent, from $984,000 during the same period in the prior year. The increase is a result of of sales and marketing costs driving increased revenues.
General and administrative expense: General and administrative expenses decreased by approximately $962,000, or 46.4 percent, to ~~$5,162,000~~approximately $1,112,000 during the three months ended June 30, 2021, as compared to ~~$4,262,000~~the same period in the prior year. The decrease was primarily a result of reductions in professional services charges of approximately $700,000, stock-based compensation costs of approximately $195,000, and payroll related costs of approximately $110,000, as compared to the same period in the prior year. Offsetting the decrease was a non-cash charge to litigation settlement reserve of $75,000 and a non-recurring charge for employee related costs of approximately $67,000.
General and administrative expenses decreased by approximately $1,305,000, or 34.9 percent, to approximately $2,430,000 during the six months ended June 30, ~~2019.~~2021, as compared to the same period in the prior year. The ~~increase~~decrease was primarily ~~the~~a result of a reduction in professional services charges of approximately $850,000, litigation settlement ~~reserves~~reserve of ~~$708,000, $649,000~~$450,000 recorded in ~~higher legal and accounting fees, higher stock-based compensation expense~~the first quarter of ~~$299,000,~~2020, partially offset by an increase in litigation settlement reserve of $75,000 in the second quarter of 2021, and a ~~reduction~~decrease in stock-based compensation costs of ~~$476,000~~approximately $88,000, as compared to the same period in ~~wages~~the prior year. Offsetting the decrease was a non-recurring charge for employee related costs of approximately $67,000.
Depreciation and ~~benefits~~amortization expense: Depreciation and ~~lower intangible~~ amortization expense ~~of $328,000~~during the three and six months ended June 30, 2021 was approximately $29,000 and $59,000, compared to approximately $48,000 and $100,000 during the same periods in the ~~current~~prior year. The decreases were primarily attributable to assets and intangible assets reaching the end of their useful lives.

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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 June 30, Change Change Three Months Ended June 30, Change Change
2020 2019 (Dollars) (Percent) 2021 2020 (Dollars) (Percent)
(in thousands) (in thousands)
PDN Network $ 679 $ 709 $ (30 ) -4.2 % $ 906 $ 679 $ 227 33.4 %
NAPW Network 726 679 47 6.9 % 431 726 (294 ) (40.5 )%
Corporate Overhead 1,346 700 646 92.3 % 664 1,346 (683 ) (50.7 )%
Total cost and expenses: $ 2,751 $ 2,088 $ 663 31.8 %
Total pre-tax costs and expenses: $ 2,001 $ 2,751 $ (749 ) (27.2 )%
Six Months Ended June 30, Change Change
2021 2020 (Dollars) (Percent)
(in thousands)
PDN Network $ 1,815 $ 1,426 $ 389 27.3 %
NAPW Network 942 1,179 (237 ) (20.1 )%
Corporate Overhead 1,553 2,557 (1,004 ) (39.3 )%
Total pre-tax costs and expenses: $ 4,310 $ 5,162 $ (852 ) (16.5 )%
~~Costs and expenses increased $47,000, or 6.9%, in our NAPW Network segment during~~For the three months ended June 30, ~~2020~~2021, pre-tax costs and expenses related to Corporate Overhead decreased by approximately $683,000, or 50.7 percent, as compared to the same period in the prior year. The reduction is primarily as a result of a ~~$258,000 legal settlement reserve, which was partially offset by lower intangible amortization expense of $164,000 and a $31,000~~ decrease in ~~personnel costs.~~
~~Costs~~professional services of approximately $440,000 and ~~expenses decreased $30,000, or4.2%, in our PDN Network segment during~~stock-based compensation costs of approximately $195,000, as compared to the ~~three months ended June 30, 2020 primarily due to a $30,000 decrease in cost of sales due to lower revenues~~same period in the ~~current period, a $78,000 decrease in sales and marketing personnel costs, partially offset by a $38,000 increase in general and administrative personnel costs.~~prior year.
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Corporate overhead expenses increased $646,000 during the three months ended June 30, 2020 primarily as a result of $485,000 in higher legal and accounting fees and a $280,000 increase in stock-based compensation expense.
Six Months Ended June 30, Change Change
2020 2019 (Dollars) (Percent)
(in thousands)
PDN Network $ 1,426 $ 1,390 $ 36 2.6 %
NAPW Network 1,179 1,584 (405 ) -25.6 %
Corporate Overhead 2,557 1,288 1,269 98.5 %
Total cost and expenses: $ 5,162 $ 4,262 $ 900 21.1 %
~~Costs and expenses decreased $405,000, or 25.6%, in our NAPW Network segment during~~For the six months ended June 30, ~~2020~~2021, pre-tax costs and expenses related to Corporate Overhead decreased by approximately $1,004,000, or 39.3 percent, as compared to the same period in the prior year. The reduction is primarily as a result of ~~lower intangible amortization expense of $328,000,~~ a ~~$200,000~~ decrease in ~~personnel costs and a $37,000 reduction in costs~~professional services of ~~sales, which was partially offset by a $258,000 legal settlement reserve recorded during the second quarter of 2020.~~
Costs and expenses increased $36,000 in the PDN Network segment during the six months ended June 30, 2020 primarily due to higher rent expense of $25,000 and bad debt expense of $49,000, partially offset by lower costs of revenues of $30,000.
~~Corporate overhead expenses increased $1,269,000 during the six months ended June 30, 2020 primarily as a result of higher legal and accounting fees of $681,000, a~~approximately $600,000, litigation settlement reserve of $450,000 recorded in the first quarter of 2020 in ~~addition to $299,000 in higher~~the current period, and stock-based compensation ~~expense, which~~costs of approximately $88,000, as compared to the same period in the prior year. The decrease was offset by an increase in professional services of approximately $110,000 and stock-based compensation costs of approximately $88,000, as compared to the same period in the prior year. Partially offsetting the reductions were employee related costs of approximately $110,000.
For the three months ended June, 2021, pre-tax costs and expenses related to our PDN Network segment increased by approximately $227,000, or 33.4%, as compared to the same period in the prior year. The increase is primarily as a result of approximately $195,000 of sales and marketing costs driving increased revenues and a non-recurring charge for employee related costs of approximately $67,000, partially offset by a ~~$200,000~~reduction of general and administrative and other costs of approximately $33,000, as compared to the same period in the prior year.
For the six months ended June, 2021, pre-tax costs and expenses related to our PDN Network segment increased by approximately $389,000, or 27.3%, as compared to the same period in the prior year. The increase is primarily as a result of approximately $311,000 of sales and marketing costs driving increased revenues, a non-recurring charge for employee related costs of approximately $67,000, and other general and administrative costs of approximately $11,000, as compared to the same period in the prior year.
For the six months ended June 30, 2021, pre-tax costs and expenses related to our NAPW Network decreased by approximately $237,000. The decrease in ~~corporate personnel costs.~~
~~Operating Expenses~~
~~Cost~~the period is primarily related to reductions in professional services and salary related expenses, partially offset by a non-cash charge to litigation settlement reserve of ~~revenues:~~ ~~Cost of revenues during~~$75,000. For the three months ended June 30, ~~2020 was $170,000,~~2021, pre-tax costs and expenses related to our NAPW Network decreased by approximately $294,000. The decrease in the period is primarily related to reductions in professional services and salary related expenses, partially offset by a ~~decrease~~non-cash charge to litigation settlement reserve of ~~$57,000, or 25.1%, from $227,000 during~~$75,000.
Income Tax Benefit
Three Months Ended June 30, Change Change
2021 2020 (Dollars) (Percent)
(in thousands)
Income tax expense (benefit) $ 50 $ (13 ) $ 63 (484.7 )%
During the three months ended June 30, ~~2019 as~~2021 and 2020, we recorded income tax expense and a ~~result~~benefit for income tax of ~~lower revenues of $372,000, or 28.1%, which resulted in a corresponding decrease in cost of revenues~~. ~~Cost of revenues during the six months ended June 30, 2020 was $343,000, a decrease of $67,000, or 16.3%, from $410,000 during the six months ended June 30, 2019.~~approximately $50,000 and $13,000, respectively. The decrease in ~~costs of revenues was primarily attributable to a $28,000 reduction~~income tax benefit, resulting in ~~facility rent for our career events business and a $19,000 decrease in web hosting fees.~~
~~Sales and marketing expense:~~ ~~Sales and marketing~~income tax expense, during the three months ended June 30, 2020 was $459,000, a decrease of $11,000, from $470,000 during the three months ended June 30, 2019. The decrease is mainly attributable to a $78,000 decrease in sales and marketing spending in our PDN Network in the current period ~~offset by $68,000 in higher branding costs and marketing costs in our NAPW Network. Sales and marketing expense during the six months ended June 30, 2020~~ was ~~$984,000, a decrease of $181,000, from $1,165,000 during the six months ended June 30, 2019. The decrease was mainly attributable~~primarily due to ~~a decrease of $227,000 in personnel costs and a $34,000 reduction in digital marketing spending, which was partially offset by $63,000 in higher branding and marketing costs in the current period~~
~~General and administrative expense:~~ ~~General and administrative expenses during the three months ended June 30, 2020 was $2,074,000,~~ an increase ~~of $900,000, or 76.7%, from $1,174,000 during the three months ended June 30, 2019. The increase was a result of a litigation settlement reserve of $258,000 recorded~~ in the second quarter of 2020, a $450,000 increase in legal and accounting fees and a $280,000 increase in stock-based compensation expense, partially offset by a reduction of $68,000 in personnel costs. General and administrative expenses during the six months ended June 30, 2020 was $3,735,000, an increase of $1,483,000, or 65.9%, compared to $2,252,000 during the six months ended June 30, 2019. The increase was a result ofdiscrete tax items associated with litigation settlement reserves ~~of $708,000, a $649,000 increase~~and changes in ~~legal and accounting fees and $299,000 in higher stock-based compensation expense, which was partially offset by a reduction of $177,000 in personnel costs.~~the Company’s net operating losses.
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~~Depreciation and amortization expense:~~ Depreciation and amortization expense during the three months ended June 30, 2020 was $48,000, compared to $217,000 during the three months ended June 30, 2019, a decrease of $169,000, or 77.9%. The decrease was primarily attributable to $164,000 in lower intangible amortization expense due to a $2,796,000 impairment charge recorded in the fourth quarter of 2018 in our NAPW segment.
Six Months Ended June 30, Change Change
2021 2020 (Dollars) (Percent)
(in thousands)
Income tax benefit $ (17 ) $ (18 ) $ 1 (5.6 )%
During the six months ended June 30, ~~2020~~2021 and 2019, depreciation and amortization expense was $100,000 and $435,000, respectively, a decrease of $335,000. The decrease was primarily attributable to $328,000 in lower intangible amortization expense.
~~Income Tax Expense (Benefit)~~
Three Months Ended June 30, Change Change
2020 2019 (Dollars) (Percent)
(in thousands)
Income tax benefit $ (13 ) $ (10 ) $ (3 ) 30.0 %
~~During the three months ended June 30,~~ 2020, ~~and 2019,~~ we recorded a benefit for income tax of ~~$13,000~~approximately $17,000 and ~~$10,000,~~$18,000, respectively. The increase in income tax benefit during the current period was primarily due to an increase in a discrete tax ~~item~~items associated with ~~stock-based compensation expense~~litigation settlement reserves and changes in ~~addition~~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 June 30, Change Change
2021 2020 (Dollars) (Percent)
(in thousands)
PDN Network $ 239 $ (77 ) $ 316 411.2 %
NAPW Network (186 ) (368 ) 182 (49.5 )%
Corporate Overhead (643 ) (1,336 ) 693 51.9 %
Consolidated net loss from continuing operations $ (590 ) $ (1,781 ) $ 1,191 66.9 %
Six Months Ended June 30, Change Change
2021 2020 (Dollars) (Percent)
(in thousands)
PDN Network $ 599 $ (225 ) $ 824 366.2 %
NAPW Network (412 ) (436 ) 24 5.5 %
Corporate Overhead (1,532 ) (2,542 ) 1,010 39.7 %
Consolidated net loss from continuing operations $ (1,345 ) $ (3,203 ) $ 1,858 58.0 %
Consolidated Net Loss from Continuing Operations. As the result of the factors discussed above, during the three months ended June 30, 2021, we incurred a net loss of approximately $590,000 from continuing operations, an increase of approximately $1,192,000 or 66.9 percent, compared to a ~~reduction in our valuation allowance.~~
Six Months Ended June 30, Change Change
2020 2019 (Dollars) (Percent)
(in thousands)
Income tax benefit $ (18 ) $ (76 ) $ 58 -76.3 %
net loss of approximately $1,781,000 during the three months ended June 30, 2020. During the six months ended June 30, ~~2020 and 2019,~~2021, we ~~recorded~~incurred a ~~benefit for income tax~~net loss of ~~$18,000 and $76,000, respectively. The decrease in income tax benefit~~approximately $1,345,000 from continuing operations, an increase of approximately $1,858,000 or 58.0 percent, compared to a net loss of approximately $3,203,000 during the ~~current~~same period ~~was primarily due to decrease in tax rates pursuant to the U.S. Tax Cuts and Jobs Act that occurred~~ in the prior ~~year in addition to a lower reduction in our deferred tax liabilities in the current~~ 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. In May 2018, we sold Noble Voice to a long-time customer of the Company and exited the business segment previously conducted by Noble Voice. For the three and six months ended June 30, 2019, results from discontinued operations incudes costs and expenses associated with Noble Voice.
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Operating Results of Discontinued Operations
The following table ~~presents~~represents the components of gross operating results from discontinued operations, which are included in the statements of operations and comprehensive loss for the three and six months ended June 30, ~~2020~~2021 and ~~2019:~~2020:

Three Months Ended June 30, Six Months Ended June 30, Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019 2021 2020 2021 2020

Revenues $ - $ 2 $ - $ 41 $ - $ - $ - $ -

Cost of Sales 8 13 15 30 18,201 7,787 20,517 15,143
Depreciation and amortization 2 4 2 8 - 1,676 - 1,676
Sales and marketing 80 69 105 154 - 80,425 - 105,114
General and administrative (38 ) 300 - 583 20,728 (37,620 ) 30,198 -
Non-operating (expense) income (6 ) 10 (6 ) 4
Non-operating expense 10,372 5,553 10,372 5,553
Loss from discontinued operations before income tax (58 ) (374 ) (128 ) (730 ) (49,301 ) (57,821 ) (61,087 ) (127,486 )
Income tax expense - 7 - 7
Income tax expense (benefit) - - - -
Net loss from discontinued operations $ (58 ) $ (381 ) $ (128 ) $ (737 ) $ (49,301 ) $ (57,821 ) $ (61,087 ) $ (127,486 )
~~Net loss~~
~~The following table sets forth each operating segment’s net income or loss for the periods presented. The period-to-period comparison is not necessarily indicative of future results.~~
Three Months Ended June 30, Change Change
2020 2019 (Dollars) (Percent)
(in thousands)
PDN Network $ (77 ) $ 321 $ (398 ) -124.0 %
NAPW Network (368 ) (43 ) (325 ) 755.8 %
Corporate Overhead (1,336 ) (667 ) (669 ) 100.3 %
Consolidated net loss from continuing operations $ (1,781 ) $ (389 ) $ (1,392 ) 357.8 %
Six Months Ended June 30, Change Change
2020 2019 (Dollars) (Percent)
(in thousands)
PDN Network $ (225 ) $ 160 $ (385 ) -240.6 %
NAPW Network (436 ) (143 ) (293 ) 204.9 %
Corporate Overhead (2,542 ) (1,210 ) (1,332 ) 110.1 %
Consolidated net loss from continuing operations $ (3,203 ) $ (1,193 ) $ (2,010 ) 168.5 %
Liquidity and Capital Resources
The following table summarizes our liquidity and capital resources as of June 30, ~~2020~~2021 and December 31, ~~2019:~~2020:
June 30, December 31, June 30, December 31,
2020 2019 2021 2020
(in thousands) (in thousands)
Cash and cash equivalents $ 859 $ 634 $ 2,508 $ 2,118
Working capital (deficiency) $ (2,616 ) $ (2,114 ) $ (738 ) $ (1,156 )
~~As of June 30, 2020, we had cash and cash equivalents of $859,000 compared to cash and cash equivalents of $634,000 at December 31, 2019.~~ Our principal sources of liquidity are our cash and cash equivalents, including net proceeds from the issuances of common stock. As of June 30, ~~2020,~~2021, we had ~~a working capital deficit~~cash and cash equivalents of ~~approximately $2,616,000,~~$2,508,585 compared to ~~a working capital deficit~~cash and cash equivalents of ~~approximately $2,114,000 as of~~$2,117,569 at December 31, ~~2019.~~2020. We had an accumulated deficit of ~~approximately $92,002,000~~$94,429,148 at June 30, ~~2020.~~2021. During the six months ended June 30, ~~2020,~~2021, we generated a net loss from continuing operations of ~~approximately $3,203,000 and~~$1,345,227. For the six months ended June 30, 2021 we used cash from continuing operations of approximately ~~$1,913,000.~~$663,000.
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~~While we have aggressively implemented cost cutting initiatives and have continued our~~
We continue to focus on ~~improving~~ our overall profitability ~~though new sales~~by reducing operating and ~~marking initiatives and through business collaborations,~~overhead expenses, we have continued to generate negative cash flows from operations, and we expect to incur net losses for the foreseeable ~~future.~~future, especially considering the negative impact COVID-19 will have on our liquidity and financial position. These conditions raise substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent on our ability to further implement our business plan, raise capital, ~~make strategic acquisitions~~ and generate ~~organic growth in revenues from our existing operating segments.~~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 certain vendors, implementing a new approval process overseeing travel and other expenses, and significantly reducing the cash compensation for independent board directors. If we are still not successful in sufficiently reducing our costs, we may then need to dispose of our other assets or discontinue business lines.
On ~~March 22, 2020,~~February 1, 2021, we entered into ~~an agreement~~a private placement with ~~Malven Group Limited, a company established under the laws of the British Virgin Islands (“Malven”),~~Ms. Yiran Gu, in ~~connection with the purchase by Malven of 1,939,237~~which we sold 500,000 shares of our common stock at a price ~~of $0.7735~~ per share of $2.00 for gross proceeds of ~~$1,500,000. The closing~~$1,000,000.
On July 9, 2021, the Company closed the registered direct offering, pursuant to which certain institutional accredited investors purchased 1,470,588 shares of the ~~transaction took place on March 31, 2020.~~
~~On June 26, 2020, we entered into a second agreement with Malven Group Limited, in connection with the purchase of 312,500 shares of~~Company’s common stock, ~~at a price of $3.20~~par value $0.01 per share, ~~for gross proceeds of $1,000,000. The closing of the transaction took place on June 29, 2020 and we received the funds in July 2020.~~
On July 27, 2020, we entered into a Securities Purchase Agreement (the “Agreement”) with three institutional accredited investors. Pursuant to the Agreement, we offered and sold 1,481,484 shares of our common stock at a per share price ~~of $1.35~~equal to $1.70 for gross proceeds of ~~approximately $2,000,000 pursuant~~$2,499,999.60.
In March 2021, IPDN entered into a stock purchase agreement ("Stock Purchase Agreement") to ~~our Registration Statement~~purchase a significant equity stake in RemoteMore USA Inc. (“RemoteMore”), a Delaware corporation. According to an arrangement reached by the parties, IPDN made an initial refundable deposit of $60,000.00 to RemoteMore to facilitate the completion of the transaction. In August 2021, based on ~~Form S-3 (Registration Statement No. 333-227249) (the “Transaction”). The Transaction closed on July 29, 2020 and we received net proceeds~~milestones achieved in the negotiations, IPDN completed the purchase of ~~$1,814,353, after deducting financial advisory, legal and escrow related fees.~~all preferred stock in RemoteMore, constituting 5.625% of all outstanding stock of RemoteMore, for $180,000.00. At the same time, IPDN made an additional refundable deposit of $300,000.00 to RemoteMore to further facilitate the completion of the transaction. RemoteMore will use the deposits towards closing costs.
We currently anticipate that our available funds and cash flow from operations may not be sufficient to meet our working capital requirements for the twelve months subsequent to the issuance of our financial statements. In order to fund our operations, we will need to increase revenues or raise capital by the issuance of ~~common~~ stock. However, there can be no assurances that our business plans and actions will be successful, that we will generate anticipated revenues, or that unforeseen circumstances ~~similar to COVID-19~~ will not require additional funding sources in the future or effectuate plans to conserve liquidity. Future efforts to raise additional funds may not be successful or they may not be available on acceptable terms, if at all. In addition, due to China’s foreign currency control, the Company cannot move money between China and the USA freely. The People’s Bank of China (PBOC) and State Administration of Foreign Exchange (SAFE) regulate the flow of foreign exchange in and out of the country strictly. We need to get approval from Chinese government to move money from China to the U.S. which might take extra time.
We collect membership fees generally at the commencement of the membership term or at renewal periods thereafter. The memberships we sell are for one year and we defer recognition of the revenue from membership sales and renewals and recognize it ratably over the twelve-month period. Starting January 2, 2018, we ~~also offer~~began offering a monthly membership for IAW USA for which we collect a fee on a monthly basis. Our PDN Network also sells recruitment services to employers, generally on a one-year contract basis. This revenue is also deferred and recognized over the life of the contract. Our payment terms for PDN Network 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.~~funds, corporate and municipal debt and U.S. government and U.S. government agency securities.
Six Months Ended June 30,
2020 2019
(in thousands)
Cash (used in) provided by continued operations
Operating activities $ (1,913 ) $ (1,482 )
Investing activities (7 ) (3 )
Financing activities 2,151 1,798
Effect of exchange rate fluctuations on cash and cash equivalents (50 ) 14
Cash provided by (used in) discontinued operations
Operating activities 44 406
Net increase in cash and cash equivalents $ 225 $ 733
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Six Months Ended June 30,
2020 2020
Cash provided by (used in) continued operations (in thousands)
Operating activities $ (663 ) $ (1,913 )
Investing activities (81 ) (7 )
Financing activities 1,167 2,151
Effect of exchange rate fluctuations on cash and cash equivalents (33 ) (50 )
Cash provided by (used in) discontinued operations Operating activities - 44
Net increase (decrease) in cash and cash equivalents $ 390 $ 225
Cash and Cash Equivalents
The Company considers cash and cash equivalents to include all short-term, highly liquid investments that are readily convertible to known amounts of cash and have original maturities of three months or less.
Net Cash Used in Operating Activities
Net cash used in operating activities from continuing operations during the six months ended June 30, 2021 was approximately $663,000. We had a net loss from continuing operations of approximately $1,345,227 during the six months ended June 30, 2021, which included a non-cash litigation settlement reserve of $75,000, stock based compensation expense of approximately $309,000, depreciation of amortization expense of $52,000 and amortization of right-of-use assets of $46,000, which was partially offset by deferred tax benefit of approximately $17,000. Changes in operating assets and liabilities used approximately $162,462 of cash during the six months ended June 30, 2021, consisting primarily of decreases in accounts receivable, accounts payable, and accrued expenses, partially offset by an increase in deferred revenue. We received $380,000 in cash as a result of a decrease in our Merchant Reserve.
Net cash used in operating activities from continuing operations during the six months ended June 30, 2020 was $1,913,000. We had a net loss from continuing operations of $3,203,000 during the six months ended June 30, 2020, which included a non-cash litigation settlement reserve of $708,000, stock-based compensation expenses of $398,000 and depreciation and amortization expense of $100,000 and amortization of right-of-use assets of $79,000, which was partially offset by payments of lease obligations of $91,000. Changes in operating assets and liabilities provided $113,000 of cash during the six months ended June 30, 2020, consisting primarily of a $271,000 increase in accrued expenses and a $268,000 increase in account receivable, which was partially offset by a $378,000 reduction in deferred revenue and $125,000 reduction in prepaid expenses.
Net Cash Used in Investing Activities
Net cash used in ~~operating~~investing activities from continuing operations ~~for the six months ended June 30, 2019 was $1,482,000. We had a net loss from continuing operations of $1,193,000~~ during the six months ended June 30, ~~2019,~~2021 was approximately $81,000, which ~~included depreciation~~consisted of refundable deposits related to future investments, investments in developed technology and amortization expense of $435,000, stock-based compensation expense of $99,000 and amortization of right-of-use assets of $75,000, which was partially by a $376,000 write-off of accounts payable, payments of lease obligations of $88,000 and deferred tax benefits of $77,000. Changes in operating assets and liabilities used $360,000 of cash during the six months ended June 30, 2019, consisting primarily of a $433,000 decreases in deferred revenues and a $225,000 decrease in accounts payable, partially offset by a $387,000 increases in accounts receivable.computer equipment purchases.
~~Net Cash Used in Investing Activities~~
Net cash used in investing activities from continuing operations during the six months ended June 30, 2020 was $7,400, which consisted of investments in developed technology and computer equipment purchases. ~~During~~
Net Cash Provided by Financing Activities
Net cash provided by financing activities from continuing operations during the six months ended June 30, ~~2019, net cash used~~2021 was approximately $1,167,000 and which reflected $1,000,000 proceeds from the sale of common stock in ~~investing activities~~February 2021 and $167,000 from ~~continuing operations was $2,500 and consisted of investment in developed technology.~~other financing activities.
~~Net Cash Provided by Financing Activities~~
Net cash provided by financing activities from continuing operations during the six months ended June 30, 2020 was $2,151,000, which reflected proceeds from the sale of common stock of $1,500,000 and $651,000 in proceeds received with respect to the Paycheck Protection Program loan. On March 22, 2020, we entered into an agreement with Malven Group Limited, a company established under the laws of the British Virgin Islands, in connection with the purchase of 1,939,237 shares of our common stock at a price of $0.7735 per share for gross proceeds of $1,500,000. The closing of the transaction took place on March 30, 2020.
3235

On June 26, 2020, we entered into a second agreement with Malven Group Limited, in connection with the purchase of 312,500 shares of common stock at a price of $3.20 per share for gross proceeds of $1,000,000. The closing of the transaction took place on June 29, 2020 and gross proceeds of $1,000,000 were received in July 2020.
Net cash provided by financing activities from continuing operations during the six months ended June 30, 2019 was $1,798,000, consisting of $1,100,000 in gross proceeds from the sale of 500,000 shares of common stock to one purchaser at a purchase price $2.20 per share, $498,000 in gross proceeds from the sale of 237,031 shares of common stock ranging from $1.146 to $3.96 and $400,000 in gross proceeds from a short-term loan from GNet Tech Holdings, a related party through one of our shareholders, Cosmic Forward Limited, partially offset by a $200,000 repayment of the short-term loan from GNet Tech Holdings
Off-Balance Sheet Arrangements
Since inception, we have not engaged in any off-balance sheet activities as defined in Regulation S-K Item 303(a)(4).
Critical Accounting Policies and Estimates
Our management’s discussion and analysis of financial condition and results of operations is based on our ~~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 consolidated financial statements requires us to exercise considerable judgment with respect to establishing sound accounting policies and in making estimates and assumptions that affect the reported amounts of our assets and liabilities, our recognition of revenues and expenses, and disclosure of commitments and contingencies at the date of the consolidated financial statements.
We base our estimates on our historical experience, knowledge of our business and industry, current and expected economic conditions, the attributes of our products, the regulatory environment, and in certain cases, the results of outside appraisals. We periodically re-evaluate our estimates and assumptions with respect to these judgments and modify our approach when circumstances indicate that modifications are necessary. These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
While we believe that the factors we evaluate provide us with a meaningful basis for establishing and applying sound accounting policies, we cannot guarantee that the results will always be accurate. Since the determination of these estimates requires the exercise of judgment, actual results could differ from such estimates.
While our significant accounting policies are more fully described in Note 3 to our ~~condensed~~ consolidated financial statements included inat the end of this ~~Form 10-Q,~~Annual Report, we believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating our reported financial results and affect the more significant judgments and estimates that we use in the preparation of our consolidated financial statements.
Accounts Receivable
Our policy is to reserve for uncollectible accounts based on our best estimate of the amount of 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 other factors that may indicate that the realization of an account may be in doubt. Account balances deemed to be uncollectible are charged to the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.
Goodwill and Intangible Assets
The Company accounts for goodwill and intangible assets in accordance with ASC 350, Intangibles – Goodwill and Other (“ASC 350”). ASC 350 requires that goodwill and other intangibles with indefinite lives should be tested for impairment annually or on an interim basis if events or circumstances indicate that the fair value of an asset has decreased below its carrying value.
33
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.
36

When conducting its annual goodwill impairment assessment, the Company initially performs a qualitative evaluation of whether it is more likely than not that goodwill is impaired. If it is determined by a qualitative evaluation that it is more likely than not that goodwill is impaired, the Company then compares the fair value of the Company’s reporting unit to its carrying or book value. If the fair value of the reporting unit exceeds its carrying value, goodwill is not impaired and the Company is not required to perform further testing. If the carrying value of a reporting unit exceeds its fair value, the Company will measure any goodwill impairment losses as the amount by which the carrying amount of a reporting unit exceeds its fair value, not to exceed the total amount of goodwill allocated to that reporting unit.
Capitalized Technology Costs
We account for capitalized technology costs in accordance with ASC 350-40, Internal-Use Software (“ASC 350-40”). In accordance with ASC 350-40, we capitalize certain external and internal computer software costs incurred during the application development stage. The application development stage generally includes software design and configuration, coding, testing and installation activities. Training and maintenance costs are expensed as incurred, while upgrades and enhancements are capitalized if it is probable that such expenditures will result in additional functionality. Capitalized software costs are amortized over the estimated useful lives of the software assets on a straight-line basis, generally not exceeding three years.
Business Combinations
ASC 805, Business Combinations (“ASC 805”), applies the acquisition method of accounting for business combinations to all acquisitions where the acquirer gains a controlling interest, regardless of whether consideration was exchanged. ASC 805 establishes principles and requirements for how the acquirer : a) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree; b) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and c) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. Accounting for acquisitions requires the Company to recognize, separately from goodwill, the assets acquired and the liabilities assumed at their acquisition-date fair values. Goodwill as of the acquisition date is measured as the excess of consideration transferred and the net of the acquisition-date fair values of the assets acquired and the liabilities assumed. While the Company uses its best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date, the estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the consolidated statements of comprehensive loss.
Revenue Recognition
Our principal sources of revenue are recruitment revenue, consumer marketing and consumer advertising revenue, membership subscription fees, and product sales. Recruitment revenue includes revenue recognized from direct sales to customers for recruitment services and events, as well as revenue from our direct ecommerce sales. Revenues from recruitment services are recognized when the services are performed, evidence of an arrangement exists, the fee is fixed or determinable and collectability is probable. Our recruitment revenue is derived from agreements through single and multiple job postings, recruitment media, talent recruitment communities, basic and premier corporate memberships, hiring campaign marketing and advertising, e-newsletter marketing and research and outreach services.
Consumer marketing and consumer advertising revenue is recognized either based upon a fixed fee for revenue sharing agreements in which payment is required at the time of posting, or billed based upon the number of impressions (the number of times an advertisement is displayed) recorded on the websites as specified in the customer agreement.
3437

Revenue generated from NAPW Network membership subscriptions is recognized ratably over the 12-month membership period, although members pay their annual fees at the commencement of the membership period. Starting January 2, 2018, we ~~also offer~~began offering a monthly membership for which we collect fees on a monthly basis and we recognize revenue in the same month as the fees are collected. Revenue from related membership services are derived from fees for development and set-up of a member’s personal on-line profile and/or press release announcements. Fees related to these services are recognized as revenue at the time the on-line profile is complete and press release is distributed.
Recent Accounting Pronouncements
See Note 3 to our financial statements.
ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4 – CONTROLS AND PROCEDURES
Evaluation of disclosure controls and procedures
As of June 30, ~~2020,~~2021, our management conducted an evaluation, under the supervision and with the participation of our Chief Executive Officer and Interim Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures; as is defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We recognize that there are material weaknesses related to our internal controls. Therefore, our Chief Executive Officer and Interim Chief Financial Officer have concluded that our disclosure controls and procedures were not effective, as of the end of the period covered by this Quarterly Report. This includes ensuring that information required to be disclosed was recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Furthermore, to provide reasonable assurance that information required to be disclosed is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
~~Changes in~~Management’s Report on Internal Control over Financial Reporting

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer (principal executive officer) and Interim Chief Financial Officer (principal financial officer), is responsible for establishing and maintaining adequate internal control over financial reporting

~~During~~ as defined in Rules 13a-15(f) and 15d-15(f) of the ~~first six months of 2020, we continued to undertake certain initiatives to improve and remediate material weaknesses related to~~Exchange Act. We have designed our internal ~~control~~controls to provide reasonable assurance that our financial statements are prepared in accordance with generally accepted accounting principles in the United States (U.S. GAAP), and include those policies and procedures that:

	●	pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and disposition of our assets;

	●	provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorization of our management and directors; and

	●	provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Our management conducted an evaluation of the effectiveness of our internal controls over financial reporting ~~that were identified for the year ended~~as of December 31, ~~2019. Specifically, we continued to implement more effective~~2020. In making this evaluation, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in its 2013 Internal Control — Integrated Framework.

Based on this evaluation conducted as of December 31, 2020, our Chief Executive Officer and Interim Chief Financial Officer had concluded that our internal controls over financial reporting ~~process and internal control procedures that included monthly and quarterly closing check-lists and monthly review~~were not effective as of the end of the period covered in our 2020 Annual Report on Form 10-K. Management undertook several remediation actions, including hiring experienced accounting personnel, improvements in the segregation of duties within our accounting and financial ~~reports by the Company’s Finance Department. We also continued improving~~reporting functions, GAAP training of internal staff and ~~to utilize third-party consultants~~engaging an outside consultant to assist the Company on complex GAAP matters. Although these measures greatly helped to improve our internal controls, they did not fully remediate deficiencies in controls. Despite this, our management has concluded that the ~~review~~financial statements included in this report fairly present in all material respects our financial position and ~~preparation~~results of ~~complex~~operations.

The Company’s 2020 Annual Report does not include an attestation report of the Company’s registered public accounting ~~transaction and financial statement reports. There have been no other changes in our~~firm regarding internal control over financial reporting ~~during~~as it was not subject to attestation by the ~~first six months~~Company’s registered public accounting firm pursuant to rules of the SEC that permit the Company to provide only management’s report in the 2020 Annual Report on Form 10-K.

Material Weakness in Internal Control Over Financial Reporting

A material weakness is a control deficiency or a combination of control deficiencies that ~~have materially affected,~~result in more than a remote likelihood that a material misstatement of the annual or ~~are reasonably likely to materially affect, our internal controls over~~interim financial ~~reporting.~~

statements will not be prevented or detected. Our management ~~has~~had concluded that, as of ~~June 30,~~December 31, 2020, we did not maintain effective controls over the preparation, review, presentation and disclosure of our financial statements. Specifically, we noted the ~~following:~~following.

	●	~~Relevant operating information is~~Management has not ~~adequately used~~implemented policies and procedures to ~~develop accounting~~recognize revenue equal to the amount allocated from revenue sharing arrangements with partners. Specifically, invoices of such arrangements are not agreed to approved price list before recording and ~~financial information~~related write-offs and ~~serve as a basis~~credit memos for reliable financial reporting. This same operating information is also used as the basis for accounting estimates. Specifically, financial and nonfinancial indicators of going concern and impairment of assets werepayments to be received are not ~~completely assessed~~reviewed or approved by ~~management.~~management;

	●	~~Employees lack full technical competence~~The Company does not have accounting policies and ~~training necessary~~procedures to specify the correct treatment for estimating the ~~nature~~allowance for doubtful accounts and ~~complexity~~bad debt expense of ~~the entity’s activities.~~recruitment services. Specifically, ~~Company personnel could not perform purchase accounting or fair value measurements with Company’s acquisitions.~~

	●	~~Supporting~~a supporting analysis is not prepared for ~~each non-routine event or transaction that requires management’s judgement and/or estimate. Specifically, no analysis is prepared to document compliance with relevant GAAP~~estimating the allowance for doubtful accounts and ~~entity’s accounting policies.~~bad debt expense. Delinquent accounts receivable are not reviewed; and

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

~~Limitations on effectiveness~~Plan for Remediation of ~~controls~~Material Weakness

During fiscal 2021, we continued our initiatives to improve and ~~procedures~~remediate material weaknesses related to our internal control over financial reporting for the period ended December 31, 2020. Specifically:

	●	We continue to look to expand our corporate accounting staff and added qualified personnel with knowledge of U.S. GAAP;

	●	continued updating of accounting policies and procedures;

	●	implementation of more robust accounting software technologies to reduce the amount of manual processes; and

	●	we continue to improve the financial reporting processes which included monthly and quarterly closing check-lists and monthly review of the financial reports by the Company’s Finance Department leadership.

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

Limitations on the Effectiveness of Controls

The effectiveness of any system of internal control over financial reporting, including ours, is subject to inherent limitations, including the exercise of judgment in designing, implementing, operating and evaluating the controls and procedures, and the inability to eliminate misconduct completely. Accordingly, any system of internal control over financial reporting, including ours, no matter how well designed and operated, can only provide reasonable, not absolute assurances. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. We intend to continue to monitor and upgrade our internal controls as necessary or appropriate for our business, but cannot assure you that such improvements will be sufficient to provide us with effective internal control over financial reporting.

Changes in Internal Control over Financial Reporting

During the second quarter of 2021, we continued to undertake certain initiatives to improve and remediate material weaknesses related to our internal control over financial reporting that were identified for the year ended December 31, 2020. Specifically, we continued to implement more effective financial reporting process and internal control procedures that included monthly and quarterly closing check-lists, updating of accounting policies and procedures, implementation of more robust accounting technologies, and monthly review of the financial reports by the Company’s Finance Department. We also continued improving GAAP training of internal staff and to utilize third-party consultants, when necessary, to assist in the review and preparation of complex accounting transaction and financial statement reports. There have been ~~remediated.~~no other changes in our internal control over financial reporting during the second quarter of 2021 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II

ITEM 1 – LEGAL PROCEEDINGS

In a letter dated October 12, 2017, White Winston Select Asset Funds (“White Winston”) threatened to assert claims against the Company in excess of $2 million based on White Winston’s contention that ~~the Company’s~~our conduct delayed White Winston’s ability to sell our shares ~~in the Company~~of Common Stock during a period when ~~the Company’s~~our stock price was generally falling. On ~~April 30, 2018,~~October 28, 2020, we and White Winston ~~filed~~reached a ~~lawsuit, entitled White Winston Select Asset Funds, LLC v. Professional Diversity Network, Inc., No. 18-cv-10844, (the “Federal Action”)~~settlement agreement, in ~~the United States District Court for the District~~which we made a cash payment of ~~Massachusetts, asserting federal jurisdiction based~~$250,000 on ~~diversity~~October 29, 2020 and a second cash payment of ~~citizenship. The four-count complaint~~$350,000 was paid on February 16, 2021. In addition, we issued 150,000 shares of our common stock in the Federal Action alleged that White Winston is entitled to recover compensatory damages of $1,708,233, plus attorneys’ fees, treble damages and other amounts. White Winston served the complaint on July 12, 2018, and the Company moved to dismiss the entire action for failure to state a claim. On October 15, 2018, prior to addressing the motion to dismiss, the Court issued an order noting that White Winston (which is a limited liability company) had failed to allege the citizenship of its members and ordered White Winston to show cause that complete diversity exists between the parties and that the Court had jurisdiction. On October 23, 2018, White Winston dismissed the Federal Action without prejudice. On December 18, 2018, White Winston filed a complaint in Massachusetts Superior Court in Suffolk County in Boston alleging the same claims and rights to relief as in the Federal Action. The Company has moved to once again to dismiss the complaint in its entirety for failure to state a claim. The entire motion package, comprised of the Company’s motion to dismiss and accompanying memorandum, White Winston’s opposition, and the Company’s reply brief, were filed with the court on Monday, March 25, 2019. This motion was not granted. We have since then substantially completed all of the discovery process and will begin expert witness disclosures. The Company denies liability for all claims and has entered into settlement negotiations.January 2021.

NAPW (as leasee) is a defendant in a Nassau County (NY) Supreme Court ~~case, whereby~~case. TL Franklin Avenue Plaza LLC (as lessor) has sued ~~NAPW Case index No. LT-000421/2018, with respect to NAPW’s former Garden City NY Premises. NAPW had surrendered the Premises to the Landlord,~~ and ~~the Landlord has~~ obtained a judgment against NAPW in the amount of $746,142.41. As a result of the judgement order, the Company recorded a $780,000 litigation settlement reserve in the second quarter of 2020, which reflected the judgement order in addition to imputed interest costs[NAPW Case index No. LT-000421/2018; NAPW’s former Garden City, NY, office.] NAPW has reserved for this judgment.

We and ~~legal fees. NAPW is currently negotiating a settlement with the Landlord.~~

~~The Company and its~~our wholly-owned subsidiary, NAPW, Inc., are parties to a proceeding captioned Deborah Bayne, et al. vs. NAPW, Inc. and Professional Diversity Network, Inc., No. 18-cv-3591 (E.D.N.Y.), filed on June 20, 2018 and alleging violations of the Fair Labor Standards Act and certain provisions of the New York Labor Law. ~~The Company disputes~~We dispute that it or its subsidiary violated the applicable laws or that either entity has any liability and intends to vigorously defend against these claims. The matter is in the final stages of discovery and we have completed depositions of relevant witnesses. During the first quarter of 2020, ~~the Company~~we recorded a $450,000 litigation settlement reserve in the event of an unfavorable outcome in this proceeding. ~~The Company~~In November 2020, both parties entered into mediation proceedings but a settlement was not reached. This matter is ~~engaged~~scheduled to go to trial in ~~settlement discussions.~~2021.

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

General Legal Matters

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

ITEM 1A – RISK FACTORS

Smaller reporting companies are not required to provide the information required by this item.

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

On ~~March 31, 2020~~February 1, 2021, the Company ~~closed~~entered into a private placement with ~~Malven Group Limited, a company established under~~Ms. Yiran Gu, in which the ~~laws of the British Virgin Islands, in connection with the purchase of 1,939,237~~Company sold 500,000 shares of ~~our~~its common stock at a price ~~of $0.7735~~ per share of $2.00 for gross proceeds of ~~$1,500,000.~~$1,000,000. The Company’s Form 8-K filed on ~~March 27, 2020~~February 2, 2021 is incorporated herein by reference.

On ~~June 26, 2020,~~July 9, 2021 the Company ~~entered into a second agreement with Malven Group Limited, in connection with~~closed the ~~sale of 312,500~~registered direct offering, pursuant to which certain institutional accredited investors purchased 1,470,588 shares of the Company’s common stock, ~~of the Company~~par value $0.01 per share, at a ~~price of $3.20~~ per share price equal to $1.70 for gross proceeds of ~~$1,000,000. The closing of the transaction took place on June 29, 2020 and the sale proceeds of $1,000,000 were received in July 2020.~~$2,499,999.60.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURE

Not applicable.

ITEM 5. OTHER INFORMATION

~~Please refer to Note 15 in the condensed consolidated financial statements.~~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 ~~pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~

~~32.2~~		~~Certification of~~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

3742

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, on May 20, 2020.~~authorized.

	PROFESSIONAL DIVERSITY NETWORK, INC.

Date: August ~~13, 2020~~16, 2021	By:	/s/ Xin (Adam) He
	Name:	Xin (Adam) He
	Title:	Chief Executive Officer

~~Date: August 13, 2020~~	~~By:~~	~~/s/ Charles O’Brien~~
	~~Name:~~	~~Charles O’Brien~~
	~~Title:~~	~~Interim~~ and Chief Financial Officer
		(On behalf of the Registrant and as principal financial
		officer and principal accounting officer)

3843

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 ~~pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~

~~32.2~~		~~Certification of~~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

3944

	June 30, 2021			December 31, 2020
	(Unaudited)
Current Assets:
Cash and cash equivalents	$	2,507,585		$	2,117,569
Accounts receivable, net		1,078,826			1,005,482
Incremental direct costs		39,102			36,212
Prepaid expense and other current assets		383,021			355,260
Current assets from discontinued operations		4,600			6,898
Total current assets		4,013,134			3,521,421

Property and equipment, net		12,532			10,382
Capitalized technology, net		30,540			25,867
Goodwill		339,451			339,451
Intangible assets, net		338,074			376,178
Right-of-use assets		457,492			487,677
Merchant reserve		380,849			760,849
Security deposits		126,340			66,340
Long-term assets from discontinued operations		205,813			3,085,178
Total assets	$	5,904,225		$	8,673,343

Current Liabilities:
Accounts payable	$	376,142		$	728,379
Accrued expenses		1,672,077			1,626,164
Deferred revenue		2,223,384			1,901,129
Lease liability, current portion		77,100			46,526
Current liabilities from discontinued operations		402,203			375,276
Total current liabilities		4,750,906			4,677,474

Lease liability, non-current portion		448,932			463,998
Deferred tax liability		169,416			186,039
Total liabilities		5,369,254			5,327,511

Commitments and contingencies		-			-

Stockholders’ Equity
Common stock, $0.01 par value; 45,000,000 shares authorized, 13,598,897 shares and 12,820,891 shares issued as of June 30, 2021 and December 31, 2020, and 13,597,849 and 12,819,843 shares outstanding as of June 30, 2021 and December 31, 2020.		135,989			128,198
Additional paid in capital		94,861,394			95,985,080
Accumulated other comprehensive income		3,853			292,506
Accumulated deficit		(94,429,148	)		(93,022,835	)
Treasury stock, at cost; 1,048 shares at June 30, 2021 and December 31, 2020		(37,117	)		(37,117	)
Total stockholders’ equity		534,971			3,345,832
Total liabilities and stockholders’ equity	$	5,904,225		$	8,673,343

	June 30,			December 31,
	2020			2019
	(Unaudited)
Current Assets:
Cash and cash equivalents	$	858,875		$	633,615
Accounts receivable, net		453,112			720,750
Incremental direct costs		16,876			33,258
Prepaid expense and other current assets		365,640			240,763
Current assets from discontinued operations		3,940			75,996
Total current assets		1,698,443			1,704,382

Property and equipment, net		8,546			21,188
Capitalized technology, net		54,177			95,884
Goodwill		339,451			339,451
Intangible assets, net		414,281			452,385
Right-of-use assets		14,326			93,251
Merchant reserve		760,849			760,849
Security deposits		15,033			15,033
Long-term assets from discontinued operations		2,846,658			3,109,200
Total assets	$	6,151,764		$	6,591,623

Current Liabilities:
Accounts payable	$	856,976		$	796,137
Accrued expenses		1,633,789			654,169
Deferred revenue		1,321,125			1,699,001
Short-term loan		162,770			-
Lease liability, current portion		16,016			105,083
Current liabilities from discontinued operations		323,276			564,044
Total current liabilities		4,313,952			3,818,434

Long-term loan		488,308			-
Deferred tax liability		202,833			221,254
Total liabilities		5,005,093			4,039,688

Commitments and contingencies

Stockholders’ Equity
Common stock, $0.01 par value; 45,000,000 shares authorized, 11,339,407 shares and 8,928,611 shares issued as of June 30, 2020 and December 31, 2019, and 11,338,359 and 8,927,563 shares outstanding as of June 30, 2020 and December 31, 2019		113,384			89,286
Additional paid in capital		93,000,285			91,126,784
Accumulated other comprehensive income		72,347			44,242
Accumulated deficit		(92,002,228	)		(88,671,260	)
Treasury stock, at cost; 1,048 shares at June 30, 2020 and December 31, 2019		(37,117	)		(37,117	)
Total stockholders’ equity		1,146,671			2,551,935
Total liabilities and stockholders’ equity	$	6,151,764		$	6,591,623

	2021			2020
	Six Months Ended June 30,
	2021			2020
Revenues:
Membership fees and related services	$	521,083		$	737,239
Recruitment services		2,326,765			1,138,920
Products sales and other		3,339			3,330
Consumer advertising and marketing solutions		93,830			54,638
Total revenues		2,945,017			1,934,127

Costs and expenses:
Cost of revenues		521,201			343,397
Sales and marketing		1,300,499			984,075
General and administrative		2,429,639			3,734,923
Depreciation and amortization		58,683			99,849
Total costs and expenses		4,310,022			5,162,244

Loss from continuing operations		(1,365,005	)		(3,228,117	)

Other income (expense)
Interest and other income		2,735			6,214
Other income (expense), net		2,735			6,214

Loss before income tax benefit		(1,362,270	)		(3,221,903	)
Income tax benefit		(17,043	)		(18,421	)
Loss from continuing operations		(1,345,227	)		(3,203,482	)
Loss from discontinued operations		(61,086	)		(127,486	)
Net loss	$	(1,406,313	)	$	(3,330,968	)

Other comprehensive loss:
Net loss	$	(1,406,313	)	$	(3,330,968	)
Foreign currency translation adjustment		(288,653	)		28,105
Comprehensive loss:	$	(1,694,966	)	$	(3,302,863	)

Basic and diluted loss per share:
Continuing operations	$	(0.10	)	$	(0.32	)
Discontinued operations	$	(0.00	)	$	(0.01	)
Net loss	$	(0.10	)	$	(0.33	)

Weighted average outstanding shares used in computing net loss per common share:
Basic and diluted		13,368,449			9,951,759

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
Revenues:
Membership fees and related services	$	353,408		$	633,914		$	737,239		$	1,428,453
Recruitment services		572,233			651,046			1,138,920			1,125,306
Products sales and other		1,899			1,143			3,330			3,955
Consumer advertising and marketing solutions		24,290			38,059			54,638			73,775
Total revenues		951,830			1,324,162			1,934,127			2,631,489

Costs and expenses:
Cost of revenues		169,920			226,925			343,397			410,584
Sales and marketing		459,106			469,377			984,075			1,165,144
General and administrative		2,074,069			1,174,289			3,734,923			2,252,189
Depreciation and amortization		47,848			217,334			99,849			434,517
Total costs and expenses		2,750,943			2,087,925			5,162,244			4,262,434

Loss from continuing operations		(1,799,113	)		(763,763	)		(3,228,117	)		(1,630,945	)

Other income (expense)
Interest expense		-			(11,599	)		-			(14,182	)
Interest and other income		5,550			376,068			6,214			376,068
Other income (expense), net		5,550			364,469			6,214			361,886

Loss before income tax benefit		(1,793,563	)		(399,294	)		(3,221,903	)		(1,269,059	)
Income tax benefit		(12,512	)		(10,236	)		(18,421	)		(75,869	)
Loss from continuing operations		(1,781,051	)		(389,058	)		(3,203,482	)		(1,193,190	)
Loss from discontinued operations		(57,821	)		(382,176	)		(127,486	)		(737,413	)
Net loss	$	(1,838,872	)	$	(771,234	)	$	(3,330,968	)	$	(1,930,603	)

Other comprehensive loss:
Net loss	$	(1,838,872	)	$	(771,234	)	$	(3,330,968	)	$	(1,930,603	)
Foreign currency translation adjustment		(11,768	)		(9,349	)		28,105			13,686
Comprehensive loss:	$	(1,850,640	)	$	(780,583	)	$	(3,302,863	)	$	(1,916,917	)

Basic and diluted loss per share:
Continuing operations	$	(0.16	)	$	(0.08	)	$	(0.32	)	$	(0.23	)
Discontinued operations	$	(0.01	)	$	(0.08	)	$	(0.01	)	$	(0.14	)
Net loss	$	(0.17	)	$	(0.16	)	$	(0.33	)	$	(0.37	)

Weighted average outstanding shares used in computing net loss per common share:
Basic and diluted		10,933,614			5,074,480			9,951,759			5,117,098

	2021			2020
	Three Months Ended June 30,
	2021			2020
Revenues:
Membership fees and related services	$	257,878		$	353,408
Recruitment services		1,151,685			572,233
Products sales and other		1,908			1,899
Consumer advertising and marketing solutions		48,694			24,290
Total revenues		1,460,165			951,830

Costs and expenses:
Cost of revenues		260,047			169,920
Sales and marketing		600,784			459,106
General and administrative		1,111,786			2,074,069
Depreciation and amortization		29,076			47,848
Total costs and expenses		2,001,693			2,750,943

Loss from continuing operations		(541,528	)		(1,799,113	)

Other income (expense)
Interest and other income		1,850			5,550
Other income (expense), net		1,850			5,550

Loss before income tax expense (benefit)		(539,678	)		(1,793,563	)
Income tax expense (benefit)		49,934			(12,512	)
Loss from continuing operations		(589,612	)		(1,781,051	)
Loss from discontinued operations		(46,012	)		(57,821	)
Net loss	$	(635,624	)	$	(1,838,872	)

Other comprehensive loss:
Net loss	$	(635,624	)	$	(1,838,872	)
Foreign currency translation adjustment		3,466			(11,768	)
Comprehensive loss:	$	(632,158	)	$	(1,850,640	)

Basic and diluted loss per share:
Continuing operations	$	(0.04	)	$	(0.16	)
Discontinued operations	$	(0.00	)	$	(0.01	)
Net loss	$	(0.04	)	$	(0.17	)

Weighted average outstanding shares used in computing net loss per common share:
Basic and diluted		13,472,385			10,933,614

	Shares		Amount		Capital			Deficit			Shares		Amount			Income (Loss)			Equity
																Accumulated
					Additional											Other			Total
	Common Stock				Paid in			Accumulated			Treasury Stock					Comprehensive			Stockholders’
	Shares		Amount		Capital			Deficit			Shares		Amount			Income (Loss)			Equity
Balance at January 1, 2021		12,819,843	$	128,198	$	95,985,080		$	(93,022,835	)		1,048	$	(37,117	)	$	292,506		$	3,345,832

Sale of common stock		500,000		5,000		995,000			-			-		-			-			1,000,000
Issuance of common stock		279,054		2,791		163,709			-			-		-			-			166,500
Share-based compensation		-		-		309,329			-			-		-			-			309,329
Adjustment from discontinued operations						(2,591,724	)													(2,591,724	)
Translation adjustments		-		-		-			-			-		-			(288,653	)		(288,653	)
Net loss		-		-		-			(1,406,313	)		-		-			-			(1,406,313	)
Balance at June 30, 2021		13,598,897	$	135,989	$	94,861,394		$	(94,429,148	)		1,048	$	(37,117	)	$	3,853		$	534,971

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

Sale of common stock		737,031		7,370		1,590,445			-			-		-			-			1,597,815
Conversion of note payable - related party		209,205		2,092		497,908														500,000
Issuance of common stock for settlement of acounts payable		30,640		306		98,664														98,970
Issuance of vested restricted shares		27,761		278		(278	)													-
Share-based compensation		-		-		98,689			-			-		-			-			98,689
Translation adjustments		-		-		-			-			-		-			13,686			13,686
Net loss		-		-		-			(1,930,603	)		-		-			-			(1,930,603	)
Balance at June 30, 2019		5,860,850	$	58,608	$	86,014,331		$	(86,757,399	)		1,048	$	(37,117	)	$	(10,654	)	$	(732,231	)

	2021			2020
	Six Months Ended June 30,
	2021			2020
Cash flows from operating activities:
Loss from continuing operations	$	(1,345,227	)	$	(3,203,482	)
Adjustments to reconcile net loss from continuing operations to net cash used in operating activities - continuing operations:
Depreciation and amortization		51,818			99,849
Deferred tax benefit		(17,043	)		(18,421	)
Amortization of right-of-use asset		45,693			78,925
Accretion of lease liability		-			2,217
Stock-based compensation expense		309,328			397,599
Litigation settlement reserve		75,000			708,422
Payment of lease obligations		-			(91,284	)
Reduction of merchant reserve		380,000			-
Changes in operating assets and liabilities, net of effects of discontinued operations:
Accounts receivable		(73,344	)		267,638
Prepaid expenses and other current assets		(27,341	)		(124,877	)
Incremental direct costs		(2,890	)		16,382
Accounts payable		(352,236	)		60,839
Accrued expenses		(29,086	)		271,198
Deferred revenue		322,255			(377,876	)
Net cash used in operating activities - continuing operations		(663,073	)		(1,912,871	)
Net cash provided by operating activities - discontinued operations		(318	)		44,178
Net cash used in operating activities		(663,391	)		(1,868,693	)

Cash flows from investing activities:
Costs incurred to develop technology		-			(3,701	)
Purchases of property and equipment		(20,357	)		(3,695	)
Payments for investment deposits		(60,000	)		-
Net cash used in investing activities - continuing operations		(80,357	)		(7,396	)
Net cash used in investing activities - discontinued operations		-			-
Net cash provided used in investing activities		(80,357	)		(7,396	)

Cash flows from financing activities:
Proceeds from the sale of common stock		1,166,500			1,500,000
Proceeds from short-term loan		-			651,078
Net cash provided by financing activities - continuing operations		1,166,500			2,151,078
Net cash provided by financing activities		1,166,500			2,151,078

Effect of exchange rate fluctuations on cash and cash equivalents		(32,556	)		(49,729	)
Net increase (decrease) in cash and cash equivalents		390,016			225,260
Cash, cash equivalents, beginning of period		2,117,569			633,615
Cash and cash equivalents, end of period		2,507,585			858,875

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

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

●	~~OFCCP job promotion and recordation services~~

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

●	~~Diversity recruitment job advertising services~~

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

●	~~Diversity executive staffing services~~

	As of June 30,
	2021		2020

Warrants to purchase common stock		125,000		125,000
Stock options		36,126		66,126
Unvested restricted stock		159,524		206,775
Total dilutive securities		320,650		397,901

●	On-line job postings to our diversity sites and to our broader network of websites including the National Association for the Advancement of Colored People, National Urban League, Kappa Alpha Psi, Phi Beta Sigma and many other partner organizations;

●	OFCCP job promotion and recordation services;

●	Diversity job fairs, both in person and virtual fairs;

●	Diversity recruitment job advertising services;

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

●	Diversity executive staffing services.

	June 30, 2021		December 31, 2020
Capitalized cost:
Balance, beginning of period	$	2,169,245	$	2,169,245
Additional capitalized cost		23,569		-
Balance, end of period		2,192,814		2,169,245

Accumulated amortization:
Balance, beginning of period	$	2,143,378	$	2,130,037
Provision for amortization		18,896		13,341
Balance, end of period		2,162,274		2,143,378
Capitalized Technology, net		30,540		25,867

		Gross							Useful Lives		Gross Carrying		Accumulated			Net Carrying
	Useful Lives	Carrying		Accumulated			Net Carrying
June 30, 2020	(Years)	Amount		Amortization			Amount
June 30, 2021									(Years)		Amount		Amortization			Amount
Long-lived intangible assets:
Sales Process	10	$	2,130,956	$	(1,807,075	)	$	323,881		10	$	2,130,956	$	(1,883,282	)	$	247,674
Paid Member Relationships	5		803,472		(803,472	)		-		5		803,472		(803,472	)		-
Member Lists	5		8,086,181		(8,086,181	)		-		5		8,086,181		(8,086,181	)		-
Developed Technology	3		648,000		(648,000	)		-		3		648,000		(648,000	)		-
Trade Name/Trademarks	4		440,000		(440,000	)		-		4		440,000		(440,000	)		-
			12,108,609		(11,784,728	)		323,881				12,108,609		(11,860,935	)		247,674
Indefinite-lived intangible assets:
Trade name								90,400									90,400
Intangible assets, net							$	414,281								$	338,074

Year ended December 31,
Remaining of 2020	$	38,103
2021		76,207
Remaining of 2021			$	38,104
2022		76,207		76,207
2023		76,207		76,207
2024 and thereafter		57,157
	$	323,881
2024				57,156
Net Carrying Amount			$	247,674

	As of
	June 30,		December 31,
	2020		2019

Litigation reserve	$	1,246,002	$	348,000
Accrued payroll		137,193		72,166
Accrued legal fees		80,208		69,896
Accrued Board of Director fees		57,378		50,364
Accrued revenue sharing agreements		49,939		43,844
Other		63,069		69,899
Total accrued liabilities	$	1,633,789	$	654,169

						Weighted Average									Weighted
				Weighted		Remaining									Average
				Average		Contractual		Aggregate					Weighted		Remaining
	Number of			Exercise		Life		Intrinsic					Average		Contractual		Aggregate
	Options			Price		(in Years)		Value		Number of			Exercise		Life		Intrinsic
Outstanding - January 1, 2020		295,793		$	8.88		7.5	$	-
										Options			Price		(in Years)		Value
Outstanding - January 1, 2021											66,126		$	5.24		8.3	$	-
Granted		30,000			3.69		10.0				30,000			2.10		3.9
Exercised		-			-		-				-			-		-
Forfeited		(259,667	)		9.21		-				(20,000	)		3.69		-
Outstanding - June 30, 2020		66,126		$	5.24		8.8	$	-
Outstanding - June 30 2021											76,126		$	4.41		8.4	$	-

Exercisable at June 30, 2020		26,126		$	8.18		7.5	$	-
Exercisable at June 30, 2021											26,126		$	8.18		6.5	$	-

	Six Months Ended
	June 30, 2020
Expected dividend yield		-
Risk-free interest rate		0.33	%
Expected volatility		111.55	%
Expected term (in years)		5.75
Grant-date fair value of stock options awarded	$	3.03

	~~Number of~~
	~~Shares~~
~~Outstanding - January 1, 2019~~		~~60,651~~
~~Granted~~		~~47,568~~
~~Forfeited~~		~~(13,865~~	)
~~Vested~~		~~(27,761~~	)
~~Outstanding - June 30, 2019~~		~~66,593~~

	Three Months Ended June 30, 2021
	PDN			NAPW			Corporate
	Network			Network			Overhead			Consolidated
Membership fees and related services	$	-		$	257,878		$	-		$	257,878
Recruitment services		1,151,685			-			-			1,151,685
Products sales and other		-			1,908			-			1,908
Consumer advertising and marketing solutions		48,694			-			-			48,694
Total revenues		1,200,379			259,786			-			1,460,165
Income (loss) from continuing operations		293,211			(171,460	)		(663,279	)		(541,528	)
Depreciation and amortization		2,419			26,657			-			29,076
Income tax (benefit) expense		(18,675	)		14,885			53,724			49,934
Net loss from continuing operations		313,443			(186,051	)		(717,003	)		(589,612	)

	As of June 30, 2021
Goodwill	$	339,451	$	-	$	-	$	339,451
Intangibles assets, net		90,400		247,674		-		338,074
Assets from continuing operations		4,927,004		766,808		-		5,693,812

	Three Months Ended June 30, 2020
	PDN			NAPW			Corporate
	Network			Network			Overhead			Consolidated
Membership fees and related services	$	-		$	353,408		$	-		$	353,408
Recruitment services		572,233			-			-			572,233
Products sales and other		-			1,899			-			1,899
Consumer advertising and marketing solutions		24,290			-			-			24,290
Total revenues		596,523			355,307			-			951,830
Loss from continuing operations		(82,526	)		(370,196	)		(1,346,391	)		(1,799,113	)
Depreciation and amortization		11,835			36,013			-			47,848
Income tax benefit		(121	)		(2,201	)		(10,190	)		(12,512	)
Net loss from continuing operations		(76,855	)		(367,995	)		(1,336,201	)		(1,781,051	)

	As of December 31, 2020
Goodwill	$	339,451	$	-	$	-	$	339,451
Intangibles assets, net		90,400		323,881		-		414,281
Assets from continuing operations		2,103,830		1,197,336		-		3,301,166

	Three Months Ended June 30, 2020												Six Months Ended June 30, 2020												Six Months Ended June 30, 2021
	PDN			NAPW			Corporate						PDN			NAPW			Corporate						PDN		NAPW			Corporate
	Network			Network			Overhead			Consolidated			Network			Network			Overhead			Consolidated			Network		Network			Overhead			Consolidated
Membership fees and related services	$	-		$	353,408		$	-		$	353,408		$	-		$	737,239		$	-		$	737,239		$	-	$	521,083		$	-		$	521,083
Recruitment services		572,233			-			-			572,233			1,138,920			-			-			1,138,920			2,326,765		-			-			2,326,765
Products sales and other		-			1,899			-			1,899			-			3,330			-			3,330			-		3,339			-			3,339
Consumer advertising and marketing solutions		24,290			-			-			24,290			54,638			-			-			54,638			93,830		-			-			93,830
Total revenues		596,523			355,307			-			951,830			1,193,558			740,569			-			1,934,127			2,420,595		524,422			-			2,945,017
Loss from continuing operations		(82,526	)		(370,196	)		(1,346,391	)		(1,799,113	)		(232,550	)		(438,306	)		(2,557,261	)		(3,228,117	)
Income (loss) from continuing operations																										606,035		(417,879	)		(1,553,159	)		(1,365,005	)
Depreciation and amortization		11,835			36,013			-			47,848			26,510			73,339			-			99,849			3,597		55,086			-			58,683
Income tax benefit		(121	)		(2,201	)		(10,190	)		(12,512	)		(1,072	)		(2,608	)		(14,741	)		(18,421	)
Net loss from continuing operations		(76,855	)		(367,995	)		(1,336,201	)		(1,781,051	)		(225,264	)		(435,698	)		(2,542,520	)		(3,203,482	)
Income tax expense (benefit)																										9,431		(5,735	)		(20,739	)		(17,043	)
Net income (loss) from continuing operations																										599,338		(412,144	)		(1,532,420	)		(1,345,227	)

	As of June 30, 2020
Goodwill	$	339,451	$	-	$	-	$	339,451
Intangibles assets, net		90,400		323,881		-		414,281
Assets from continuing operations		2,103,830		1,197,336		-		3,301,166

	Three Months Ended June 30, 2019												Six Months Ended June 30, 2019
	PDN			NAPW			Corporate						PDN			NAPW			Corporate
	Network			Network			Overhead			Consolidated			Network			Network			Overhead			Consolidated
Membership fees and related services	$	-		$	633,914		$	-		$	633,914		$	-		$	1,428,453		$	-		$	1,428,453
Recruitment services		651,046			-			-			651,046			1,125,306			-			-			1,125,306
Products sales and other		-			1,143			-			1,143			-			3,955			-			3,955
Consumer advertising and marketing solutions		38,059			-			-			38,059			73,775			-			-			73,775
Total revenues		689,105			635,057			-			1,324,162			1,199,081			1,432,408			-			2,631,489
Loss from continuing operations		(19,545	)		(44,245	)		(699,973	)		(763,763	)		(191,021	)		(151,976	)		(1,287,948	)		(1,630,945	)
Depreciation and amortization		15,891			201,443			-			217,334			31,632			402,885			-			434,517
Income tax benefit		24,110			(1,037	)		(33,309	)		(10,236	)		10,975			(9,166	)		(77,678	)		(75,869	)
Net loss from continuing operations		320,814			(43,208	)		(666,664	)		(389,058	)		159,890			(142,810	)		(1,210,270	)		(1,193,190	)

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

Net proceeds from common stock sales received in July 2020:
June 29, 2020, stock sale	$	1,000,000
July 27, 2020, stock sale		1,814,353
Total	$	2,814,353

	Three Months Ended June 30,				Change			Change			Three Months Ended June 30				Change			Change
	2020		2019		(Dollars)			(Percent)			2021		2020		(Dollars)			(Percent)
	(in thousands)										(in thousands)
Revenues:
Membership fees and related services	$	354	$	634	$	(280	)		-44.2	%	$	258	$	354	$	(96	)		(27.1	)%
Recruitment services		572		651		(79	)		-12.1	%		1,152		572		580			101.4	%
Products sales and other		2		1		1			100.0	%		2		2		-			-	%
Consumer advertising and marketing solutions		24		38		(14	)		-36.8	%		49		24		25			104.2	%
Total revenues	$	952	$	1,324	$	(372	)		-28.1	%	$	1,461	$	952	$	509			53.5	%

	Six Months Ended June 30				Change			Change
	2021		2020		(Dollars)			(Percent)
	(in thousands)
Revenues:
Membership fees and related services	$	521	$	737	$	(216	)		(29.3	)%
Recruitment services		2,327		1,139		1,188			104.3	%
Products sales and other		3		3		-			-	%
Consumer advertising and marketing solutions		94		55		39			70.9	%
Total revenues	$	2,945	$	1,934	$	1,011			52.3	%

	Six Months Ended June 30,				Change			Change
	2021		2020		(Dollars)			(Percent)
	(in thousands)
Cost and expenses:
Cost of revenues	$	521	$	343	$	178			51.9	%
Sales and marketing		1,300		984		316			32.1	%
General and administrative		2,430		3,735		(1,305	)		(34.9	)%
Depreciation and amortization		59		100		(41	)		(41.0	)%
Total pre-tax cost and expenses:	$	4,310	$	5,162	$	(852	)		(16.5	)%