UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended
or
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:
(Exact name of Registrant as Specified in Its Charter)
(State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) | |
(Address of Principal Executive Offices) | (Zip Code) |
(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 | |
The
|
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 ☒
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 ☒
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.
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).
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 ☐ | Smaller
reporting company | |
Emerging
growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised 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
☐
There were shares outstanding of the registrant’s common stock as of November 15, 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 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 NINE MONTHS ENDED SEPTEMBER 30, 2021
TABLE OF CONTENTS
2 |
Item 1. FINANCIAL STATEMENTS
Professional Diversity Network, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
September 30, 2021 | December 31, 2020 | |||||||
(Unaudited) | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | $ | ||||||
Accounts receivable, net | ||||||||
Incremental direct costs | ||||||||
Prepaid expense and other current assets | ||||||||
Current assets from discontinued operations | ||||||||
Total current assets | ||||||||
Property and equipment, net | ||||||||
Capitalized technology, net | ||||||||
Goodwill | ||||||||
Intangible assets, net | ||||||||
Right-of-use assets | ||||||||
Merchant reserve | ||||||||
Security deposits | ||||||||
Long-term assets from discontinued operations | ||||||||
Total assets | $ | $ | ||||||
Current Liabilities: | ||||||||
Accounts payable | $ | $ | ||||||
Accrued expenses | ||||||||
Deferred revenue | ||||||||
Stock to be issued | - | |||||||
Lease liability, current portion | ||||||||
Current liabilities from discontinued operations | ||||||||
Total current liabilities | ||||||||
Lease liability, non-current portion | ||||||||
Other long-term liabilities | - | |||||||
Deferred tax liability | ||||||||
Total liabilities | ||||||||
Commitments and contingencies | - | - | ||||||
Stockholders’ Equity | ||||||||
Common stock, $ | par value; shares authorized, shares and shares issued as of September 30, 2021 and December 31, 2020, and and shares outstanding as of September 30, 2021 and December 31, 2020.||||||||
Additional paid in capital | ||||||||
Accumulated other comprehensive income | ||||||||
Accumulated deficit | ( | ) | ( | ) | ||||
Treasury stock, at cost; | shares at September 30, 2021 and December 31, 2020( | ) | ( | ) | ||||
Total Professional Diversity Network, Inc. stockholders’ equity | ||||||||
Noncontrolling interest | - | |||||||
Total stockholders’ equity | ||||||||
Total liabilities, noncontrolling interests, and stockholders’ equity | $ | $ |
The accompanying notes are an integral part of these condensed consolidated financial statements.
3 |
Professional Diversity Network, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited)
Nine Months Ended September 30, | ||||||||
2021 | 2020 | |||||||
Revenues: | ||||||||
Membership fees and related services | $ | $ | ||||||
Recruitment services | ||||||||
Products sales and other | ||||||||
Consumer advertising and marketing solutions | ||||||||
Total revenues | ||||||||
Costs and expenses: | ||||||||
Cost of revenues | ||||||||
Sales and marketing | ||||||||
General and administrative | ||||||||
Depreciation and amortization | ||||||||
Total costs and expenses | ||||||||
Loss from continuing operations | ( | ) | ( | ) | ||||
Other income (expense) | ||||||||
Interest and other income | ||||||||
Other income (expense), net | ||||||||
Loss before income tax benefit | ( | ) | ( | ) | ||||
Income tax benefit | ( | ) | ( | ) | ||||
Loss from continuing operations, net of tax | ( | ) | ( | ) | ||||
Loss from discontinued operations | ( | ) | ( | ) | ||||
Net loss including non-controlling interests | $ | ( | ) | $ | ( | ) | ||
Net loss attributable to non-controlling interests | - | |||||||
Net loss attributable to Professional Diversity Network, Inc. | $ | ( | ) | $ | ( | ) | ||
Other comprehensive loss, net of tax: | ||||||||
Net loss attributable to Professional Diversity Network, Inc. | $ | ( | ) | $ | ( | ) | ||
Foreign currency translation adjustments | ( | ) | ||||||
Comprehensive loss, net of tax | $ | ( | ) | $ | ( | ) | ||
Loss per share attributable to Professional Diversity Network, Inc., basic and diluted: | ||||||||
Continuing operations | $ | ( | ) | $ | ( | ) | ||
Discontinued operations | $ | ( | ) | $ | ( | ) | ||
Net loss attributable to Professional Diversity Network, Inc. | $ | ( | ) | $ | ( | ) | ||
Weighted average shares outstanding: | ||||||||
Basic and diluted |
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)
Three Months Ended September 30, | ||||||||
2021 | 2020 | |||||||
Revenues: | ||||||||
Membership fees and related services | $ | $ | ||||||
Recruitment services | ||||||||
Products sales and other | ||||||||
Consumer advertising and marketing solutions | ||||||||
Total revenues | ||||||||
Costs and expenses: | ||||||||
Cost of revenues | ||||||||
Sales and marketing | ||||||||
General and administrative | ||||||||
Depreciation and amortization | ||||||||
Total costs and expenses | ||||||||
Loss from continuing operations | ( | ) | ( | ) | ||||
Other income (expense) | ||||||||
Interest and other income | ( | ) | ||||||
Other income (expense), net | ( | ) | ||||||
Loss before income tax expense (benefit) | ( | ) | ( | ) | ||||
Income tax expense (benefit) | ( | ) | ( | ) | ||||
Loss from continuing operations, net of tax | ( | ) | ( | ) | ||||
Loss from discontinued operations | ( | ) | ( | ) | ||||
Net loss including non-controlling interests | $ | ( | ) | $ | ( | ) | ||
Net loss attributable to non-controlling interests | - | |||||||
Net loss attributable to Professional Diversity Network, Inc. | $ | ( | ) | $ | ( | ) | ||
Other comprehensive loss, net of tax: | ||||||||
Net loss attributable to Professional Diversity Network, Inc. | $ | ( | ) | $ | ( | ) | ||
Foreign currency translation adjustments | ( | ) | ||||||
Comprehensive loss, net of tax | $ | ( | ) | $ | ( | ) | ||
Loss per share attributable to Professional Diversity Network, Inc.,basic and diluted: | ||||||||
Continuing operations | $ | ( | ) | $ | ( | ) | ||
Discontinued operations | $ | $ | ||||||
Net loss attributable to Professional Diversity Network, Inc. | $ | ( | ) | $ | ( | ) | ||
Weighted average shares outstanding: | ||||||||
Basic and diluted |
The accompanying notes are an integral part of these condensed consolidated financial statements.
5 |
Professional Diversity Network, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (Unaudited)
Accumulated | ||||||||||||||||||||||||||||||||||||
Additional | Other | Noncontrolling | Total | |||||||||||||||||||||||||||||||||
Common Stock | Paid in | Accumulated | Treasury Stock | Comprehensive | Interests in | Stockholders’ | ||||||||||||||||||||||||||||||
Shares | Amount | Capital | Deficit | Shares | Amount | Income (Loss) | Subsidiary | Equity | ||||||||||||||||||||||||||||
Balance at January 1, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||||
Sale of common stock | - | - | - | - | ||||||||||||||||||||||||||||||||
Issuance of common stock | - | - | - | - | ||||||||||||||||||||||||||||||||
Share-based compensation | - | - | - | - | - | - | ||||||||||||||||||||||||||||||
Adjustment from discontinued operations | - | - | ( | ) | - | - | - | - | ( | ) | ||||||||||||||||||||||||||
Noncontrolling interest in subsidiary | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||
Translation adjustments | - | - | - | - | - | - | ( |
) | ( | ) | ||||||||||||||||||||||||||
Net loss | - | - | - | ( | ) | - | - | - | ( |
) | ( | ) | ||||||||||||||||||||||||
Balance at September 30, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ |
Accumulated | ||||||||||||||||||||||||||||||||||||
Common Stock | Additional Paid in |
Accumulated | Treasury Stock | Other Comprehensive |
Noncontrolling Interests in |
Total Stockholders’ |
||||||||||||||||||||||||||||||
Shares | Amount | Capital | Deficit | Shares | Amount | Income (Loss) | Subsidiary | Equity | ||||||||||||||||||||||||||||
Balance at January 1, 2020 | $ | $ | $ | ( |
) | $ | ( |
) | $ | $ | - | $ | |
|||||||||||||||||||||||
Issuance of common stock | - | - | - | - | - | |||||||||||||||||||||||||||||||
Share-based compensation | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||
Translation adjustments | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||
Net loss | - | - | - | ( |
) | - | - | - | - | ( |
) | |||||||||||||||||||||||||
Balance at September 30, 2020 | $ | $ | $ | ( |
) | $ | ( |
) | $ | $ | $ |
The accompanying notes are an integral part of these condensed consolidated financial statements.
6 |
Professional Diversity Network, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended September 30, | ||||||||
2021 | 2020 | |||||||
Cash flows from operating activities: | ||||||||
Loss from continuing operations | $ | ( | ) | $ | ( | ) | ||
Adjustments to reconcile net loss from continuing operations to net cash used in operating activities - continuing operations: | ||||||||
Depreciation and amortization | ||||||||
Deferred tax benefit | ( | ) | ( | ) | ||||
Amortization of right-of-use asset | ||||||||
Accretion of lease liability | - | |||||||
Stock-based compensation expense | ||||||||
Litigation settlement reserve | ||||||||
Payment of lease obligations | - | ( | ) | |||||
Reduction of merchant reserve | - | |||||||
Write-off property and equipment | - | |||||||
Changes in operating assets and liabilities, net of effects of discontinued operations: | ||||||||
Accounts receivable | ( | ) | ( | ) | ||||
Prepaid expenses and other current assets | ( | ) | ||||||
Incremental direct costs | ||||||||
Accounts payable | ( | ) | ( | ) | ||||
Accrued expenses | ( | ) | ||||||
Deferred revenue | ( | ) | ||||||
Net cash used in operating activities - continuing operations | ( | ) | ( | ) | ||||
Net cash provided by operating activities - discontinued operations | ( | ) | ( | ) | ||||
Net cash used in operating activities | ( | ) | ( | ) | ||||
Cash flows from investing activities: | ||||||||
Costs incurred to develop technology | ( | ) | ( | ) | ||||
Purchases of property and equipment | ( | ) | ( | ) | ||||
Payments for investment deposits | ( | ) | ( | ) | ||||
Acquisition of equity interest in RemoteMore USA, Inc. | ( | ) | - | |||||
Net cash used in investing activities - continuing operations | ( | ) | ( | ) | ||||
Net cash used in investing activities - discontinued operations | - | - | ||||||
Net cash provided used in investing activities | ( | ) | ( | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from the sale of common stock | ||||||||
Proceeds from short-term loan | - | |||||||
Net cash provided by financing activities - continuing operations | ||||||||
Net cash provided by financing activities | ||||||||
Effect of exchange rate fluctuations on cash and cash equivalents | ||||||||
Net increase (decrease) in cash and cash equivalents | ||||||||
Cash, cash equivalents, beginning of period | ||||||||
Cash and cash equivalents, end of period | ||||||||
Supplemental disclosures of other cash flow information: | ||||||||
Cash paid for income taxes | $ | $ |
The accompanying notes are an integral part of these condensed consolidated financial statements.
7 |
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 condensed consolidated financial statements and notes thereto included in our 2020 Form 10-K.
Professional
Diversity Network, Inc. (“PDN, 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 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. In addition, PDN, Inc. owns
The NAPW Network is a 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.
RemoteMore USA provides companies with talented engineers to provide solutions to their software needs. Companies are given access to contract full and part-time developers from a pool of vetted candidates matching skills, experience and location through a remote-hiring marketplace.
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 September 30, 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 third quarter of 2021.
The
Company had an accumulated deficit of ($
8 |
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 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 effectuate plans to conserve liquidity. Future efforts to improve liquidity through the issuance of our common stock may not be successful or they may not be available on acceptable terms, if at all.
On
February 1, 2021, the Company entered into a private placement with Ms. Yiran Gu, in which the Company sold
On
July 9, 2021 the Company closed the registered direct offering, pursuant to which certain institutional accredited investors purchased
On
September 22, 2021, the Company entered into a stock purchase agreement with Cosmic Forward Limited, in which the Company sold
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 condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the 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 condensed 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 September 30, 2021 and December 31, 2020, the allowance for doubtful accounts
was approximately $
9 |
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 $
Property
and Equipment -
Property and equipment is stated at cost, including any cost to place the property into service, less accumulated depreciation. Depreciation
is recorded on a straight-line basis over the estimated useful lives of the assets which currently range from three to five years. Leasehold
improvements are amortized over the shorter of their estimated useful lives or the term of the lease. Maintenance, repairs and minor
replacements are charged to operations as incurred; major replacements and betterments are capitalized. The cost of any assets sold or
retired and related accumulated depreciation are removed from the accounts at the time of disposition, and any resulting profit or loss
is reflected in income or expense for the period. Depreciation expense during the nine months ended September 30, 2021 and 2020 was approximately
$
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
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 condensed consolidated statements of operations.
10 |
Goodwill and Intangible Assets - The Company accounts for goodwill and intangible assets in accordance with ASC 350, Intangibles – Goodwill and Other (“ASC 350”). ASC 350 requires that goodwill and other intangibles with indefinite lives should be tested for impairment annually or on an interim basis if events or circumstances indicate that the fair value of an asset has decreased below its carrying value.
Goodwill is tested for impairment at the reporting unit level on an annual basis (December 31 for the Company) and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. The Company considers its market capitalization and the carrying value of its assets and liabilities, including goodwill, when performing its goodwill impairment test.
When conducting its annual goodwill impairment assessment, the Company initially 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.
Discontinued Operations
China Operations
The Company previously disclosed in its Form 10-K for the year ending December 31, 2019 (the “2019 10-K”) and subsequently that the assets of PDN China were frozen by Chinese local authorities in November 2019 in connection with the criminal investigation of alleged illegal public fund raising by Gatewang Group (the “Gatewang Case”), a separate company organized under the laws of the People’s Republic of China (“Gatewang”), with which Mr. Maoji (Michael) Wang, the former Chairman and CEO of the Company was affiliated. A subsequent investigation led by a special committee of the Board concluded that it did not find any evidence that the Company or PDN China has engaged in the criminal activity of illegal fund-raising as alleged against Gatewang. The Company subsequently discontinued all of its operations in China.
The
Company also previously disclosed in the 2019 Form 10-K that although the seizure of PDN China’s assets had been lifted in
March 2020, however on April 22, 2021, the Company learned that RMB
The Company has asserted its claim to these funds as the genuine owner to the Chinese officials and asked for their return. The Company plans to pursue all possible legal alternatives to have these funds returned to the Company but such return is uncertain at this time.
11 |
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 nine months ended September 30, 2021, loss from discontinued
operations was approximately $(
Assets
and liabilities of China operations are now included in current assets and long-term assets from discontinued operations, and current
liabilities and long-term liabilities from discontinued operations. Current assets from discontinued operations were approximately $
Operating Results of Discontinued Operations
The following table represents the components of gross operating results from discontinued operations, which are included in the statements of operations and comprehensive loss for the three and six months ended September 30, 2021 and 2020:
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Revenues | $ | $ | $ | $ | ||||||||||||
Cost of Sales | ||||||||||||||||
Depreciation and amortization | - | - | - | |||||||||||||
Sales and marketing | - | - | - | |||||||||||||
General and administrative | ||||||||||||||||
Non-operating expense | ( | ) | ( | ) | ( | ) | ||||||||||
Loss from discontinued operations before income tax | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Income tax expense (benefit) | - | - | - | - | ||||||||||||
Net loss from discontinued operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) |
12 |
Advertising
and Marketing Expenses –
Advertising and marketing expenses are expensed as incurred or the first time the advertising takes place. The production costs of advertising
are expensed the first time the advertising takes place. For the three and nine months ended September 30, 2021, the Company incurred
advertising and marketing expenses of approximately $
Concentrations of Credit Risk - Financial instruments, which potentially subject the Company to concentration of credit risk, consist principally of cash and cash equivalents and accounts receivable. The Company places its cash with high credit quality institutions. At times, such amounts may be in excess of the FDIC insurance limits. The Company has not experienced any losses in such accounts and believes that it is not exposed to any significant credit risk on the account.
Income Taxes - The Company accounts for income taxes in accordance with ASC 740, Income Taxes, which requires that the Company recognize deferred tax liabilities and assets based on the differences between the financial statement basis and tax basis of assets and liabilities, using enacted tax rates in effect for the year in which the differences are expected to reverse. The Company estimates the degree to which tax assets and credit carryforwards will result in a benefit based on expected profitability by tax jurisdiction. A valuation allowance for such tax assets and loss carryforwards is provided when it is determined to be more likely than not that the benefit of such deferred tax asset will not be realized in future periods. If it becomes more likely than not that a tax asset will be used, the related valuation allowance on such assets would be reduced.
ASC 740 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with ASC 740-20 and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. There were no unrecognized tax benefits as of September 30, 2021. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
The Company may be subject to potential income tax examinations by federal or state authorities. These potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal and state tax laws. Management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months. Tax years that remain open for assessment for federal and state tax purposes include the years ended December 31, 2017 through 2020.
The
Company’s policy for recording interest and penalties associated with audits is to record such expense as a component of income
tax expense. There were
Fair Value of Financial Assets and Liabilities - Financial instruments, including cash and cash equivalents, short-term investments and accounts payable, are carried at cost. Management believes that the recorded amounts approximate fair value due to the short-term nature of these instruments.
As of September 30, | ||||||||
2021 | 2020 | |||||||
Warrants to purchase common stock | ||||||||
Stock options | ||||||||
Unvested restricted stock | ||||||||
Total dilutive securities |
13 |
Recent Accounting Pronouncements
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (ASU 2019-12) which simplifies the accounting for income taxes by removing certain exceptions for investments, intraperiod allocations, and interim calculations, and adds guidance 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 Company’s condensed consolidated financial statements.
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. Business Combinations
On
September 20, 2021, the Company acquired a %
interest in RemoteMore USA, Inc., a software developer recruiting company, for an estimated total purchase price of $
The purchase price allocation as of the date of the acquisition was based on a detailed analysis about the fair value of assets acquired. (No liabilities were assumed.) The major classes of assets to which we have allocated the purchase price were as follows:
Goodwill | $ | |||
Intangible assets | ||||
$ |
The goodwill recognized in connection with the acquisition is primarily attributable to anticipated synergies from future growth and is expected to be deductible for tax purposes.
5. 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.
14 |
The Company may have contracts where there is an extended timing difference between payment and the time when control of the goods or services is transferred to the customer. The Company has adopted the practical expedient and does not adjust for the promised amount of consideration for the effects of a significant financing component if it expects, at contract inception, that the period between when the entity transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less.
Nature of Goods and Services
The following is a description of principal activities from which the Company generates its revenue:
Membership Fees and Related Services
Membership fees of longer than one month are collected up-front and member benefits become available immediately; however those benefits must remain available over the 12-month membership period. At the time of enrollment, membership fees are recorded as deferred revenue and are recognized as revenue ratably over the 12-month membership period. Members who are enrolled in this plan may cancel their membership in the program at any time and receive a partial refund (amount remaining in deferred revenue) or due to consumer protection legislation, a full refund based on the policies of the member’s credit card company.
The Company also offers monthly memberships for which it collects fees on a monthly basis and recognizes revenue in the same month as the fees are collected.
Revenue from related membership services are derived from fees for development and set-up of a member’s personal on-line profile and/or press release announcements. Fees related to these services are recognized as revenue at the time the on-line profile is complete and press release is distributed.
Recruitment Services
The Company’s recruitment services revenue is derived from the Company’s agreements through single and multiple job postings, recruitment media, talent recruitment communities, basic and premier corporate memberships, hiring campaign marketing and advertising, e-newsletter marketing and research and outreach services. 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 condensed consolidated statements of operations.
Revenues generated from contracts entered into to provide software solutions are recognized as work is performed and invoiced to customers at the beginning of the following month with payment typically due within 14 days.
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.
15 |
Disaggregation of revenue
Revenue is disaggregated by product line and timing of transfer of products and services and is in line with our reportable segments as described in Note 13 - Segment Reporting.
Contract Balances
The
Company’s rights to consideration for work completed, but not billed at the reporting date, is classified as a receivable, as it
has an unconditional right to payment or only conditional for the passage of time. The Company has
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 $
Transaction price allocated to the remaining performance obligations
The Company applies the optional exemptions and does not disclose: a) information about remaining performance obligations that have an original expected duration of one year or less or b) transaction price allocated to unsatisfied performance obligations for which variable consideration is allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied promise to transfer a distinct good or service that forms part of a single performance obligation in accordance with the series guidance.
The typical duration of all event related and other contracts is one year or less and, as a result, the Company applies the optional exemptions and does not disclose information about remaining performance obligations that have an original expected duration of one year or less.
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.
6. Capitalized Technology
Capitalized Technology, net is as follows:
September 30, 2021 | December 31, 2020 | |||||||
Capitalized cost: | ||||||||
Balance, beginning of period | $ | $ | ||||||
Additional capitalized cost | ||||||||
Balance, end of period | $ | $ | ||||||
Accumulated amortization: | ||||||||
Balance, beginning of period | $ | $ | ||||||
Provision for amortization | ||||||||
Balance, end of period | ||||||||
Capitalized Technology, net | $ | $ |
For
the three months ended September 30, 2021 and 2020, amortization expense was approximately $
16 |
7. Intangible Assets
Intangible assets, net was as follows:
Useful Lives | Gross Carrying | Accumulated | Net Carrying | |||||||||||||
September 30, 2021 | (Years) | Amount | Amortization | Amount | ||||||||||||
Long-lived intangible assets: | ||||||||||||||||
Sales Process | $ | $ | ( | ) | $ | |||||||||||
Paid Member Relationships | ( | ) | ||||||||||||||
Member Lists | ( | ) | ||||||||||||||
Developed Technology | ( | ) | ||||||||||||||
Trade Name/Trademarks | ( | ) | ||||||||||||||
Contracts purchased | Based on terms | |||||||||||||||
( | ) | |||||||||||||||
Indefinite-lived intangible assets: | ||||||||||||||||
Trade name | ||||||||||||||||
Intangible assets, net | $ |
Useful Lives | Gross Carrying | Accumulated | Net Carrying | |||||||||||||
December 31, 2020 | (Years) | Amount | Amortization | Amount | ||||||||||||
Long-lived intangible assets: | ||||||||||||||||
Sales Process | $ | $ | ( | ) | $ | |||||||||||
Paid Member Relationships | ( | ) | ||||||||||||||
Member Lists | ( | ) | ||||||||||||||
Developed Technology | ( | ) | ||||||||||||||
Trade Name/Trademarks | ( | ) | ||||||||||||||
( | ) | |||||||||||||||
Indefinite-lived intangible assets: | ||||||||||||||||
Trade name | ||||||||||||||||
Intangible assets, net | $ |
As of September 30, 2021, estimated amortization expense in future fiscal years is summarized as follows:
Year ended December 31, | ||||
Remaining of 2021 | $ | |||
2022 | ||||
2023 | ||||
2024 | ||||
2025 | ||||
Net Carrying Amount | $ |
For
the three months ended September 30, 2021 and 2020, amortization expense was approximately $
8. Commitments and Contingencies
Lease Obligations - The Company leases office space and equipment under various operating lease agreements, including an office for its headquarters, as well as office spaces for its events business, sales and administrative offices under non-cancelable lease arrangements that provide for payments on a graduated basis with various expiration dates.
As
of September 30, 2021, right of use assets and related current lease obligations were $
17 |
Other
- PDN China’s bank account with balance of approximately $
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 $
NAPW
(as leasee) is a defendant in a Nassau County (NY) Supreme Court case. TL Franklin Avenue Plaza LLC (as lessor) has sued and obtained
a judgment against NAPW in the amount of $
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 $
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.
9. 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, and CFL agreed to purchase, 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 $
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.
On
September 22, 2021, the Company entered into a stock purchase agreement with CFL, in which the Company sold shares of its common stock at a price per share
of $for gross proceeds of approximately $
As of September 30, 2021 and November 15, 2021,
CFL beneficially holds shares of the Company’s outstanding Common Stock equal to approximately
18 |
10. 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 shares of undesignated preferred stock.
Common Stock – The Company has one class of common stock outstanding with a total number of shares authorized of . As of September 30, 2021, the Company had shares of common stock outstanding.
In January 2021, the Company issued shares of the Company’s common stock to White Winston as a result of a settlement agreement (see note 7. Commitments and Contingencies).
On
February 1, 2021, the Company entered into a private placement with Ms. Yiran Gu, in which the Company sold
On
July 9, 2021, the Company closed the registered direct offering, pursuant to which certain institutional accredited investors purchased
On
September 22, 2021, the Company entered into a stock purchase agreement with CFL, in which the Company sold
Equity Incentive Plans – The Company’s 2013 Equity Compensation Plan (the “2013 Plan”) was adopted for the purpose of providing equity incentives to employees, officers, directors and consultants including options, restricted stock, restricted stock units, stock appreciation rights, other equity awards, annual incentive awards and dividend equivalents. Through a series of amendments to the 2013 Plan, the number of authorized shares available for issuance of common stock under the Plan increased from shares to shares. The Company further amended the 2013 Plan to increase the number of authorized shares of common stock under the Plan by shares, which the Company’s stockholders approved and ratified on June 14, 2021. The Company is now authorized to issue 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 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.
19 |
Weighted | ||||||||||||||||
Average | ||||||||||||||||
Weighted | Remaining | |||||||||||||||
Average | Contractual | Aggregate | ||||||||||||||
Number of | Exercise | Life | Intrinsic | |||||||||||||
Options | Price | (in Years) | Value | |||||||||||||
Outstanding - January 1, 2021 | $ | $ | - | |||||||||||||
Granted | ||||||||||||||||
Exercised | - | |||||||||||||||
Forfeited | ( | ) | - | |||||||||||||
Outstanding - September 30 2021 | $ | $ | ||||||||||||||
Exercisable at September 30, 2021 | $ | $ |
Weighted | ||||||||||||||||
Average | ||||||||||||||||
Weighted | Remaining | |||||||||||||||
Average | Contractual | Aggregate | ||||||||||||||
Number of | Exercise | Life | Intrinsic | |||||||||||||
Options | Price | (in Years) | Value | |||||||||||||
Outstanding - January 1, 2020 | $ | $ | - | |||||||||||||
Granted | ||||||||||||||||
Exercised | - | |||||||||||||||
Forfeited | ( | ) | - | |||||||||||||
Outstanding - September 30, 2020 | $ | $ | ||||||||||||||
Exercisable at September 30, 2020 | $ | $ |
Total unrecognized pre-tax stock-based compensation expense related to unvested stock options at September 30, 2021 was approximately $ .
Warrants
As
of September 30, 2021 and December 31, 2020,
20 |
Restricted Stock
Number of | ||||
Shares | ||||
Outstanding - January 1, 2021 | ||||
Granted | ||||
Forfeited | ||||
Vested | ( | ) | ||
Outstanding - September 30, 2021 |
Number of | ||||
Shares | ||||
Outstanding - January 1, 2020 | ||||
Granted | ||||
Forfeited | ||||
Vested | ( | ) | ||
Outstanding - September 30, 2020 |
Additionally, the Company had no non-cash pre-tax stock-based compensation expense recorded for the nine months ended September 30, 2021 and 2020, respectively, as a component of general and administrative expenses in the accompanying statements of operations, pertaining to restricted stock.
Total unrecognized pre-tax stock-based compensation expense related to unvested restricted stock at September 30, 2021 was $ .
12. Income Taxes
The Company’s quarterly income tax provision is based upon an estimated annual income tax rate. The Company’s quarterly provision for income taxes also includes the tax impact of discrete items, if any, including changes in judgment about valuation allowances and effects of changes in tax laws or rates, in the interim period in which they occur.
During
the three months ended September 30, 2021 and 2020, the Company recorded income tax benefit of $
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 September 30, 2021. The valuation allowance at September
30, 2021 was approximately $
21 |
13. Segment Information
The Company operates in the following segments: (i) PDN Network, (ii) Other (which includes NAPW Network and RemoteMore) and (iii) Corporate Overhead. The financial results of China Operations have been reclassified from the Company’s reportable segments to discontinued operations for all periods presented.
The following tables present key financial information related of the Company’s reportable segments related to financial position as of September 30, 2021 and December 31, 2020 and results of operations for the three and nine months ended September 30, 2021 and 2020:
Three Months Ended September 30, 2021 | ||||||||||||||||
PDN | Corporate | |||||||||||||||
Network | Other | Overhead | Consolidated | |||||||||||||
Membership fees and related services | $ | $ | $ | $ | ||||||||||||
Recruitment services | - | - | ||||||||||||||
Products sales and other | - | - | ||||||||||||||
Consumer advertising and marketing solutions | - | - | ||||||||||||||
Total revenues | - | |||||||||||||||
Income (loss) from continuing operations | ( | ) | ( | ) | ( | ) | ||||||||||
Depreciation and amortization | - | |||||||||||||||
Income tax (benefit) expense | ( | ) | ( | ) | ( | ) | ||||||||||
Net loss from continuing operations | ( | ) | ( | ) | ( | ) |
As of September 30, 2021 | ||||||||||||||||
Goodwill | $ | $ | $ | $ | ||||||||||||
Intangibles assets, net | ||||||||||||||||
Assets from continuing operations |
Three Months Ended September 30, 2020 | ||||||||||||||||
PDN | Corporate | |||||||||||||||
Network | Other | Overhead | Consolidated | |||||||||||||
Membership fees and related services | $ | $ | $ | $ | ||||||||||||
Recruitment services | - | - | ||||||||||||||
Products sales and other | - | - | ||||||||||||||
Consumer advertising and marketing solutions | - | - | ||||||||||||||
Total revenues | - | |||||||||||||||
Loss from continuing operations | ) | ( | ) | ( | ) | |||||||||||
Depreciation and amortization | - | |||||||||||||||
Income tax benefit | ( | ) | ( | ) | ( | ) | ||||||||||
Net loss from continuing operations | ( | ) | ( | ) |
As of December 31, 2020 | ||||||||||||||||
Goodwill | $ | $ | $ | $ | ||||||||||||
Intangibles assets, net | ||||||||||||||||
Assets from continuing operations |
22 |
Nine Months Ended September 30, 2021 | ||||||||||||||||
PDN | Corporate | |||||||||||||||
Network | Other | Overhead | Consolidated | |||||||||||||
Membership fees and related services | $ | $ | $ | $ | ||||||||||||
Recruitment services | - | - | ||||||||||||||
Products sales and other | - | - | ||||||||||||||
Consumer advertising and marketing solutions | - | - | ||||||||||||||
Total revenues | - | |||||||||||||||
Income (loss) from continuing operations | ( | ) | ( | ) | ( | ) | ||||||||||
Depreciation and amortization | - | |||||||||||||||
Income tax expense (benefit) | ( | ) | ( | ) | ( | ) | ||||||||||
Net income (loss) from continuing operations | ( | ) | ( | ) | ( | ) |
Nine Months Ended September 30, 2020 | ||||||||||||||||
PDN | Corporate | |||||||||||||||
Network | Other | Overhead | Consolidated | |||||||||||||
Membership fees and related services | $ | $ | $ | $ | ||||||||||||
Recruitment services | - | - | ||||||||||||||
Products sales and other | - | - | ||||||||||||||
Consumer advertising and marketing solutions | - | - | ||||||||||||||
Total revenues | - | |||||||||||||||
Loss from continuing operations | ( | ) | ( | ) | ( | ) | ||||||||||
Depreciation and amortization | - | |||||||||||||||
Income tax benefit | ( | ) | ( | ) | ( | ) | ||||||||||
Net loss from continuing operations | ( | ) | ( | ) | ( | ) |
14. Subsequent Events
The Company has evaluated subsequent events through the filing of this Quarterly Report on Form 10-Q, and determined that there have been no events that have occurred that would require adjustments to our disclosures in the condensed consolidated financial statements.
23 |
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 condensed consolidated financial statements and notes thereto included in our 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 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 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.
On March 4, 2020, our Board of Directors (the “Board”) decided to discontinue all operations in China. The resolution approved by the Board does not contemplate a sale of the business unit or a sale of any assets to a third-party for its China operations, but to effectively cease operations, which will commence during the second quarter of 2020. Accordingly, all historical financial results associated with the China operations have been reclassified to discontinued operations and current and prior period financial results have been reclassified. China operations were previously disclosed as a reportable operating segment as “China Operations”.
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Impact of COVID-19
The COVID-19 pandemic has negatively impacted the global economy, disrupted consumer spending and global supply chains and created significant volatility and disruption of financial markets. The COVID-19 pandemic may have an adverse effect on our business and financial performance. The extent of the impact of the COVID-19 pandemic, including our ability to execute our business strategies as planned, will depend on future developments, including the duration and severity of the pandemic, which are highly uncertain and cannot be predicted. In response to mandates and recommendations from federal, state and local authorities, as well as decisions we have made to protect the health and safety of our employees with respect to the COVID-19 pandemic, we temporarily closed our offices and had our employees work remotely until July 6, 2021. We may face more closure requirements and other operation restrictions for prolonged periods of time due to, among other factors, evolving and stringent public health directives, quarantine policies, social distancing measures, or other local and/or 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 or similar orders in the 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.
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” 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 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 access to networking events and member programming. Upgrades to an Innovator membership include the Initiator benefits as well enhanced education and mentorship. The most comprehensive level, the Influencer, provides all the aforementioned benefits plus admission to exclusive “live” events and expanded opportunities for marketing and promotion, including the creation and distribution of a press release, which is prepared by professional writers and sent over major newswires. Additionally, all memberships offer discounts through the IAW Perks program and preferred partners. NAPW Membership is renewable and fees are payable on an annual or monthly basis, with the first 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.
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.
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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.
The following table provides a reconciliation of net loss from continuing operations to Adjusted EBITDA for the three and nine months ended September 30, 2021 and 2020, the most directly comparable GAAP measure reported in our condensed consolidated financial statements:
Three Months Ended September 30, | ||||||||
2021 | 2020 | |||||||
(in thousands) | ||||||||
Loss from Continuing Operations | $ | (88 | ) | $ | (912 | ) | ||
Stock-based compensation | 127 | 111 | ||||||
Litigation settlement reserve | - | 766 | ||||||
Loss attributable to noncontrolling interest | 19 | - | ||||||
Depreciation and amortization | 30 | 38 | ||||||
Interest and other income | (2 | ) | 5 | |||||
Income tax expense (benefit) | (2 | ) | (14 | ) | ||||
Adjusted EBITDA | $ | 82 | $ | (6 | ) |
Nine Months Ended September 30, | ||||||||
2021 | 2020 | |||||||
(in thousands) | ||||||||
Loss from Continuing Operations | $ | (1,434 | ) | $ | (4,116 | ) | ||
Stock-based compensation | 436 | 509 | ||||||
Litigation settlement reserve | 75 | 1,475 | ||||||
Loss attributable to noncontrolling interest | 19 | - | ||||||
Depreciation and amortization | 88 | 138 | ||||||
Interest and other income | (5 | ) | (1 | ) | ||||
Income tax benefit | (19 | ) | (32 | ) | ||||
Adjusted EBITDA | $ | (840 | ) | $ | (2,027 | ) |
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Results of Operations
Revenues
Total Revenues
The following tables set forth our revenue for the periods presented. The period-to-period comparison of financial results is not necessarily indicative of future results.
Three Months Ended September 30 | Change | Change | ||||||||||||||
2021 | 2020 | (Dollars) | (Percent) | |||||||||||||
(in thousands) | ||||||||||||||||
Revenues: | ||||||||||||||||
Membership fees and related services | $ | 240 | $ | 319 | $ | (79 | ) | (24.8 | )% | |||||||
Recruitment services | 1,368 | 930 | 438 | 47.1 | % | |||||||||||
Products sales and other | 20 | - | 20 | 100.0 | % | |||||||||||
Consumer advertising and marketing solutions | 55 | 56 | (1 | ) | (1.8 | )% | ||||||||||
Total revenues | $ | 1,683 | $ | 1,305 | $ | 378 | 29.0 | % |
Total revenues for the three months ended September 30, 2021 increased approximately $378,000, or 29.0%, to approximately $1,683,000 from approximately $1,305,000 during the same period in the prior year. The increase was predominately attributable to an approximate $438,000 increase in recruitment services revenues in the current period, partially offset by an approximate $79,000 decrease in membership fees and related services revenues, as compared to the same period in the prior year.
Nine Months Ended September 30 | Change | Change | ||||||||||||||
2021 | 2020 | (Dollars) | (Percent) | |||||||||||||
(in thousands) | ||||||||||||||||
Revenues: | ||||||||||||||||
Membership fees and related services | $ | 761 | $ | 1,056 | $ | (295 | ) | (27.9 | )% | |||||||
Recruitment services | 3,695 | 2,069 | 1,626 | 78.6 | % | |||||||||||
Products sales and other | 23 | 4 | 19 | 475.0 | % | |||||||||||
Consumer advertising and marketing solutions | 149 | 110 | 39 | 35.5 | % | |||||||||||
Total revenues | $ | 4,628 | $ | 3,239 | $ | 1,389 | 42.9 | % |
Total revenues for the nine months ended September 30, 2021 increased approximately $1,389,000, or 42.9%, to approximately $4,628,000 from approximately $3,239,000 during the same period in the prior year. The increase was predominately attributable to an approximate $1,626,000 increase in recruitment services revenues in the current period, partially offset by an approximate $295,000 decrease in membership fees and related services revenues, as compared to 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 September 30, | Change | Change | ||||||||||||||
2021 | 2020 | (Dollars) | (Percent) | |||||||||||||
(in thousands) | ||||||||||||||||
PDN Network | $ | 1,425 | $ | 986 | $ | 439 | 44.5 | % | ||||||||
Other | 258 | 319 | (61 | ) | (19.1 | )% | ||||||||||
Total revenues | $ | 1,683 | $ | 1,305 | $ | 378 | 29.0 | % |
During the three months ended September 30, 2021, our PDN Network generated approximately $1,425,000 in revenues compared to approximately $986,000 in revenues during the three months ended September 30, 2020, an increase of approximately $439,000 or 44.5 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 September 30, 2021, Other revenues were approximately $258,000, compared to revenues of approximately $319,000 during the same period in the prior year, a decrease of approximately $61,000 or 19.1 percent. The decrease in revenues was primarily due a continued decrease in legacy membership retention rates and the continued effects of COVID-19 for the NAPW network of approximately $80,000. Partially offsetting the decrease was an increase in revenues of approximately $19,000 associated with RemoteMore for which there were no comparable revenues in the prior year.
Nine Months Ended September 30, | Change | Change | ||||||||||||||
2021 | 2020 | (Dollars) | (Percent) | |||||||||||||
(in thousands) | ||||||||||||||||
PDN Network | $ | 3,845 | $ | 2,180 | $ | 1,665 | 76.4 | % | ||||||||
Other | 783 | 1,059 | (276 | ) | (26.1 | )% | ||||||||||
Total revenues | $ | 4,628 | $ | 3,239 | $ | 1,389 | 42.9 | % |
During the nine months ended September, 2021, our PDN Network generated approximately $3,845,000 in revenues compared to approximately $2,180,000 in revenues during the nine months ended September 30, 2020, an increase of approximately $1,665,000 or 76.4 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 nine months ended September 30, 2021, Other revenues were approximately $783,000, compared to revenues of approximately $1,059,000 during the same period in the prior year, a decrease of approximately $276,000 or 26.1 percent. The decrease in revenues was primarily due a continued decrease in legacy membership retention rates and the continued effects of COVID- for the NAPW network of approximately $295,000. Partially offsetting the decrease was an increase in revenues of approximately $19,000 associated with RemoteMore for which there were no comparable revenues in the prior year. We believe that the membership services that we provide to our customers turned into a discretionary spending decision for our patrons during 2020 and continued throughout the first nine months of 2021. Many of the services that we provide, including all in-person events, were postponed as a result of the COVID-19 pandemic. Partially offsetting the decrease was an increase in revenues of approximately $19,000 associated with RemoteMore for which there were no comparable revenues in the prior year.
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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 September 30, | Change | Change | ||||||||||||||
2021 | 2020 | (Dollars) | (Percent) | |||||||||||||
(in thousands) | ||||||||||||||||
Cost and expenses: | ||||||||||||||||
Cost of revenues | $ | 347 | $ | 206 | $ | 141 | 68.4 | % | ||||||||
Sales and marketing | 526 | 420 | 106 | 25.2 | % | |||||||||||
General and administrative | 873 | 1,562 | (689 | ) | (44.1 | )% | ||||||||||
Depreciation and amortization | 29 | 38 | (9 | ) | (23.7 | )% | ||||||||||
Total pre-tax cost and expenses: | $ | 1,775 | $ | 2,226 | $ | (451 | ) | (20.3 | )% |
Nine Months Ended September 30, | Change | Change | ||||||||||||||
2021 | 2020 | (Dollars) | (Percent) | |||||||||||||
(in thousands) | ||||||||||||||||
Cost and expenses: | ||||||||||||||||
Cost of revenues | $ | 868 | $ | 549 | $ | 319 | 58.1 | % | ||||||||
Sales and marketing | 1,826 | 1,404 | 422 | 30.1 | % | |||||||||||
General and administrative | 3,303 | 5,297 | (1,994 | ) | (37.6 | )% | ||||||||||
Depreciation and amortization | 88 | 138 | (50 | ) | (36.2 | )% | ||||||||||
Total pre-tax cost and expenses: | $ | 6,085 | $ | 7,388 | $ | (1,303 | ) | (17.6 | )% |
Cost of revenues: Cost of revenues during the three months ended September 30, 2021 was approximately $347,000, an increase of approximately $141,000, or 68.4 percent, from approximately $206,000 during the same period of the prior year, as a direct result of increased revenues of approximately $378,000, or 29.0 percent. Cost of revenues during the nine months ended September 30, 2021 was approximately $868,000, an increase of approximately $319,000, or 58.1 percent, from approximately $549,000 during the same period in the prior year, as a direct result of increased revenues of approximately $1,389,000, or 42.9 percent.
Sales and marketing expense: Sales and marketing expense during the three months ended September 30, 2021 was approximately $526,000, an increase of approximately $106,000, or 25.2 percent, from $420,000 during the same period in the prior year. Sales and marketing expense during the nine months ended September 30, 2021 was approximately $1,826,000, an increase of approximately $422,000, or 30.1 percent, from $1,404,000 during the same period in the prior year. The increase in the three and nine month periods are a result of sales and marketing costs driving the aforementioned increases in revenues.
General and administrative expense: General and administrative expenses decreased by approximately $689,000, or 44.1 percent, to approximately $873,000 during the three months ended September 30, 2021, as compared to the same period in the prior year. The decrease, as compared to the same period in the prior year, was primarily a result of reductions in professional services charges of approximately $645,000 payroll related costs of approximately $62,000, and bad debt charges of approximately $34,000, partially offset by expenses related to RemoteMore of approximately $53,000, for which there was no charges in the comparable period.
General and administrative expenses decreased by approximately $1,994,000, or 37.6 percent, to approximately 3,303,000 during the nine months ended September 30, 2021, as compared to the same period in the prior year. The decrease was primarily a result of a reduction in professional services charges of approximately $1,459,000, litigation settlement reserve of $450,000 recorded in the first quarter of 2020, partially offset by an increase in litigation settlement reserve of $75,000 in the second quarter of 2021, bad debt charges of approximately $82,000, stock-based compensation costs of approximately $73,000, bad debt charges of approximately $82,000, and payroll related costs of approximately $79,000, as compared to the same period in the prior year. Offsetting the decrease were expenses related to RemoteMore of approximately $53,000, for which there was no charges in the comparable period.
Depreciation and amortization expense: Depreciation and amortization expense during the three and nine months ended September 30, 2021 was approximately $29,000 and $88,000, compared to approximately $38,000 and $138,000 during the same periods in the 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 September 30, | Change | Change | ||||||||||||||
2021 | 2020 | (Dollars) | (Percent) | |||||||||||||
(in thousands) | ||||||||||||||||
PDN Network | $ | 732 | 670 | 62 | 9.3 | % | ||||||||||
Other | 460 | 277 | 183 | 66.1 | % | |||||||||||
Corporate Overhead | 583 | 1,279 | (696 | ) | (54.4 | )% | ||||||||||
Total pre-tax costs and expenses: | $ | 1,775 | $ | 2,226 | $ | 451 | (20.3 | )% |
Nine Months Ended September 30, | Change | Change | ||||||||||||||
2021 | 2020 | (Dollars) | (Percent) | |||||||||||||
(in thousands) | ||||||||||||||||
PDN Network | $ | 2,546 | 2,098 | 448 | 21.4 | % | ||||||||||
Other | 1,403 | 1,455 | (52 | ) | (3.6 | )% | ||||||||||
Corporate Overhead | 2,136 | 3,835 | (1,699 | ) | (44.3 | )% | ||||||||||
Total pre-tax costs and expenses: | $ | 6,085 | $ | 7,388 | $ | (1,303 | ) | (17.6 | )% |
For the three months ended September 30, 2021, pre-tax costs and expenses related to Corporate Overhead decreased by approximately $696,000, or 54.4 percent, as compared to the same period in the prior year. The reduction is primarily as a result of a decrease in professional services of approximately $696,000 as compared to the same period in the prior year.
For the nine months ended September 30, 2021, pre-tax costs and expenses related to Corporate Overhead decreased by approximately $1,699,000, or 44.3 percent, as compared to the same period in the prior year. The reduction is primarily as a result of a decrease in professional services of approximately $1,376,000, litigation settlement reserve of $450,000 recorded in the first quarter of 2020 in the current period, and stock-based compensation costs of approximately $73,000, as compared to the same period in the prior year. Partially offsetting the reductions were employee related costs of approximately $74,000
For the three months ended September 30, 2021, pre-tax costs and expenses related to our PDN Network segment increased by approximately $62,000, or 9.3%, as compared to the same period in the prior year. The increase is primarily as a result of approximately $94,000 of costs and revenues and $46,000 of sales and marketing costs driving the aforementioned increased revenues, partially offset by a reduction of general and administrative and other costs of approximately $81,000, as compared to the same period in the prior year.
For the nine months ended September, 2021, pre-tax costs and expenses related to our PDN Network segment increased by approximately $448,000, or 21.4%, as compared to the same period in the prior year. The increase is primarily as a result of approximately $358,000 of sales and marketing costs and $225,000 of costs and revenues and driving increased revenues, partially offset by a reduction of general and administrative and other costs of approximately $112,000, as compared to the same period in the prior year.
For the three months ended September 30, 2021, pre-tax costs and expenses related to Other increased by approximately $183,000. The increase in the period is primarily related to approximately $60,000 of sales and marketing costs and $46,000 of costs and revenues due to increased advertising, promotions and member benefits in an effort to increase future revenues, general and administrative expenses of approximately $35,000, as well as expenses related to RemoteMore of approximately $53,000, for which there was no charges in the comparable period and approximately
For the nine months ended September 30, 2021, pre-tax costs and expenses related to Other decreased by approximately $52,000. The decrease in the period is primarily related to reductions in professional services of approximately $226,000 and salary related expenses of approximately $233,000, partially offset by a non-cash charge to litigation settlement reserve of $75,000 and expenses related to RemoteMore of approximately $53,000, for which there was no charges in the comparable period, and other operating costs.
Income Tax Benefit