Commitments and Contingencies |
12 Months Ended | |||||||||||||||||||||||||
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Dec. 31, 2016 | ||||||||||||||||||||||||||
| Commitments and Contingencies Disclosure [Abstract] | ||||||||||||||||||||||||||
| Commitments and Contingencies |
10. Commitments and Contingencies
Lease Obligations - The Company leases office space, a corporate apartment, office furniture and equipment under various operating lease agreements.
The Company leases an office for its headquarters in Illinois, 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.
The Company leases space for its headquarters in Chicago, Illinois under a lease that expires on June 30, 2017. The Company also leases office space in Minnetonka, Minnesota for its Events division under a lease that expires on September 30, 2017.
The Company leases office space in Garden City, New York, under a lease that expires on February 28, 2019, which is used by NAPW Network membership coordinators and executive and administrative staff.
The Company leases office space in Jericho, New York, under a lease that ends on June 30, 2018. The Company currently sub-leases that property to a tenant under a landlord-approved sublease that is coterminous with the Company’s prime lease. The sublease provides for payments on a graduated basis through its expiration date of July 30, 2018.
The Company leases office space in Darien, Illinois, which serves as the headquarters and sales center of Noble Voice. The lease expires August 31, 2017.
Beginning January 1, 2017, the Company leases office space in China under a non-cancelable lease arrangement that provides for payments on a graduated basis through December 31, 2019.
Rent expense, amounting to $1,059,749 and $1,436,902 for the years ended December 31, 2016 and 2015, respectively, is included in general and administrative expense in the consolidated statements of operations. Included in rent expense is sublease income of $363,000 and $345,000 for the years ended December 31, 2016 and 2015, respectively.
During the year ended December 31, 2016, the Company recorded a gain on lease cancellation of approximately $424,000 related to the closing of its Los Angeles, CA office in general and administrative expenses in the accompanying consolidated statements of operations.
Future annual minimum payments net of sublease income due under the leases are summarized as follows:
Legal Proceedings
The Company and its wholly-owned subsidiary, NAPW, Inc. ("NAPW"), became parties during the year ended December 31, 2016 to an action captioned LinkedIn Corp. v. NAPW, Inc. and Professional Diversity Network, Inc., No. 16-CV-299784 (Santa Clara Superior Ct.). The complaint was filed on September 12, 2016. The plaintiff, LinkedIn Corp. (“LinkedIn”), sought payment of outstanding amounts it claimed were owed under a marketing agreement between LinkedIn and NAPW. The Company presented LinkedIn with a counter-claim and the matter was mediated. On December 20, 2016, the parties settled and released all claims against one another for the Company's payment of $1,450,000, which the Company paid in full on January 10, 2017. As a result of the settlement and release, the Company recorded a gain on litigation settlement in the amount of $1,740,297 in the accompanying statement of operations for the year ending December 31, 2016.
The Company and its wholly-owned subsidiary, NAPW, Inc., are parties to litigation captioned Gauri Ramnath, et al. v. Professional Diversity Network, Inc., et al., No. BC604153 (Los Angeles Superior Ct.), a putative class action filed in January 2016 alleging violations of various California Labor Code (wage & hour) sections. This matter was fully resolved when the Company agreed to deposit $500,000 with the Court’s administrator to be distributed to the class of plaintiffs. While the matter was fully resolved by the Court’s November 28, 2016 approval of the settlement, the funds distribution and other logistical processes are expected to fully conclude during 2017. As a result of the settlement, the Company recorded a litigation settlement expense in the amount of $500,000, which is recorded in gain on litigation settlement, in the accompanying statement of operations for the year ending December 31, 2016.
The Company and its wholly-owned subsidiary, NAPW, Inc., are parties to a proceeding captioned In re Professional Diversity Network, Cases 31-CA-159810 and 31-CA-162904 (“NLRB”), filed with the National Labor Relations Board in June 2015 and alleging violations of the National Labor Relations Act against the Company and its wholly-owned subsidiary, NAPW, Inc., where employee was allegedly terminated for asserting “union organizing” rights. While the Company disputes that any rights were impacted, the NLRB has issued its preliminary order requiring the Company to take certain remedial actions in the form of posting notices and revising certain policies. The NLRB’s order is currently awaiting affirmation or rejection by the U.S. Court of Appeals for the Ninth Circuit.
The Company is a party to a proceeding captioned Paul Sutcliffe v. Professional Diversity Network, Inc., No. 533-2016-00033 (EEOC), filed with the Equal Employment Opportunity Commission in April 2016 and alleging violations of Title VII and the Age Discrimination in Employment Act, where employee was allegedly terminated due to his race (Caucasian) and his age (over 40). The EEOC has issued a preliminary finding that the Company discriminated against the complainant. The complainant has not yet filed a lawsuit.
Separation Agreement
On July 16, 2015, the Company and Proman entered into a Separation Agreement whereby Proman resigned from his position as the Company’s Executive Vice President and Chief Operating Officer and resigned from the Company’s Board of Directors. Under the terms of the Separation Agreement, the Company paid Proman severance in an amount equal to the value of nine months of his annual salary, or $206,250, which is recorded in general and administrative expenses in the accompanying consolidated statements of operations.
On November 4, 2016, the Company entered into a Confidential Settlement and Mutual Release of All Claims (the “Release”) with Proman, pursuant to which the Company agreed among other things that (i) it would pay Proman $300,000 at the closing of the Share Issuance and Sale (see Note 11), (ii) the Separation Agreement would be terminated as of November 4, 2016, and (iii) the Promissory Note in the principal amount of $445,000 dated September 24, 2014 in favor of Proman would be terminated as of November 4, 2016. The Company also agreed that notwithstanding the termination of the Separation Agreement pursuant to the Release, Proman’s co-sale right would be preserved and he would continue to hold the options and warrants he held as of November 4, 2016. On November 7, 2016, the Company paid Proman $300,000 pursuant to the Release.
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.
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