Commitments and Contingencies |
9 Months Ended |
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Sep. 30, 2016 | |
| Commitments and Contingencies Disclosure [Abstract] | |
| Commitments and Contingencies |
7. 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.
Rent expense, amounting to approximately $258,000 and $383,000 for the three months ended September 30, 2016 and 2015, respectively, and approximately $808,000 and $1,083,000 for the nine months ended September 30, 2016 and 2015, respectively, is included in general and administrative expense in the condensed consolidated statements of comprehensive loss. Included in rent expense is sublease income of approximately $93,000 and $90,000 for the three months ended September 30, 2016 and 2015, respectively, and approximately $279,000 and $255,000 for the nine months ended September 30, 2016 and 2015, respectively.
During the nine months ended September 30, 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 condensed consolidated statements of operations and comprehensive loss.
Legal Proceedings
The Company and its wholly-owned subsidiary, NAPW, Inc., are parties 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. LinkedIn Corp. (“LinkedIn”), the plaintiff, seeks payment of outstanding amounts it claims are owed under a marketing agreement between LinkedIn and NAPW. The Company has prepared but has not yet filed a counterclaim. LinkedIn has agreed to postpone the deadline for the Company to file a responsive pleading to January 5, 2017. The parties have also agreed to mediate their respective claims, with a mediation currently scheduled for December 20, 2016. The case is in its preliminary stages and it is uncertain whether or not its outcome is likely to have a material impact on the Company’s financial position.
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 alleging violations of various California Labor Code (wage & hour) sections. The plaintiffs seek unspecified damages. The complaint was filed in December 2015 and the Company has answered. On April 28, 2016, the parties entered into a mutual settlement agreement and release, on behalf of all putative class participants, in the amount of $500,000. Such amount is recorded in accrued expenses in the accompanying condensed consolidated balance sheet as of September 30, 2016. The parties’ agreement and its amount are subject to Court and state agency approval. The Company has been notified that the Court will hold a hearing to consider final approval on November 28, 2016. The Company anticipates that, if the global settlement is approved, it will have to fund the settlement in late Fourth Quarter of 2016 or early First Quarter of 2017.
The Company and its wholly-owned subsidiary, NAPW, Inc., are parties to an administrative action before the National Labor Relations Board captioned as In re Professional Diversity Network, Cases 31-CA-159810 and 31-CA-162904 (NLRB), alleging violations of the National Labor Relations Act, 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 Company is currently working with the agency to comply with the NLRB order. The Company does not anticipate that its outcome will have a material impact on the Company’s financial position.
The Company is a party to an administrative action before the Equal Employment Opportunity Commission captioned as Paul Sutcliffe v. Professional Diversity Network, Inc., No. 533-2016-00033 (EEOC), 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 Company is currently weighing its appellate options, but does not anticipate that this case will have a material impact on the Company’s financial position.
On November 4, 2016, the Company entered into a Confidential Settlement and Mutual Release of All Claims (the “Release”) with Matthew B. Proman (“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, (ii) the Separation Agreement and Mutual Release of All Claims, dated July 16, 2015 between Proman and the Company (the “Separation Agreement”) would be terminated as of November 4, 2016, and (iii) the Seller Promissory Note in the principal amount of $445,000 dated September 24, 2014 in favor of Proman (the “Promissory Note”) 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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