UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
|
FORM 10-Q
|
Professional Diversity Network, Inc.
|
|
(Exact Name of Registrant as Specified in its Charter)
|
|
Delaware
(State or Other Jurisdiction of Incorporation or
Organization)
|
80-0900177
(I.R.S. Employer Identification No.)
|
801 W. Adams Street, Suite 600, Chicago, Illinois 60607
(Address of Principal Executive Offices) (Zip Code)
Telephone: (312) 614-0950
(Registrant’s Telephone Number, Including Area Code)
N/A
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
|
Large accelerated filer ☐
|
|
Accelerated filer ☐
|
Non-accelerated filer ☐
|
|
Smaller reporting company ☒
|
Page
|
|||
PART I
|
1
|
||
ITEM 1.
|
FINANCIAL STATEMENTS
|
1
|
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
20
|
|
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
34
|
|
ITEM 4.
|
CONTROLS AND PROCEDURES
|
34
|
|
PART II
|
34
|
||
ITEM 1.
|
LEGAL PROCEEDINGS
|
34
|
|
ITEM 1A.
|
RISK FACTORS
|
35
|
|
ITEM 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
37
|
|
ITEM 3.
|
DEFAULTS UPON SENIOR SECURITIES
|
37
|
|
ITEM 4.
|
MINE SAFETY DISCLOSURE
|
37
|
|
ITEM 5.
|
OTHER INFORMATION
|
38
|
|
ITEM 6.
|
EXHIBITS
|
38
|
|
Professional Diversity Network, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|
June 30,
|
December 31,
|
||||||
|
2016
|
2015
|
||||||
|
(Unaudited)
|
|||||||
Current Assets:
|
||||||||
Cash and cash equivalents
|
$
|
1,292,244
|
$
|
2,070,693
|
||||
Accounts receivable, net
|
1,772,860
|
2,510,530
|
||||||
Short-term investments
|
-
|
500,000
|
||||||
Incremental direct costs
|
719,747
|
1,023,916
|
||||||
Prepaid license fee
|
-
|
112,500
|
||||||
Prepaid expenses and other current assets
|
305,752
|
411,592
|
||||||
Total current assets
|
4,090,603
|
6,629,231
|
||||||
|
||||||||
Property and equipment, net
|
353,921
|
444,398
|
||||||
Capitalized technology, net
|
302,958
|
456,523
|
||||||
Goodwill
|
20,201,190
|
20,201,190
|
||||||
Intangible assets, net
|
10,617,639
|
12,051,839
|
||||||
Merchant reserve
|
1,426,927
|
1,260,849
|
||||||
Security deposits
|
377,070
|
383,786
|
||||||
Total assets
|
$
|
37,370,308
|
$
|
41,427,816
|
||||
|
||||||||
Current Liabilities:
|
||||||||
Accounts payable
|
$
|
4,301,997
|
$
|
4,465,941
|
||||
Accrued expenses
|
1,425,112
|
837,712
|
||||||
Deferred revenue
|
5,122,268
|
7,507,176
|
||||||
Customer deposits
|
-
|
112,500
|
||||||
Warrant liability
|
380,000
|
-
|
||||||
Promissory note
|
445,000
|
445,000
|
||||||
Total current liabilities
|
11,674,377
|
13,368,329
|
||||||
|
||||||||
Deferred tax liability
|
4,348,515
|
4,942,908
|
||||||
Line of credit, net of unamortized debt issuance costs
|
330,563
|
-
|
||||||
Deferred rent
|
52,740
|
45,155
|
||||||
Other liabilities
|
61,575
|
426,267
|
||||||
Total liabilities
|
16,467,770
|
18,782,659
|
||||||
|
||||||||
Commitments and contingencies
|
||||||||
|
||||||||
Stockholders' Equity
|
||||||||
Common stock, $0.01 par value; 25,000,000 shares authorized; 14,608,230
shares issued as of June 30, 2016 and December 31, 2015; and 14,466,513 shares outstanding as of June 30, 2016 and December 31, 2015 |
144,749
|
144,749
|
||||||
Additional paid in capital
|
63,930,830
|
63,427,542
|
||||||
Accumulated deficit
|
(43,135,924
|
)
|
(40,890,017
|
)
|
||||
Treasury stock, at cost; 8,382 shares at June 30, 2016 and December 31, 2015
|
(37,117
|
)
|
(37,117
|
)
|
||||
Total stockholders' equity
|
20,902,538
|
22,645,157
|
||||||
|
||||||||
Total liabilities and stockholders' equity
|
$
|
37,370,308
|
$
|
41,427,816
|
Professional Diversity Network, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited)
|
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
||||||||||||||
|
2016
|
2015
|
2016
|
2015
|
||||||||||||
|
||||||||||||||||
Revenues
|
||||||||||||||||
Membership fees and related services
|
$
|
4,259,144
|
$
|
6,754,247
|
$
|
9,299,318
|
$
|
13,542,927
|
||||||||
Lead generation
|
1,415,958
|
2,760,022
|
2,935,549
|
5,519,126
|
||||||||||||
Recruitment services
|
717,360
|
756,039
|
1,340,669
|
1,602,701
|
||||||||||||
Product sales and other
|
404,590
|
64,736
|
491,583
|
300,429
|
||||||||||||
Consumer advertising and marketing solutions
|
53,976
|
63,785
|
127,052
|
136,086
|
||||||||||||
Total revenues
|
6,851,028
|
10,398,829
|
14,194,171
|
21,101,269
|
||||||||||||
|
||||||||||||||||
Costs and expenses:
|
||||||||||||||||
Cost of revenues
|
803,646
|
1,471,760
|
1,688,391
|
3,183,306
|
||||||||||||
Sales and marketing
|
3,428,115
|
5,479,052
|
7,249,691
|
12,094,563
|
||||||||||||
General and administrative
|
2,749,214
|
3,902,136
|
6,417,631
|
7,845,817
|
||||||||||||
Depreciation and amortization
|
811,232
|
870,273
|
1,678,242
|
1,805,196
|
||||||||||||
Total costs and expenses
|
7,792,207
|
11,723,221
|
17,033,955
|
24,928,882
|
||||||||||||
|
||||||||||||||||
Loss from operations
|
(941,179
|
)
|
(1,324,392
|
)
|
(2,839,784
|
)
|
(3,827,613
|
)
|
||||||||
|
||||||||||||||||
Other (expense) income
|
||||||||||||||||
Interest expense
|
(778
|
)
|
(29,479
|
)
|
(1,167
|
)
|
(75,110
|
)
|
||||||||
Interest and other income
|
(481
|
)
|
7,126
|
651
|
23,184
|
|||||||||||
Other income (expense), net
|
(1,259
|
)
|
(22,353
|
)
|
(516
|
)
|
(51,926
|
)
|
||||||||
|
||||||||||||||||
Change in fair value of warrant liability
|
-
|
71,270
|
-
|
91,560
|
||||||||||||
|
||||||||||||||||
Loss before income tax benefit
|
(942,438
|
)
|
(1,275,475
|
)
|
(2,840,300
|
)
|
(3,787,979
|
)
|
||||||||
Income tax benefit
|
(136,169
|
)
|
(497,196
|
)
|
(594,393
|
)
|
(1,466,822
|
)
|
||||||||
Net loss
|
$
|
(806,269
|
)
|
$
|
(778,279
|
)
|
$
|
(2,245,907
|
)
|
$
|
(2,321,157
|
)
|
||||
|
||||||||||||||||
Net loss per common share, basic and diluted
|
$
|
(0.06
|
)
|
$
|
(0.06
|
)
|
$
|
(0.16
|
)
|
$
|
(0.17
|
)
|
||||
|
||||||||||||||||
Weighted average shares used in computing net loss
per common share:
|
||||||||||||||||
Basic and diluted
|
14,466,513
|
14,023,916
|
14,466,513
|
13,375,405
|
Professional Diversity Network, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
|
|
Six Months Ended June 30,
|
|||||||
|
2016
|
2015
|
||||||
Cash flows from operating activities:
|
||||||||
Net loss
|
$
|
(2,245,907
|
)
|
$
|
(2,321,157
|
)
|
||
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||
Depreciation and amortization
|
1,678,242
|
1,805,196
|
||||||
Deferred tax benefit
|
(594,393
|
)
|
(1,466,822
|
)
|
||||
Gain on lease cancellation
|
(423,998
|
)
|
||||||
Stock-based compensation expense
|
99,830
|
236,369
|
||||||
Amortization of prepaid license fees
|
112,500
|
112,500
|
||||||
Amortization of premium on short-term investments, net
|
-
|
70,644
|
||||||
Amortization of customer deposits
|
(112,500
|
)
|
(112,500
|
)
|
||||
Change in fair value of warrant liability
|
-
|
(91,560
|
)
|
|||||
Accretion of debt discount
|
-
|
5,208
|
||||||
Changes in operating assets and liabilities:
|
||||||||
Accounts receivable
|
737,670
|
636,698
|
||||||
Prepaid expenses and other current assets
|
105,840
|
(23,483
|
)
|
|||||
Incremental direct costs
|
304,169
|
(197,403
|
)
|
|||||
Accounts payable
|
(163,944
|
)
|
(1,350,043
|
)
|
||||
Accrued expenses
|
587,400
|
153,375
|
||||||
Deferred revenue
|
(2,384,908
|
)
|
(312,776
|
)
|
||||
Deferred rent
|
7,585
|
39,534
|
||||||
Other liabilities
|
59,306
|
-
|
||||||
Net cash used in operating activities
|
(2,233,108
|
)
|
(2,816,220
|
)
|
||||
|
||||||||
Cash flows from investing activities:
|
||||||||
Proceeds from maturities of short-term investments
|
500,000
|
4,957,000
|
||||||
Purchases of short-term investments
|
-
|
(925,000
|
)
|
|||||
Costs incurred to develop technology
|
-
|
(231,437
|
)
|
|||||
Purchases of property and equipment
|
-
|
(64,154
|
)
|
|||||
Security deposit
|
6,716
|
(4,850
|
)
|
|||||
Net cash provided by investing activities
|
506,716
|
3,731,559
|
||||||
|
||||||||
Cash flows from financing activities:
|
||||||||
Proceeds from the sale of common stock
|
-
|
5,235,300
|
||||||
Repayment of note payable
|
-
|
(1,272,006
|
)
|
|||||
Payment of offering costs
|
-
|
(653,427
|
)
|
|||||
Proceeds from line of credit
|
1,572,576
|
-
|
||||||
Payment of deferred financing costs
|
(458,555
|
)
|
-
|
|||||
Merchant reserve
|
(166,078
|
)
|
(400,000
|
)
|
||||
Payments of capital leases
|
-
|
(15,232
|
)
|
|||||
Net cash provided by financing activities
|
947,943
|
2,894,635
|
||||||
|
||||||||
Net (decrease) increase in cash and cash equivalents
|
(778,449
|
)
|
3,809,974
|
|||||
Cash and cash equivalents, beginning of period
|
2,070,693
|
1,519,467
|
||||||
Cash and cash equivalents, end of period
|
$
|
1,292,244
|
$
|
5,329,441
|
||||
|
||||||||
Supplemental disclosures of other cash flow information:
|
||||||||
Cash paid for income taxes
|
$
|
4,605
|
$
|
4,631
|
||||
|
||||||||
Non-cash disclosures:
|
||||||||
Working capital adjustment to note payable
|
$
|
-
|
$
|
32,281
|
||||
Issuance of warrants in connection with Master Credit Facility
|
$
|
783,458
|
$
|
-
|
Professional Diversity Network, Inc.
|
Condensed Consolidated Notes to Financial Statements (Unaudited)
|
Professional Diversity Network, Inc.
|
Condensed Consolidated Notes to Financial Statements (Unaudited)
|
Professional Diversity Network, Inc.
|
Condensed Consolidated Notes to Financial Statements (Unaudited)
|
|
2016
|
2015
|
||||||
Warrants to purchase common stock
|
4,112,500
|
362,500
|
||||||
Stock options
|
144,857
|
340,857
|
||||||
Unvested restricted stock
|
44,445
|
200,001
|
||||||
|
4,301,802
|
903,358
|
Professional Diversity Network, Inc.
|
Condensed Consolidated Notes to Financial Statements (Unaudited)
|
Professional Diversity Network, Inc.
|
Condensed Consolidated Notes to Financial Statements (Unaudited)
|
|
June 30,
2016 |
December 31,
2015 |
||||||
Capitalized cost:
|
||||||||
Balance, beginning of period
|
$
|
1,888,791
|
$
|
1,469,432
|
||||
Additional capitalized cost
|
-
|
419,359
|
||||||
Balance, end of period
|
$
|
1,888,791
|
$
|
1,888,791
|
||||
|
||||||||
Accumulated amortization:
|
||||||||
Balance, beginning of period
|
$
|
1,432,268
|
$
|
943,362
|
||||
Provision for amortization
|
153,565
|
488,906
|
||||||
Balance, end of period
|
$
|
1,585,833
|
$
|
1,432,268
|
||||
Capitalized Technology, net
|
$
|
302,958
|
$
|
456,523
|
June 30, 2016
|
Useful Lives
(Years)
|
Gross
Carrying
Amount
|
Accumulated
Amortization
|
Net Carrying
Amount
|
|||||||||||
Long-lived intangible assets:
|
|||||||||||||||
Sales Process
|
10
|
$
|
3,970,000
|
$
|
(700,264
|
)
|
$
|
3,269,736
|
|||||||
Paid Member Relationships
|
5
|
890,000
|
(313,972
|
)
|
576,028
|
||||||||||
Member Lists
|
5
|
8,957,000
|
(3,159,831
|
)
|
5,797,169
|
||||||||||
Developed Technology
|
3
|
978,000
|
(555,166
|
)
|
422,834
|
||||||||||
Trade Name/Trademarks
|
4
|
480,000
|
(209,861
|
)
|
270,139
|
||||||||||
Customer Relationships
|
5
|
280,000
|
(88,667
|
)
|
191,333
|
||||||||||
|
15,555,000
|
(5,027,761
|
)
|
10,527,239
|
|||||||||||
Indefinite-lived intangible assets:
|
|||||||||||||||
Trade Name
|
90,400
|
||||||||||||||
|
|||||||||||||||
Intangible assets, net
|
$
|
10,617,639
|
Professional Diversity Network, Inc.
|
Condensed Consolidated Notes to Financial Statements (Unaudited)
|
December 31, 2015
|
Useful Lives
(Years)
|
Gross
Carrying Amount
|
Accumulated
Amortization
|
Net Carrying
Amount
|
|||||||||||
Long-lived intangible assets:
|
|||||||||||||||
Sales Process
|
10
|
$
|
3,970,000
|
$
|
(501,764
|
)
|
$
|
3,468,236
|
|||||||
Paid Member Relationships
|
5
|
890,000
|
(224,972
|
)
|
665,028
|
||||||||||
Member Lists
|
5
|
8,957,000
|
(2,264,131
|
)
|
6,692,869
|
||||||||||
Developed Technology
|
3
|
978,000
|
(392,167
|
)
|
585,833
|
||||||||||
Trade Name/Trademarks
|
4
|
480,000
|
(149,860
|
)
|
330,140
|
||||||||||
Customer Relationships
|
5
|
280,000
|
(60,667
|
)
|
219,333
|
||||||||||
|
15,555,000
|
(3,593,561
|
)
|
11,961,439
|
|||||||||||
Indefinite-lived intangible assets:
|
|||||||||||||||
Trade Name
|
90,400
|
||||||||||||||
|
|||||||||||||||
Intangible assets, net
|
$
|
12,051,839
|
Years ending December 31,
|
||||
2016 (six months)
|
$
|
1,434,200
|
||
2017
|
2,802,233
|
|||
2018
|
2,563,872
|
|||
2019
|
1,846,697
|
|||
2020
|
397,000
|
|||
2021
|
397,000
|
|||
Thereafter
|
1,086,237
|
|||
|
$
|
10,527,239
|
Total Master Credit Facility
|
$
|
1,572,576
|
||
Less: Unamortized debt issuance costs
|
(1,242,013
|
)
|
||
Total Master Credit Facility, net of unamortized debt issuance costs
|
330,563
|
|||
Less: Current portion of Master Credit Facility
|
-
|
|||
Long-term portion
|
$
|
330,563
|
Professional Diversity Network, Inc.
|
Condensed Consolidated Notes to Financial Statements (Unaudited)
|
Professional Diversity Network, Inc.
|
Condensed Consolidated Notes to Financial Statements (Unaudited)
|
Professional Diversity Network, Inc.
|
Condensed Consolidated Notes to Financial Statements (Unaudited)
|
Professional Diversity Network, Inc.
|
Condensed Consolidated Notes to Financial Statements (Unaudited)
|
|
Number of
Options
|
Weighted
Average
Exercise Price
|
Weighted
Average
Remaining
Contractual
Life
(in Years)
|
Aggregate
Intrinsic
Value |
||||||||||||
Outstanding - December 31, 2015
|
157,190
|
$
|
3.75
|
8.0
|
$
|
-
|
||||||||||
Granted
|
-
|
-
|
||||||||||||||
Exercised
|
-
|
-
|
||||||||||||||
Forfeited/Canceled/Expired
|
(12,333
|
)
|
(3.45
|
)
|
||||||||||||
Outstanding – June 30, 2016
|
144,857
|
$
|
3.78
|
7.9
|
$
|
-
|
||||||||||
|
||||||||||||||||
Exercisable – June 30, 2016
|
108,522
|
3.89
|
8.0
|
$
|
-
|
|
Number of
Options
|
Weighted
Average
Grant
Date Fair
Value
|
||||||
Unvested - December 31, 2015
|
109,522
|
$
|
1.72
|
|||||
Granted
|
-
|
-
|
||||||
Vested
|
(70,187
|
)
|
(1.75
|
)
|
||||
Forfeited/Canceled/Expired
|
(3,000
|
)
|
(1.65
|
)
|
||||
Unvested – June 30, 2016
|
36,335
|
$
|
1.65
|
Professional Diversity Network, Inc.
|
Condensed Consolidated Notes to Financial Statements (Unaudited)
|
|
Number of
Warrants
|
Weighted
Average
Exercise Price
|
Weighted
Average
Remaining
Contractual
Life
(in Years)
|
Aggregate
Intrinsic
Value |
||||||||||||
Outstanding - December 31, 2015
|
362,500
|
$
|
8.34
|
3.5
|
$
|
-
|
||||||||||
Granted
|
3,750,000
|
0.85
|
||||||||||||||
Exercised
|
-
|
-
|
||||||||||||||
Forfeited/Canceled/Expired
|
-
|
-
|
||||||||||||||
Outstanding – June 30, 2016
|
4,112,500
|
$
|
1.51
|
4.8
|
$
|
412,500
|
||||||||||
|
||||||||||||||||
Exercisable – June 30, 2016
|
1,912,902
|
1.78
|
4.6
|
$
|
232,560
|
|
Number of
Warrants
|
Weighted
Average
Grant
Date Fair
Value
|
||||||
Unvested - December 31, 2015
|
-
|
$
|
-
|
|||||
Granted
|
3,750,000
|
0.18
|
||||||
Vested
|
(3,750,000
|
)
|
(0.18
|
)
|
||||
Forfeited/Canceled/Expired
|
-
|
-
|
||||||
Unvested – June 30, 2016
|
-
|
$
|
-
|
Professional Diversity Network, Inc.
|
Condensed Consolidated Notes to Financial Statements (Unaudited)
|
Financial Instrument
|
Level
|
June 30,
2016
|
December 31,
2015
|
||||||||
Warrant liability
|
3
|
$
|
380,000
|
$
|
-
|
Strike price
|
$
|
0.25
|
||
Market price
|
$
|
0.40
|
||
Expected life
|
5 years
|
|||
Risk-free interest rate
|
1.01
|
%
|
||
Dividend yield
|
0.00
|
%
|
||
Volatility
|
100
|
%
|
||
Warrants exercisable
|
1,199,598
|
Professional Diversity Network, Inc.
|
Condensed Consolidated Notes to Financial Statements (Unaudited)
|
Balance – January 1, 2016
|
$
|
-
|
||
Initial value of warrant liability
|
380,000
|
|||
Balance – June 30, 2016
|
$
|
380,000
|
|
Three Months Ended June 30, 2016
|
|||||||||||||||
|
PDN Network
|
NAPW
Network |
Noble Voice
|
Consolidated
|
||||||||||||
|
||||||||||||||||
Membership fees and related services
|
$
|
-
|
$
|
4,259,144
|
$
|
-
|
$
|
4,259,144
|
||||||||
Lead generation
|
-
|
-
|
1,415,958
|
1,415,958
|
||||||||||||
Recruitment services
|
717,360
|
-
|
-
|
717,360
|
||||||||||||
Products sales and other
|
-
|
404,590
|
-
|
404,590
|
||||||||||||
Consumer advertising and marketing solutions
|
53,976
|
-
|
-
|
53,976
|
||||||||||||
Total revenues
|
771,336
|
4,663,734
|
1,415,958
|
6,851,028
|
||||||||||||
Loss from operations
|
(289,066
|
)
|
(232,145
|
)
|
(419,968
|
)
|
(941,179
|
)
|
||||||||
Depreciation and amortization
|
47,318
|
697,166
|
66,748
|
811,232
|
||||||||||||
Income tax expense (benefit)
|
2,630
|
18,059
|
(156,858
|
)
|
(136,169
|
)
|
||||||||||
Net loss
|
(292,955
|
)
|
(250,204
|
)
|
(263,110
|
)
|
(806,269
|
)
|
Six Months Ended June 30, 2016
|
||||||||||||||||
PDN Network
|
NAPW
Network |
Noble Voice
|
Consolidated
|
|||||||||||||
Membership fees and related services
|
$
|
-
|
$
|
9,299,318
|
$
|
-
|
$
|
9,299,318
|
||||||||
Lead generation
|
-
|
-
|
2,935,549
|
2,935,549
|
||||||||||||
Recruitment services
|
1,340,669
|
-
|
-
|
1,340,669
|
||||||||||||
Products sales and other
|
-
|
491,583
|
-
|
491,583
|
||||||||||||
Consumer advertising and marketing solutions
|
127,052
|
-
|
-
|
127,052
|
||||||||||||
Total revenues
|
1,467,721
|
9,790,901
|
2,935,549
|
14,194,171
|
||||||||||||
Loss from operations
|
(720,892
|
)
|
(1,278,890
|
)
|
(840,002
|
)
|
(2,839,784
|
)
|
||||||||
Depreciation and amortization
|
96,650
|
1,469,230
|
112,362
|
1,678,242
|
||||||||||||
Income benefit
|
(150,909
|
)
|
(267,672
|
)
|
(175,812
|
)
|
(594,393
|
)
|
||||||||
Net loss
|
(570,499
|
)
|
(1,011,218
|
)
|
(664,190
|
)
|
(2,245,907
|
)
|
||||||||
|
At June 30, 2016
|
|||||||||||||||
Goodwill
|
$
|
339,451
|
$
|
19,861,739
|
$
|
-
|
$
|
20,201,190
|
||||||||
Intangible assets, net
|
90,400
|
10,155,906
|
371,333
|
10,617,639
|
||||||||||||
Total assets
|
2,324,978
|
33,216,315
|
1,829,015
|
37,370,308
|
Professional Diversity Network, Inc.
|
Condensed Consolidated Notes to Financial Statements (Unaudited)
|
|
Three Months Ended June 30, 2015
|
|||||||||||||||
|
PDN
Network |
NAPW
Network |
Noble Voice
|
Consolidated
|
||||||||||||
|
||||||||||||||||
Membership fees and related services
|
$
|
-
|
$
|
6,754,247
|
$
|
-
|
$
|
6,754,247
|
||||||||
Lead generation
|
-
|
-
|
2,760,022
|
2,760,022
|
||||||||||||
Recruitment services
|
756,039
|
-
|
-
|
756,039
|
||||||||||||
Products sales and other
|
-
|
64,736
|
-
|
64,736
|
||||||||||||
Consumer advertising and marketing solutions
|
63,785
|
-
|
-
|
63,785
|
||||||||||||
Total revenues
|
819,824
|
6,818,983
|
2,760,022
|
10,398,829
|
||||||||||||
Loss from operations
|
(636,691
|
)
|
(592,698
|
)
|
(125,003
|
)
|
(1,324,392
|
)
|
||||||||
Depreciation and amortization
|
95,741
|
728,821
|
45,711
|
870,273
|
||||||||||||
Income tax benefit
|
(229,652
|
)
|
(219,086
|
)
|
(48,458
|
)
|
(497,196
|
)
|
||||||||
Capital expenditures
|
-
|
33,869
|
3,882
|
37,751
|
||||||||||||
Net loss
|
(358,122
|
)
|
(343,612
|
)
|
(76,545
|
)
|
(778,279
|
)
|
|
Six Months Ended June 30, 2015
|
|||||||||||||||
|
PDN
Network |
NAPW
Network |
Noble Voice
|
Consolidated
|
||||||||||||
|
||||||||||||||||
Membership fees and related
services
|
$
|
-
|
$
|
13,542,927
|
$
|
-
|
$
|
13,542,927
|
||||||||
Lead generation
|
-
|
-
|
5,519,126
|
5,519,126
|
||||||||||||
Recruitment services
|
1,602,701
|
-
|
-
|
1,602,701
|
||||||||||||
Products sales and other
|
-
|
300,429
|
-
|
300,429
|
||||||||||||
Consumer advertising and marketing
solutions
|
136,086
|
-
|
-
|
136,086
|
||||||||||||
Total revenues
|
1,738,787
|
13,843,356
|
5,519,126
|
21,101,269
|
||||||||||||
Loss from operations
|
(1,236,595
|
)
|
(2,111,758
|
)
|
(479,260
|
)
|
(3,827,613
|
)
|
||||||||
Depreciation and amortization
|
191,755
|
1,522,213
|
91,228
|
1,805,196
|
||||||||||||
Income tax benefit
|
(466,632
|
)
|
(814,121
|
)
|
(186,069
|
)
|
(1,466,822
|
)
|
||||||||
Capital expenditures
|
-
|
50,216
|
13,938
|
64,154
|
||||||||||||
Net loss
|
(730,329
|
)
|
(1,297,637
|
)
|
(293,191
|
)
|
(2,321,157
|
)
|
|
At December 31, 2015
|
|||||||||||||||
Goodwill
|
$
|
339,451
|
$
|
19,861,739
|
$
|
-
|
$
|
20,201,190
|
||||||||
Intangible assets, net
|
90,400
|
11,502,106
|
459,333
|
12,051,839
|
||||||||||||
Total assets
|
4,167,229
|
34,985,831
|
2,274,756
|
41,427,816
|
Professional Diversity Network, Inc.
|
Condensed Consolidated Notes to Financial Statements (Unaudited)
|
Professional Diversity Network, Inc.
|
Condensed Consolidated Notes to Financial Statements (Unaudited)
|
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|||||||||||||||
2016
|
2015
|
2016
|
2015
|
|||||||||||||
Percentage of revenue by product:
|
||||||||||||||||
Membership fees and related services
|
62.2
|
%
|
64.9
|
%
|
65.5
|
%
|
64.2
|
%
|
||||||||
Lead generation
|
20.7
|
%
|
26.5
|
%
|
20.7
|
%
|
26.2
|
%
|
||||||||
Recruitment services
|
10.5
|
%
|
7.3
|
%
|
9.4
|
%
|
7.6
|
%
|
||||||||
Products sales and other
|
5.9
|
%
|
0.6
|
%
|
3.5
|
%
|
1.4
|
%
|
||||||||
Consumer advertising and consumer marketing solutions
|
0.7
|
%
|
0.7
|
%
|
0.9
|
%
|
0.6
|
%
|
As of
|
||||||||||
June 30,
|
Change
|
|||||||||
2016
|
2015
|
(Percent)
|
||||||||
(in thousands)
|
||||||||||
PDN Network Registered Users (1)
|
8,552
|
5,721
|
49.5
|
%
|
||||||
NAPW Network Total Membership (2)
|
872
|
804
|
8.5
|
%
|
Three Months Ended
|
||||||||||||
June 30,
|
Change
|
|||||||||||
2016
|
2015
|
(Percent)
|
||||||||||
(in thousands)
|
||||||||||||
NAPW Network bookings
|
$
|
3,812
|
$
|
6,615
|
(42.4
|
%)
|
||||||
PDN Network bookings
|
$
|
617
|
$
|
716
|
(13.8
|
%)
|
|
Three Months Ended
|
Six Months Ended
|
||||||||||||||
|
June 30,
|
June 30,
|
||||||||||||||
|
2016
|
2015
|
2016
|
2015
|
||||||||||||
Net loss
|
$
|
(806
|
)
|
$
|
(778
|
)
|
$
|
(2,246
|
)
|
$
|
(2,321
|
)
|
||||
Stock-based compensation expense
|
43
|
114
|
100
|
236
|
||||||||||||
Depreciation and amortization
|
811
|
870
|
1,678
|
1,805
|
||||||||||||
Litigation settlement
|
-
|
-
|
500
|
-
|
||||||||||||
Gain on lease cancellation
|
(424
|
)
|
-
|
(424
|
)
|
-
|
||||||||||
Change in fair value of warrant liability
|
-
|
(71
|
)
|
-
|
(92
|
)
|
||||||||||
Interest expense
|
1
|
29
|
1
|
75
|
||||||||||||
Interest and other income
|
-
|
(7
|
)
|
(1
|
)
|
(23
|
)
|
|||||||||
Income tax benefit
|
(136
|
)
|
(497
|
)
|
(594
|
)
|
(1,467
|
)
|
||||||||
Adjusted EBITDA
|
$
|
(511
|
)
|
$
|
(340
|
)
|
$
|
(986
|
)
|
$
|
(1,787
|
)
|
Three Months Ended
|
||||||||||||||||
June 30, |
Change
|
Change
|
||||||||||||||
|
2016
|
2015
|
(Dollars)
|
(Percent)
|
||||||||||||
(in thousands)
|
||||||||||||||||
Revenues
|
||||||||||||||||
Membership fees and related services
|
$
|
4,259
|
$
|
6,754
|
$
|
(2,495
|
)
|
(36.9
|
%)
|
|||||||
Lead generation
|
1,416
|
2,760
|
(1,344
|
)
|
(48.7
|
%)
|
||||||||||
Recruitment services
|
717
|
756
|
(39
|
)
|
(5.2
|
%)
|
||||||||||
Products sales and other
|
405
|
65
|
340
|
523.1
|
%
|
|||||||||||
Consumer advertising and marketing solutions
|
54
|
64
|
(10
|
)
|
(15.6
|
%)
|
||||||||||
Total revenues
|
$
|
6,851
|
$
|
10,399
|
$
|
(3,548
|
)
|
(34.1
|
%)
|
Six Months Ended
|
||||||||||||||||
June 30,
|
Change
|
Change
|
||||||||||||||
|
2016
|
2015
|
(Dollars)
|
(Percent)
|
||||||||||||
(in thousands)
|
||||||||||||||||
Revenues
|
||||||||||||||||
Membership fees and related services
|
$
|
9,299
|
$
|
13,543
|
$
|
(4,244
|
)
|
(31.3
|
%)
|
|||||||
Lead generation
|
2,936
|
5,519
|
(2,583
|
)
|
(46.8
|
%)
|
||||||||||
Recruitment services
|
1,341
|
1,603
|
(262
|
)
|
(16.3
|
%)
|
||||||||||
Products sales and other
|
492
|
300
|
192
|
64.0
|
%
|
|||||||||||
Consumer advertising and marketing solutions
|
126
|
136
|
(10
|
)
|
(6.6
|
%)
|
||||||||||
Total revenues
|
$
|
14,194
|
$
|
21,101
|
$
|
(6,907
|
)
|
(32.7
|
%)
|
Three Months Ended
|
||||||||||||||||
June 30,
|
Change
|
Change
|
||||||||||||||
|
2016
|
2015
|
(Dollars)
|
(Percent)
|
||||||||||||
|
(in thousands)
|
|||||||||||||||
NAPW Network
|
$
|
4,664
|
$
|
6,819
|
$
|
(2,155
|
)
|
(31.6
|
%)
|
|||||||
PDN Network
|
771
|
820
|
(49
|
)
|
(6.0
|
%)
|
||||||||||
Noble Voice
|
1,416
|
2,760
|
(1,344
|
)
|
(48.7
|
%)
|
||||||||||
Total revenues
|
$
|
6,851
|
$
|
10,399
|
$
|
(3,548
|
)
|
(34.1
|
%)
|
Six Months Ended
|
||||||||||||||||
June 30,
|
Change
|
Change
|
||||||||||||||
|
2016
|
2015
|
(Dollars)
|
(Percent)
|
||||||||||||
|
(in thousands)
|
|||||||||||||||
NAPW Network
|
$
|
9,791
|
$
|
13,843
|
$
|
(4,052
|
)
|
(29.3
|
%)
|
|||||||
PDN Network
|
1,467
|
1,739
|
(272
|
)
|
(15.6
|
%)
|
||||||||||
Noble Voice
|
2,936
|
5,519
|
(2,583
|
)
|
(46.8
|
%)
|
||||||||||
Total revenues
|
$
|
14,194
|
$
|
21,101
|
$
|
(6,907
|
)
|
(32.7
|
%)
|
Three Months Ended
|
||||||||||||||||
|
June 30,
|
Change
|
Change
|
|||||||||||||
|
2016
|
2015
|
(Dollars)
|
(Percent)
|
||||||||||||
|
(in thousands)
|
|||||||||||||||
Costs and expenses:
|
||||||||||||||||
Cost of revenues
|
$
|
804
|
$
|
1,472
|
$
|
(668
|
)
|
(45.4
|
%)
|
|||||||
Sales and marketing
|
3,428
|
5,479
|
(2,051
|
)
|
(37.4
|
%)
|
||||||||||
General and administrative
|
2,749
|
3,902
|
(1,153
|
)
|
(29.5
|
%)
|
||||||||||
Depreciation and amortization
|
811
|
870
|
(59
|
)
|
(6.8
|
%)
|
||||||||||
Total costs and expenses
|
$
|
7,792
|
$
|
11,723
|
$
|
(3,931
|
)
|
(33.5
|
%)
|
Six Months Ended
|
||||||||||||||||
|
June 30,
|
Change
|
Change
|
|||||||||||||
|
2016
|
2015
|
(Dollars)
|
(Percent)
|
||||||||||||
|
(in thousands)
|
|||||||||||||||
Costs and expenses:
|
||||||||||||||||
Cost of revenues
|
$
|
1,688
|
$
|
3,183
|
$
|
(1,495
|
)
|
(47.0
|
%)
|
|||||||
Sales and marketing
|
7,250
|
12,095
|
(4,845
|
)
|
(40.1
|
%)
|
||||||||||
General and administrative
|
6,418
|
7,846
|
(1,428
|
)
|
(18.2
|
%)
|
||||||||||
Depreciation and amortization
|
1,678
|
1,805
|
(127
|
)
|
(7.0
|
%)
|
||||||||||
Total costs and expenses
|
$
|
17,034
|
$
|
24,929
|
$
|
(7,895
|
)
|
(31.7
|
%)
|
Three Months Ended | ||||||||||||||||
June 30, |
Change
|
Change
|
||||||||||||||
2016 |
2015
|
(Dollars)
|
(Percent)
|
|||||||||||||
(in thousands) | ||||||||||||||||
Total
|
$
|
(1
|
)
|
$
|
(22
|
)
|
$
|
21
|
(95.5
|
%)
|
Six Months Ended | ||||||||||||||||
June 30, | Change | Change | ||||||||||||||
2016
|
2015
|
(Dollars) | (Percent) | |||||||||||||
(in thousands) | ||||||||||||||||
Total
|
$
|
(1
|
)
|
$
|
(52
|
)
|
$
|
51
|
(98.1
|
%)
|
Three Months Ended | ||||||||||||||||
June 30, | Change | Change | ||||||||||||||
2016 | 2015 | (Dollars) | (Percent) | |||||||||||||
(in thousands) | ||||||||||||||||
Total
|
$
|
-
|
$
|
71
|
$
|
(71
|
)
|
(100
|
%)
|
Six Months Ended | ||||||||||||||||
June 30, | Change | Change | ||||||||||||||
2016 | 2015 | (Dollars) | (Percent) | |||||||||||||
(in thousands) | ||||||||||||||||
Total
|
$
|
-
|
$
|
92
|
$
|
(92
|
)
|
(100
|
%)
|
Three Months Ended | ||||||||||||||||
June 30, | Change | Change | ||||||||||||||
2016 | 2015 | (Dollars) | (Percent) | |||||||||||||
(in thousands) | ||||||||||||||||
Total
|
$
|
(136
|
)
|
$
|
(497
|
)
|
$
|
361
|
(72.6
|
)%
|
Six Months Ended | ||||||||||||||||
June 30, | Change | Change | ||||||||||||||
2016 | 2015 | (Dollars) | (Percent) | |||||||||||||
(in thousands) | ||||||||||||||||
Total
|
$
|
(594
|
)
|
$
|
(1,467
|
)
|
$
|
873
|
(59.5
|
)%
|
Three Months Ended
|
||||||||||||||||
June 30,
|
Change
|
Change
|
||||||||||||||
|
2016
|
2015
|
(Dollars)
|
(Percent)
|
||||||||||||
|
(in thousands)
|
|||||||||||||||
NAPW Network
|
$
|
(250
|
)
|
$
|
(344
|
)
|
$
|
94
|
(27.3
|
%)
|
||||||
PDN Network
|
(293
|
)
|
(358
|
)
|
65
|
(18.2
|
%)
|
|||||||||
Noble Voice
|
(263
|
)
|
(76
|
)
|
(187
|
)
|
246.1
|
%
|
||||||||
Consolidated net loss
|
$
|
(806
|
)
|
$
|
(778
|
)
|
$
|
(28
|
)
|
3.6
|
%
|
Six Months Ended
|
||||||||||||||||
June 30, |
Change
|
Change
|
||||||||||||||
|
2016
|
2015
|
(Dollars)
|
(Percent)
|
||||||||||||
|
(in thousands)
|
|||||||||||||||
NAPW Network
|
$
|
(1,011
|
)
|
$
|
(1,298
|
)
|
$
|
287
|
(22.1
|
%)
|
||||||
PDN Network
|
(570
|
)
|
(730
|
)
|
160
|
(21.9
|
%)
|
|||||||||
Noble Voice
|
(664
|
)
|
(293
|
)
|
(371
|
)
|
126.6
|
%
|
||||||||
Consolidated net loss
|
$
|
(2,245
|
)
|
$
|
(2,321
|
)
|
$
|
76
|
(3.3
|
%)
|
|
June 30, | December 31, | ||||||
|
2016 | 2015 | ||||||
|
(in thousands)
|
|||||||
Cash and cash equivalents
|
$
|
1,292
|
$
|
2,071
|
||||
Short-term investments
|
$
|
-
|
$
|
500
|
||||
Working capital (deficiency)
|
$
|
(7,584
|
)
|
$
|
(6,739
|
)
|
Six Months Ended | ||||||||
June 30, | ||||||||
2016 | 2015 | |||||||
|
(in thousands)
|
|||||||
Cash provided by (used in):
|
||||||||
Operating activities
|
$
|
(2,233
|
)
|
$
|
(2,816
|
)
|
||
Investing activities
|
507
|
3,731
|
||||||
Financing activities
|
948
|
2,895
|
||||||
Net increase (decrease) in cash and cash equivalents
|
$
|
(778
|
)
|
$
|
3,810
|
● | our beliefs regarding our ability to create enhanced value for our members and customers; |
● | our beliefs regarding the relation between the number of members or registered users and our revenues; |
● | our expectations regarding future changes in our salesforce; |
● | the anticipated effect of the Detroit office closure on the overhead costs and supervision; |
● | our expectations regarding the changes in revenues in 2016, 2017, 2018 and 2019 and the proportion of revenues generated by our segments; |
● | our expectations regarding future increases in sales and marketing costs and general and administrative expenses; |
● | our estimates regarding our interest expense for the second half of 2016; and |
● | the expected closing of the proposed transaction with CFL. |
● | our ability to complete the proposed transaction with CFL; |
● | failure to realize synergies and other financial benefits from mergers and acquisitions within expected time frames, including increases in expected costs or difficulties related to integration of merger and acquisition partners; |
● | inability to identify and successfully negotiate and complete additional combinations with potential merger or acquisition partners or to successfully integrate such businesses; |
● | our history of operating losses; |
● | we may not be able to reverse the significant decline in our revenues; |
● | our ability to generate sufficient eligible accounts receivable to borrow additional amounts under the Master Credit Facility; |
● | potential delisting from NASDAQ for failure to comply with continued listing requirements; |
● | our limited operating history in a new and unproven market; |
● | increasing competition in the market for online professional networks; |
● | our ability to comply with increasing governmental regulation and other legal obligations related to privacy; |
● | our ability to adapt to changing technologies and social trends and preferences; |
● | our ability to attract and retain a sales and marketing team, management and other key personnel and the ability of that team to execute on the Company’s business strategies and plans; |
● | our ability to obtain and maintain protection for our intellectual property; |
● | any future litigation regarding our business, including intellectual property claims; |
● | general and economic business conditions; and |
● | legal and regulatory developments. |
4.6
|
Warrant for the Purchase of 1,000,000 Shares of Common Stock of Professional Diversity Network, Inc. at a purchase price of $0.25 between White Winston Select Asset Funds, LLC and Professional Diversity Network, Inc., dated June 30, 2016. (1)
|
4.7
|
Warrant for the Purchase of 1,750,000 Shares of Common Stock of Professional Diversity Network, Inc. at a purchase price of $0.25 between White Winston Select Asset Funds, LLC and Professional Diversity Network, Inc., dated June 30, 2016. (1)
|
4.8
|
Warrant for the Purchase of 1,000,000 Shares of Common Stock of Professional Diversity Network, Inc. at a purchase price of $2.50 between White Winston Select Asset Funds, LLC and Professional Diversity Network, Inc., dated June 30, 2016.
|
10.27
|
Board Representation Agreement dated June 30, 2016 by and among Professional Diversity Network, Inc. and White Winston Select Asset Funds, LLC. (1)
|
31.1
|
Certification of Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a) or Rule 15d- 14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
31.2
|
Certification of Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a) or Rule 15d- 14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
32.1
|
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
101.
|
INS XBRL Instance Document
|
101.
|
SCH XBRL Taxonomy Extension Schema Document
|
101.
|
CAL XBRL Taxonomy Extension Calculation Linkbase Document
|
101.
|
DEF XBRL Taxonomy Extension Definition Linkbase Document
|
101.
|
LAB XBRL Taxonomy Extension Labels Linkbase Document
|
101.
|
PRE XBRL Taxonomy Extension Presentation Linkbase Document
|
(1) | Incorporated herein by reference to Current Report on Form 8-K filed on July 6, 2016. |
PROFESSIONAL DIVERSITY NETWORK, INC.
|
|||
Date: August 15, 2016 By:
|
/s/ David Mecklenburger | ||
Name: |
David Mecklenburger
|
||
Title: |
Chief Financial Officer
(On behalf of the Registrant and as principal financial officer and principal accounting officer)
|
Exhibit
Number |
Description of Exhibit
|
4.8
|
Corrected Warrant for the Purchase of 1,000,000 Shares of Common Stock of Professional Diversity Network, Inc. at a purchase price of $2.50 between White Winston Select Asset Funds, LLC and Professional Diversity Network, Inc., dated June 30, 2016.
|
31.1
|
Certification of Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a) or Rule 15d- 14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
31.2
|
Certification of Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a) or Rule 15d- 14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
32.1
|
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
101.
|
INS XBRL Instance Document
|
101.
|
SCH XBRL Taxonomy Extension Schema Document
|
101.
|
CAL XBRL Taxonomy Extension Calculation Linkbase Document
|
101.
|
DEF XBRL Taxonomy Extension Definition Linkbase Document
|
101.
|
LAB XBRL Taxonomy Extension Labels Linkbase Document
|
101.
|
PRE XBRL Taxonomy Extension Presentation Linkbase Document
|
Common Stock Purchase Warrant
|
Professional Diversity Network, Inc.
|
(i) | on Form S-8 (or any successor form); |
(ii) | in connection with any stock option, stock purchase or other benefit plan; or |
(iii) | for the purpose of offering such securities to another business entity or the shareholders of such entity in connection with the acquisition of assets or shares of capital stock, respectively, of such entity. |
If to the Holder:
|
c/o White Winston Select Asset Funds
|
265 Franklin St., Suite 1702
|
|
Boston, MA 02110
|
|
Fax: 801-938-7540
|
|
with a copy (which shall not constitute notice) to:
|
McCarter & English, LLP
|
265 Franklin St.
|
|
Boston, MA 02110
|
|
Attention: Burt Winnick
|
|
Fax: 617-326-3078
|
|
If to the Company:
|
Professional Diversity Network
|
801 West Adams Street, Suite 600
|
|
Chicago, IL 60607
|
|
Attention: James Kirsch
|
|
with a copy (which shall not constitute notice) to:
|
Greenberg Traurig, LLP
|
77 West Wacker Drive, Suite 3100
|
|
Chicago, IL 60601
|
|
Attn: Stacey T. Kern
|
|
Email: kerns@gtlaw.com
|
|
Fax: 312-456-8435
|
By:
|
/s/ Katherine Butkevich
|
|
Name:
|
Katherine Butkevich
|
|
Title:
|
CEO
|
By:
|
/s/ Todd M. Enright, Manager
|
|
Todd M. Enright, Manager
|
Signature Page
|
|
Common Stock Purchase Warrant
|
Professional Diversity Network, Inc.
|
(Name)
|
(Name)
|
|
(Signature)
|
(Signature)
|
(Address)
|
(Date)
|
Date:
|
Warrantholder:
|
||
Name (Print):
|
By:
|
Common Stock Purchase Warrant
|
Professional Diversity Network, Inc.
|
Purchaser:
|
|||
Company:
|
Professional Diversity Network, Inc. | ||
Security:
|
Common Stock | ||
Amount:
|
|||
Date:
|
Common Stock Purchase Warrant
|
Professional Diversity Network, Inc.
|
Purchaser Signature:
|
Common Stock Purchase Warrant
|
Professional Diversity Network, Inc.
|
1. | I have reviewed this quarterly report on Form 10-Q of Professional Diversity Network, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Katherine Butkevich
|
||
Katherine Butkevich
|
||
Chief Executive Officer
|
||
(Principal Executive Officer)
|
1. | I have reviewed this quarterly report on Form 10-Q of Professional Diversity Network, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ David Mecklenburger | ||
David Mecklenburger
|
||
Chief Financial Officer
|
||
(Principal Financial Officer)
|
(1) | The report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
(2) | The information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the registrant. |
/s/ Katherine Butkevich | ||
Katherine Butkevich
|
||
Chief Executive Officer
|
/s/ David Mecklenburger
|
||
David Mecklenburger
|
||
Chief Financial Officer
|
Document and Entity Information - shares |
6 Months Ended | |
---|---|---|
Jun. 30, 2016 |
Aug. 08, 2016 |
|
Document and Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Jun. 30, 2016 | |
Entity Registrant Name | Professional Diversity Network, Inc. | |
Entity Central Index Key | 0001546296 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2016 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 14,510,960 |
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares |
Jun. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Common stock, par value per share | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 25,000,000 | 25,000,000 |
Common stock, shares issued | 14,608,230 | 14,608,230 |
Common stock, shares outstanding | 14,466,513 | 14,466,513 |
Treasury stock, shares | 8,382 | 8,382 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Revenues | ||||
Membership fees and related services | $ 4,259,144 | $ 6,754,247 | $ 9,299,318 | $ 13,542,927 |
Lead generation | 1,415,958 | 2,760,022 | 2,935,549 | 5,519,126 |
Recruitment services | 717,360 | 756,039 | 1,340,669 | 1,602,701 |
Products sales and other | 404,590 | 64,736 | 491,583 | 300,429 |
Consumer advertising and marketing solutions | 53,976 | 63,785 | 127,052 | 136,086 |
Total revenues | 6,851,028 | 10,398,829 | 14,194,171 | 21,101,269 |
Costs and expenses: | ||||
Cost of revenues | 803,646 | 1,471,760 | 1,688,391 | 3,183,306 |
Sales and marketing | 3,428,115 | 5,479,052 | 7,249,691 | 12,094,563 |
General and administrative | 2,749,214 | 3,902,136 | 6,417,631 | 7,845,817 |
Depreciation and amortization | 811,232 | 870,273 | 1,678,242 | 1,805,196 |
Total costs and expenses | 7,792,207 | 11,723,221 | 17,033,955 | 24,928,882 |
Loss from operations | (941,179) | (1,324,392) | (2,839,784) | (3,827,613) |
Other (expense) income | ||||
Interest expense | (778) | (29,479) | (1,167) | (75,110) |
Interest and other income | (481) | 7,126 | 651 | 23,184 |
Other income (expense), net | (1,259) | (22,353) | (516) | (51,926) |
Change in fair value of warrant liability | 71,270 | 91,560 | ||
Loss before income tax benefit | (942,438) | (1,275,475) | (2,840,300) | (3,787,979) |
Income tax benefit | (136,169) | (497,196) | (594,393) | (1,466,822) |
Net loss | $ (806,269) | $ (778,279) | $ (2,245,907) | $ (2,321,157) |
Net loss per common share, basic and diluted | $ (0.06) | $ (0.06) | $ (0.16) | $ (0.17) |
Weighted average shares used in computing net loss per common share: | ||||
Basic and diluted | 14,466,513 | 14,023,916 | 14,466,513 | 13,375,405 |
Description of Business |
6 Months Ended |
---|---|
Jun. 30, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Description of Business | 1. Description of Business
Professional Diversity Network, Inc. is both the operator of the Professional Diversity Network (the “Company,” “we,” “our,” “us,” “PDN Network,” “PDN” or the “Professional Diversity Network”) and a holding company for NAPW, Inc., a wholly-owned subsidiary of the Company and the operator of the National Association of Professional Women (the “NAPW Network” or “NAPW”), as well as Noble Voice LLC and Compliant Lead LLC (collectively, “Noble Voice”), each of which is a wholly-owned subsidiary of the Company and together provide career consultation services. The Company is a corporation organized under the laws of Delaware, originally formed as IH Acquisition, LLC under the laws of the State of Illinois on October 3, 2003. 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 and Transgender (LGBT), and Students and Graduates seeking to transition from education to career. The networks’ purposes, among others, are to assist its registered users in their efforts to connect with like-minded individuals, identify career opportunities within the network and connect with prospective employers. The Company’s technology platform is integral to the operation of its business. The NAPW Network is an exclusive women-only professional networking organization, 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 though its website, as well as at events hosted at its local chapters across the country. The Noble Voice division typically conducts over 23,000 career consultations per week. Noble Voice monetizes these consultations by using proprietary technology to drive inexpensive online traffic to our offline call center and generating value-added leads for the Company’s strategic partners who provide continuing education and career services. |
Liquidity, Financial Condition and Management's Plans |
6 Months Ended |
---|---|
Jun. 30, 2016 | |
Liquidity, Financial Condition and Management's Plans [Abstract] | |
Liquidity, Financial Condition and Management's Plans | 2. Liquidity, Financial Condition and Management’s Plans
The Company’s principal sources of liquidity are its cash and cash equivalents and the net proceeds from its 2015 public offering and recent financing agreement.
The Company had an accumulated loss of approximately $43,136,000 at June 30, 2016. During the six months ended June 30, 2016, the Company generated a net loss of approximately $2,246,000, used cash in operations of approximately $2,233,000, and the Company expects that it will continue to generate operating losses for the foreseeable future. At June 30, 2016, the Company had a cash balance of approximately $1,292,000. Total revenues were approximately $6,851,000 and $10,399,000 for the three months ended June 30, 2016 and 2015, respectively, and approximately $14,194,000 and $21,101,000 for the six months ended June 30, 2016 and 2015, respectively. The Company had a working capital deficit of approximately $7,584,000 and $6,739,000 at June 30, 2016 and December 31, 2015, respectively.
The Company is closely monitoring operating costs and capital requirements and has developed an operating plan for 2016. The Company is making cost reductions in the areas of its staffing levels and operating budgets. In addition, on March 30, 2016, the Company entered into a Master Credit Facility pursuant to which it was granted a revolving credit facility in the principal amount up to the lesser of $5,000,000 or 75% of the outstanding balance of eligible customer receivables, or, if requested, the lender may approve discretionary drawdowns under the facility. On June 30, 2016, the Company closed the Master Credit Facility and received an initial disbursement of $1,572,576 (before reduction of related fees and expenses) (see Note 6). As of June 30, 2016, the Company had drawn approximately $435,000 more than its availability under the Master Credit Facility. Accordingly, the Company’s ability to receive additional funds under the Master Credit Facility is fully at the lender’s discretion. The Company may use the proceeds of the Master Credit Facility for working capital needs and to pay the costs, fees and expenses in connection with the Master Credit Facility. If revenues continue to decline, the outstanding balance of eligible receivables may not be sufficient to support the outstanding loan balance. If the Company is unable to meet its obligations under the Master Credit Facility, it may be in default and would need the lender to agree to a waiver. Management makes no assurances that the lender would provide a waiver if needed, which would result in a default in accordance with the terms of the Master Credit Facility.
These factors raise substantial doubt about the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on management's plans, as noted above. The Company’s ability to execute its operating plan beyond September 2016 depends on its lender agreeing to additional advances under the Master Credit Facility, controlling operating costs and capital requirements, and completing the proposed financing transaction with Cosmic Forward Limited (see Note 12) and if the Company is unable to access its Master Credit Facility, obtaining additional funding via the sale of equity and/or debt securities. Management cannot be sure that the lender will agree to additional advances under the Master Credit Facility or that the Company will consummate a transaction or financing that will enable the Company to meet its working capital needs. Future efforts to raise additional funds may not be successful or they may not be available on acceptable terms, if at all.
The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. These condensed consolidated financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern. |
Summary of Significant Accounting Policies |
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies | 3. Summary of Significant Accounting Policies
The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the instructions to Form 10-Q and Article 8 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows. It is management’s opinion, however, that the accompanying unaudited interim condensed consolidated financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.
The accompanying unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 as filed with the SEC on March 30, 2016 and amended May 4, 2016 (the “Annual Report”), which contains the audited financial statements and notes thereto, together with Management’s Discussion and Analysis, for the years ended December 31, 2015 and 2014. The financial information as of December 31, 2015 is derived from the audited financial statements presented in the Annual Report. The interim results for the six months ended June 30, 2016 are not necessarily indicative of the results to be expected for the year ending December 31, 2016 or for any future interim periods.
Use of Estimates - The preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the unaudited interim condensed consolidated financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future intervening events. Accordingly, the actual results could differ significantly from estimates.
Significant estimates underlying the financial statements include the fair value of acquired assets and liabilities associated with acquisitions; assessment of goodwill, other intangible assets and long-lived assets for impairment; allowances for doubtful accounts and assumptions related to the valuation of stock-based compensation.
Principles of Consolidation - The accompanying unaudited 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.
Short-Term Investments - All highly liquid investments that have an original maturity of greater than 90 days but less than one year at the date of purchase are classified as short-term investments. The Company classifies short-term investments as held to maturity and carries them at amortized cost if the Company has the positive intent and ability to hold the securities to maturity.
Revenue Recognition – Revenue is recognized when all of the following conditions exist: (1) persuasive evidence of an arrangement exists, (2) services are performed, (3) the sales price is fixed or determinable, and (4) collectability is reasonably assured.
Membership Fees and Related Services
Membership fees are collected up-front and member benefits become available immediately; however those benefits must remain available over the 12 month membership period. At the time of enrollment, membership fees are recorded as a liability under deferred revenue and are recognized as revenue ratably over the 12 month membership period. Members who are enrolled in an annual payment 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.
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.
Lead Generation
The Company derives lead generation revenues pursuant to arrangements with for-profit educational centers. Under these arrangements, the Company matches educational centers with potential candidates, pursuant to specific parameters defined in each arrangement. The Company invoices the educational centers on a monthly basis based upon the number of leads provided. Revenues related to lead generation are recognized at the time the educational centers are invoiced.
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.
Product Sales and Other Revenue
Products offered to members relate to custom made plaques and an annual registry book. Product sales are recognized as liabilities under 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 comprehensive loss.
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. Partner revenue is recognized as jobs are posted to their hosted sites.
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 months ended June 30, 2016 and 2015, the Company incurred advertising and marketing expenses of approximately $521,000 and $1,212,000, respectively. For the six months ended June 30, 2016 and 2015, the Company incurred advertising and marketing expenses of approximately $1,185,000 and $2,721,000, respectively. These amounts are included in sales and marketing expenses in the accompanying condensed consolidated statements of comprehensive loss. At June 30, 2016 and December 31, 2015, there were no prepaid advertising expenses recorded in the accompanying condensed consolidated balance sheets.
Net Loss per Share - The Company computes basic net loss per share by dividing net loss per share available to common stockholders by the weighted average number of common shares outstanding for the period and excludes the effects of any potentially dilutive securities. Diluted earnings per share, if presented, would include the dilution that would occur upon the exercise or conversion of all potentially dilutive securities into common stock using the “treasury stock” and/or “if converted” methods as applicable. The computation of basic net loss per share for the three and six months ended June 30, 2016 and 2015 excludes the potentially dilutive securities summarized in the table below because their inclusion would be anti-dilutive.
Recently Issued Accounting Pronouncements
In May 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-12, “Revenue from Contracts with Customers (Topic 606) – Narrow-Scope Improvements and Practical Expedients” (“ASU 2016-12”), which further amended ASU 2016-09 by providing additional clarity in recognizing revenue from contracts that have been modified prior to the transition period to the new standard, as well as providing additional disclosure requirements for businesses and other organizations that make the transition to the new standard by adjusting amounts from prior reporting periods via retrospective application. The Company is continuing to evaluate the expected impact of this standard on its consolidated financial statements.
In April 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing” (“ASU 2016-10”). ASU 2016-10 clarifies two aspects of Topic 606: (a) identifying performance obligations; and (b) the licensing implementation guidance. The update is effective for annual periods beginning after December 15, 2017 including interim reporting periods therein. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.
In March 2016, the FASB issued ASU No. 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”). ASU 2016-09 was issued as part of the FASB’s simplification initiative and affects all entities that issue share-based payment awards to their employees. The amendments in this update cover such areas as the recognition of excess tax benefits and deficiencies, the classification of those excess tax benefits on the statement of cash flows, an accounting policy election for forfeitures, the amount an employer can withhold to cover income taxes and still qualify for equity classification and the classification of those taxes paid on the statement of cash flows. ASU 2016-09 is effective for annual and interim periods beginning after December 15, 2016. This guidance can be applied either prospectively, retrospectively or using a modified retrospective transition method, depending on the area covered in this update. Early adoption is permitted. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.
In March 2016, the FASB issued ASU No. 2016-08, “Revenue from contracts with customers (Topic 606): Principal versus Agent Considerations Reporting Revenue Gross versus Net”. The amendments are intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations by amending certain existing illustrative examples and adding additional illustrative examples to assist in the application of the guidance. The effective date and transition of these amendments is the same as the effective date and transition of ASU 2014-09. Public entities should apply the amendments in ASU 2014-09 for annual reporting periods beginning after December 15, 2017, including interim reporting periods therein. Private entities must apply the amendments one year later. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.
In February 2016, the FASB issued new lease accounting guidance ASU No. 2016-02, “Leases” (“ASU 2016-02”). Under the new guidance, at the commencement date, lessees will be required to recognize a lease liability, which is a lessee‘s obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. The new guidance is not applicable for leases with a term of 12 months or less. Lessor accounting is largely unchanged. Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted upon issuance. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.
In August 2014, the FASB issued ASU 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern” (“ASU 2014-15”). ASU 2014-15 provides guidance on management’s responsibility in evaluating whether there is substantial doubt about a company’s ability to continue as a going concern and about related footnote disclosures. For each reporting period, management will be required to evaluate whether there are conditions or events that raise substantial doubt about a company’s ability to continue as a going concern within one year from the date the financial statements are issued. The amendments in ASU 2014-15 are effective for annual reporting periods ending after December 15, 2016, and for annual and interim periods thereafter. Early adoption is permitted. The Company will adopt the methodologies prescribed by ASU 2014-15 by the date required, and does not anticipate that the adoption of ASU 2014-15 will have a material effect on its financial position or results of operations.
In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”). ASU 2014-09 provides guidance for revenue recognition and affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets and supersedes the revenue recognition requirements in Topic 605, “Revenue Recognition,” and most industry-specific guidance. The core principle of ASU 2014-09 is the recognition of revenue when a company transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled to in exchange for those goods or services. ASU 2014-09 defines a five-step process to achieve this core principle and, in doing so, companies will need to use more judgment and make more estimates than under the current guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. ASU 2014-09 was initially effective for fiscal years beginning after December 15, 2017 and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). Early adoption is not permitted. The Company is currently evaluating the method and impact the adoption of ASU 2014-09 will have on the Company’s consolidated financial statements and disclosures. In July 2015, the FASB deferred the effective date of ASU 2014-09 for one year, and proposed some modifications to the original provisions.
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Capitalized Technology |
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Research and Development [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Capitalized Technology | 4. Capitalized Technology
Capitalized Technology, net is as follows:
Amortization expense of $45,236 and $90,663 for the three months ended June 31, 2016 and 2015, respectively, and $153,565 and $181,601 for the six months ended June 30, 2016 and 2015, respectively, is recorded in depreciation and amortization expense in the accompanying condensed consolidated statements of operations and comprehensive loss. |
Intangible Assets |
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Intangible Assets, Net (Excluding Goodwill) [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Intangible Assets | 5. Intangible Assets
Intangible assets, net is as follows:
Future annual estimated amortization expense is summarized as follows:
Amortization expense of $717,100 for the three months ended June 31, 2016 and 2015 and $1,434,200 and $1,448,186 for the six months ended June 30, 2016 and 2015, respectively, is recorded in depreciation and amortization expense in the accompanying condensed consolidated statements of operations and comprehensive loss. |
Master Credit Facility |
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||
Master Credit Facility | 6. Master Credit Facility
At June 30, 2016, the Company’s Master Credit Facility is comprised of the following:
On March 30, 2016, the Company entered into a Master Credit Facility with White Winston Select Asset Funds, LLC (“White Winston”), a private investment fund, pursuant to which the Company was granted a revolving credit facility (the “Master Credit Facility”) in the aggregate amount of up to $5,000,000. On June 30, 2016 (the “Closing Date”), the Company closed the Master Credit Facility and an initial disbursement of $1,572,576 (before reduction of related fees and expenses, or $1,022,623 of net proceeds) was made pursuant to the Master Credit Facility. Advances under the Master Credit Facility are issued at 95% of par value (the “Debt Discount”), with such Debt Discount deducted from the gross amount of the proceeds available under the Master Credit Facility at Closing and recorded as a debt issuance cost. White Winston shall make advances under the Master Credit Facility provided that the aggregate principal amount outstanding under the Master Credit Facility shall not exceed 75% of the then-outstanding balance of the Company’s customer receivables (as defined in the Master Credit Facility). With the discretionary approval of White Winston, as of June 30, 2016, the Company has drawn approximately $435,000 more than its availability under the Master Credit Facility. The Company may also request, subject to White Winston’s discretionary approval, additional advances that would be exempt from the limitation of eligible receivables. The Master Credit Facility matures on June 30, 2018 and bears interest at a rate of 8.0% per annum. Interest is payable monthly in arrears. In addition, from and after the first anniversary of the date of the Master Credit Facility and continuing until the Master Credit Facility is repaid in full, the Company is required to pay an additional fee of 3.0% on the average daily unborrowed portion of the Master Credit Facility. The fee is payable quarterly in arrears.
The Company granted White Winston a first priority lien in all tangible and intangible property now owned by the Company or to be acquired in the future, including all receivables and all of the outstanding ownership interests in each of the Company’s subsidiaries. In addition, the Company established a cash collateral account, pursuant to which all revenues and payments due to the Company will be deposited into such account and will act as security for the Master Credit Facility. The Company has unrestricted access to the cash collateral account.
Pursuant to the terms of the Master Credit Facility, on June 30, 2016 the Company issued to White Winston warrants to purchase up to (i) 1,000,000 shares of the Company’s common stock at a price of $0.25 per share (the “Fixed $0.25 Warrant”); (ii) 1,750,000 shares of the Company’s common stock at a price of $0.25 per share (the “Pro Rata Warrant”), provided that the number of shares for which the Pro Rata Warrants are exercisable shall be pro-rata based on the ratio of the actual advances made under the Facility to the aggregate face amount of the Facility and (iii) 1,000,000 shares of the Company’s common stock at a price of $2.50 per share (the “Fixed $2.50 Warrant”). The Fixed $0.25 Warrant and the Pro Rata Warrant are exercisable for five years from the date of issuance and the Fixed $2.50 Warrant is exercisable for five years beginning on December 30, 2016.
Pursuant to the terms of a Board Representation Agreement between the Company and White Winston, White Winston has the right to designate nominees for election to the Company’s Board of Directors from the date the principal amount outstanding under the Master Credit Facility first exceeds $2,000,000 until such time as White Winston’s interest (as defined in the Board Representation Agreement) falls below five percent for 60 consecutive days. The number of nominees that White Winston is entitled to designate shall be determined in accordance with the terms of the Board Representation Agreement and, provided that no event of default has occurred, shall not exceed two nominees. If an event of default has occurred and is continuing, White Winston shall have the right to designate two additional nominees for election to the Company’s Board of Directors. However, the aggregate number of nominees that White Winston is entitled to designate shall in no event exceed (i) 50 percent of the number of directors, rounded down to the nearest whole number, if the Board is comprised of an odd number of Directors, and (ii) one less than half of the number of Directors, if the Board is comprised of an even number of Directors.
The Company determined the fair value of the Fixed $0.25 Warrant and Fixed $2.50 Warrant issued to White Winston to be $272,133 using the Black-Scholes option-pricing model with the following assumptions: (1) expected volatility of 54.63%, (2) risk-free interest rate of 1.01% and (3) expected life of five years.
The Company determined that the Pro Rata Warrant should be treated as a derivative liability in accordance with ASC 815-40, “Derivatives and Hedging, Contracts in Entity’s Own Equity,” due to the variable number of shares issuable. Accordingly, the Pro Rata Warrant was initially recorded at fair value, with changes in the fair value of the liability recorded in other income/expense in the accompanying condensed consolidated statements of operations and comprehensive loss. The Company determined the fair value of the Pro Rata Warrant issued to White Winston on June 30, 2016 to be $511,325, of which $380,000 was valued as the portion attributable to the unexercisable Pro Rata Warrant using the Monte Carlo model with the following assumptions: (1) expected volatility of 100.00%, (2) risk-free interest rate of 1.01% and (3) expected life of five years.. The Company did not record any changes in the fair value of the liability during the three and six months ended June 30, 2016.
As of June 30, 2016, there were 550,402 Pro Rata Warrants exercisable. As such, the Company recorded the value of these warrants, amounting to $131,325, as a component of additional paid in capital in the accompanying condensed consolidated balance sheets.
The issuance of the Fixed $0.25 Warrant, the Fixed $2.50 Warrant and the Pro Rata Warrant has been treated as a debt issue cost and, accordingly, has been recorded as a direct deduction from the carrying amount of Master Credit Facility and is being amortized to interest expense over the contractual term of the Master Credit Facility. During the three and months ended June 30, 2016, accretion of the costs amounted to $0.
The Company incurred cash fees associated with the closing of the Master Credit Facility of $458,555. These amounts have been treated as a debt issue cost and, accordingly, have been recorded as a direct deduction from the carrying amount of Master Credit Facility and are being amortized to interest expense over the contractual term of the Master Credit Facility. During the three and six months ended June 30, 2016, accretion of the fees amounted to $0.
Contractual interest expense on the Master Credit Facility amounted to $0 for the three and six months ended June 30, 2016. Because the Company did not close on the Master Credit Facility until June 30, 2016, the Company did not incur interest expense on the outstanding amounts, nor did it record any amortization of debt issue costs related to the Master Credit Facility.
The Master Credit Facility contains customary representations and warranties, events of default and covenants, including, among other things and subject to certain exceptions, covenants that restrict the ability of the Company to incur additional indebtedness, create or permit liens on assets, make acquisitions, engage in mergers or consolidations and pay dividends or repurchase stock. In addition, the Master Credit Facility contains a covenant requiring the Company to maintain at the end of each semi-annual fiscal period commencing with the period ending December 31, 2016, a minimum current ratio of not less than 1.4 to 1.
On August 10, 2016, the Company entered into an Amendment to Master Credit Facility and Consent and Waiver Agreement with White Winston in connection with the CFL transaction (see Note 12). Pursuant to the Amendment, White Winston consented to the proposed transaction and waived certain rights in connection with the transaction. In consideration for the Amendment, the Company agreed that the Pro Rata Warrant would be exercisable in full without regard to the pro rata provisions of the warrant and paid a $15,000 financing fee, to be treated as a drawdown under the Master Credit Facility. In addition, White Winston granted the Company the right to repurchase the Pro Rata Warrant and Fixed Warrant for a period of time following the consummation of the proposed transaction. |
Commitments and Contingencies |
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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 $241,000 and $324,000 for the three months ended June 30, 2016 and 2015, respectively, and approximately $550,000 and $700,000 for the six months ended June 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 $90,000 for the three months ended June 30, 2016 and 2015 and approximately $180,000 and $165,000 for the six months ended June 30, 2016 and 2015, respectively.
During the three months ended June 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 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 June 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’s wholly-owned subsidiary, Noble Voice LLC, was party to litigation captioned as Expand, Inc. v. Noble Voice LLC et al., Case No.: 2014-CA-9366 A (Orange County, FL Circuit Court) pursuant to which Expand, Inc., d/b/a SoftRock, Inc. (“SoftRock”) filed a complaint against Noble Voice LLC and certain other defendants (the “Noble Voice Defendants”) in September 2014 alleging the existence of a purported conspiracy by Noble Voice and the other defendants to breach the individual Noble Voice Defendants’ Non-Compete Agreements and separate Confidentiality Agreements, misappropriation of trade secrets by some but not all Noble Voice Defendants, tortious interference and seeking injunctive relief. This case was settled for a confidential but nominal amount during the Second Quarter of 2016 and the action has been dismissed.
The Company and its wholly-owned subsidiary, Noble Voice, LLC, were parties to litigation captioned as Coleman v. Noble Voice, LLC, et al., Case No. 15-CV-6791 (N.D. Ill.), a putative class action, pursuant to which a consumer alleged that Noble Voice violated the Telephone Consumer Protection Act (“TCPA”) by contacting him in relation to a job for which he applied online. The complaint sought unspecified damages and injunctive relief. The lawsuit was filed in August 2015 and the Company timely filed its answer. This case was settled for a confidential but nominal amount during the Second Quarter of 2016 and the action has been dismissed.
The Company was party to litigation captioned as Norma Vazquez v. Professional Diversity Network, Inc., Case No. 16-CV-13-WCO (N.D.Ga.), a putative class action, pursuant to which a consumer alleged that the Company violated the TCPA by sending her a text message inviting her to attend a career fair. The complaint sought unspecified damages and injunctive relief. The lawsuit was filed in January 2016 and the Company timely filed its answer. This case was settled for a confidential but nominal amount during the Second Quarter of 2016 and the action has been dismissed.
The Company and its wholly-owned subsidiary, NAPW, Inc., were parties to litigation captioned as Crystal Martin, et al. v. NAPW, Inc., et al., No. BC606543 (Los Angeles Sup. Ct.), alleging violations of various California Labor Code (wage & hour) sections. The plaintiffs sought unspecified damages and civil penalties pursuant to the California Labor Code. The complaint was served in January 2016 and the Company timely filed its answer. This case was settled for a confidential but nominal amount during the Second Quarter of 2016 and the action has been dismissed.
The Company and its wholly-owned subsidiary, NAPW, Inc., were parties to litigation captioned Ilana Youngheim v. NAPW, Inc., et al., No. BC605928 (Los Angeles Sup. Ct.), a case alleging discrimination in violation of California Fair Employment and Housing Act (disability discrimination). The plaintiff sought unspecified damages, back pay, front pay, lost employment benefits and other compensation. The complaint was served in February 2016 and the Company timely filed its answer. This case was settled for a confidential but nominal amount during the Second Quarter of 2016 and the action has been dismissed.
The Company’s wholly-owned subsidiary, NAPW, Inc., was the respondent in two matters before the New York State Division of Human Rights (“DHR”), captioned Adrianne Kay Mack v. NAPW Merger Sub, Inc., No. 10178056 and Adrianne Kay Mack v. National Association of Professional Women, No. 10178191. These related cases from a single former employee alleged that the employee received disparate treatment on account of her race or national origin (in No. 10178056) and that she was terminated in retaliation for filing her original complaint (in No. 10178191). This case was settled for a nominal but confidential amount during the Second Quarter of 2016 and the action has been dismissed.
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 anticipates a final order requiring it to provide back pay to the complainant, but 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 asked the Company to provide a position statement regarding the complainant’s claims. While the outcome of any matter is uncertain, the Company does not anticipate that this case will have a material impact on the Company’s financial position.
On August 10, 2016, the Company received a letter from Matthew Proman demanding payment, on or before September 1, 2016 of the full amount of the outstanding promissory note in the amount of $445,000 made by the Company in favor of Mr. Proman, and that legal proceedings will commence if the note is not repaid. The Company believes there is no merit to Mr. Proman’s claim and will vigorously defend against any such claims.
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. |
Income Taxes |
6 Months Ended |
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Jun. 30, 2016 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | 8. Income Taxes
The effective income tax rate for the three months ended June 30, 2016 and 2015 was 14.5% and 39.0%, respectively, resulting in a $136,000 and $497,000 income tax benefit, respectively. The effective income tax rate for the six months ended June 30, 2016 and 2015 was 20.9% and 38.7%, respectively, resulting in a $594,000 and $1,467,000 income tax benefit, respectively. During the three months ended June 30, 2016 and 2015, the Company recorded a valuation allowance of $96,000 and $0, respectively, and during the six months ended June 30, 2016 and 2015, the Company recorded a valuation allowance of $374,000 and $0, respectively. 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 considered the scheduled reversal of deferred income tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based on the consideration of these items, management determined that it is more likely than not that we will not realize the deferred income tax asset balances and therefore, initially recorded a valuation allowance as of September 30, 2015. Management has again evaluated the deferred tax asset for the six months ended June 30, 2016 and has determined a full valuation allowance continues to be applicable. |
Stock-Based Compensation |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation | 9. Stock-Based Compensation
Equity Incentive Plans – The Company adopted the 2013 Equity Compensation Plan under which the Company reserved 500,000 shares of common stock for the purpose of providing equity incentives to employees, officers, directors and consultants including options, restricted stock, restricted stock units, stock appreciation rights, other equity awards, annual incentive awards and dividend equivalents. The Company subsequently amended the plan to increase the number of authorized shares of common stock under the plan to 1,800,000 shares, which the Company’s stockholders approved on June 3, 2015.
Stock Options
The following table summarizes the Company’s stock option activity for the six months ended June 30, 2016:
A summary of the changes in the Company’s unvested stock options is as follows:
The Company recorded non-cash compensation expense of approximately $15,000 and $31,000 for the three months ended June 30, 2016 and 2015, respectively, and approximately $44,000 and $43,000 for the six months ended June 30, 2016 and 2015, respectively, pertaining to stock options.
Total unrecognized compensation expense related to unvested stock options at June 30, 2016 amounts to approximately $45,000 and is expected to be recognized over a remaining weighted average period of 0.75 years.
Warrants
The following table summarizes the Company’s warrant activity for the six months ended June 30, 2016:
As discussed in Note 6, the Company granted warrants to purchase 3,750,000 shares of common stock during the three months ended June 30, 2016. The fair value of the warrants issued of $783,458 has been recorded as a direct deduction from the carrying amount of Master Credit Facility.
A summary of the changes in the Company’s unvested warrants is as follows:
No compensation cost was recognized for the three and six months ended June 30, 2016 and 2015 pertaining to warrants.
Restricted Stock
As of June 30, 2016 and December 31, 2015, there were 44,445 shares of unvested restricted stock outstanding.
The Company recorded non-cash compensation expense of approximately $28,000 and $83,000 for the three months ended June 30, 2016 and 2015, respectively, and approximately $55,000 and $194,000 for the six months ended June 30, 2016 and 2015, respectively, pertaining to restricted stock.
Total unrecognized compensation expense related to unvested restricted stock at June 30, 2016 amounts to approximately $157,000 and is expected to be recognized over a weighted average period of 1.4 years.
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Fair Value of Financial Instruments |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value of Financial Instruments | 10. Fair Value of Financial Instruments
Financial instruments, including cash and cash equivalents, short-term investments, accounts payable and accrued liabilities, are carried at historical cost. Management believes that the recorded amounts approximate fair value due to the short-term nature of these instruments.
The Company measures the fair value of financial assets and liabilities based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. The Company uses three levels of inputs that may be used to measure fair value:
Level 1 — quoted prices in active markets for identical assets or liabilities
Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable
Level 3 — inputs that are unobservable (for example cash flow modeling inputs based on assumptions)
The following table presents a summary of fair value measurements for certain financial instruments measured at fair value on a recurring basis:
Level 3 liabilities are valued using unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the derivative liabilities. For fair value measurements categorized within Level 3 of the fair value hierarchy, the Company’s accounting and finance department, who report to the Chief Financial Officer, determine its valuation policies and procedures. The development and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s accounting and finance department and are approved by the Chief Financial Officer.
Level 3 Valuation Techniques:
Level 3 financial liabilities consist of warrant liabilities for which there is no current market for these securities such that the determination of fair value requires significant judgment or estimation. Changes in fair value measurements categorized within Level 3 of the fair value hierarchy are analyzed each period based on changes in estimates or assumptions and recorded as appropriate.
The Company uses the Monte Carlo model to value Level 3 financial liabilities at inception and on subsequent valuation dates. This model is a discrete-time model that allows for sources of uncertainty and simulates the movements of the underlying asset and calculates the resulting derivative value for each trial. Such simulations are performed for a number of trials and the average value across all trials is determined in order to arrive at the concluded value of such derivative. The model incorporates transaction details such as the Company’s stock price, contractual terms, maturity, and risk free rates, as well as volatility. A significant decrease in the volatility or a significant decrease in the Company’s stock price, in isolation, would result in a significantly lower fair value measurement. Changes in the values of the derivative liabilities are recorded in “change in fair value of warrant liability” in the Company’s condensed consolidated statements of operations and comprehensive loss.
As of June 30, 2016 and December 31, 2015, there were no transfers in or out of Level 3 from other levels in the fair value hierarchy.
The warrant liability was valued using the Monte Carlo model and the following assumptions at June 30, 2016:
The following table sets forth a summary of the changes in the fair value of the Level 3 financial liabilities that are measured at fair value on a recurring basis:
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Segment Information |
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Segment Information | 11. Segment Information
The Company operates in three segments: (i) PDN Network, (2) NAPW Network and (3) Noble Voice operations, which are based on its business activities and organization. The following tables present key financial information of the Company’s reportable segments as of and for the three and six months ended June 30, 2016 and 2015:
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Subsequent Events |
6 Months Ended |
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Jun. 30, 2016 | |
Subsequent Events [Abstract] | |
Subsequent Events | 12. Subsequent Events
The Company evaluates subsequent events and transactions that occur after the balance sheet date up to the date that the consolidated financial statements were issued for potential recognition or disclosure.
On August 12, 2016, the Company entered into a stock purchase agreement (the “Purchase Agreement”), with Cosmic Forward Limited, a Republic of Seychelles company wholly-owned by a group of Chinese investors (“CFL”). Pursuant to the Purchase Agreement, the Company has agreed to issue and sell to CFL (the “Share Issuance and Sale”), and CFL has agreed to purchase, at a price of $1.20 per share (the “Per Share Price”), upon the terms and subject to the conditions set forth in the Purchase Agreement, a number of shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”), such that CFL will hold shares of Common Stock equal to approximately 51% of the outstanding shares of Common Stock, determined on a fully-diluted basis, after giving effect to the consummation of the transactions contemplated by the Purchase Agreement, including the Tender Offer described below (the “CFL Transaction”).
Pursuant to the Purchase Agreement, the Company has agreed to commence a partial issuer tender offer to purchase up to 2,500,000 shares of Common Stock as soon as reasonably practicable following the execution of the Purchase Agreement (the “Tender Offer”). The price per share to be paid for each share of Common Stock validly tendered and not withdrawn shall be paid from the proceeds of the Share Issuance and Sale and shall be equal to the Per Share Price, net to the tendering holder in cash but subject to reduction for any required withholding of taxes (or any higher price offered and paid pursuant to the Tender Offer, subject to the mutual agreement of the Company and CFL). In addition, pursuant to a co-sale right, an existing shareholder of the Company will have the right to sell up to 1,647,397 shares of Common Stock to CFL as of the date of the Purchase Agreement (the “Co-Sale Right”), and such Co-Sale Right, to the extent exercised, will reduce the number of shares of Common Stock to be purchased by CFL directly from the Company. The number of shares of Common Stock that CFL will purchase will be that amount that allows it to hold 51% of the outstanding shares of Common Stock, determined on a fully-diluted basis, after giving effect to the number of shares of Common Stock (if any) the Company purchases in the Tender Offer, and any shares sold to CFL pursuant to the co-sale right (collectively, the “Common Shares”). Assuming full participation by the Company’s stockholders in the Tender Offer, the number of Common Shares sold by the Company to CFL will be 17,122,794, subject to further reduction depending on how many shares, if any, are purchased by CFL from the existing shareholders of the Company pursuant to the Co-Sale Right. If, immediately following the consummation of the Tender Offer and after giving effect to the purchase by the Company of all shares of Common Stock validly tendered and not withdrawn in the Tender Offer, the Common Shares amount to less than 51% of the then-outstanding shares of Common Stock, determined on a fully-diluted basis, then CFL shall have an option (the “Call Option”) to purchase, at a price per share equal to the Per Share Price, such additional number of shares of Common Stock (the “Call Option Shares”) as are necessary for the previously issued Common Shares plus the Call Option Shares to equal 51% of the then-outstanding shares of Common Stock determined on a fully-diluted basis, taking into account the issuance of the Call Option Shares.
Pursuant to the terms of the Escrow Agreement, dated as of August 12, 2016 (the “Escrow Agreement”), by and among the Company, CFL and Wilmington Trust, N.A., as escrow agent (the “Escrow Agent”), CFL has agreed to fund no later than August 19, 2016 approximately $1.7 million (the “Escrow Amount”) into an escrow account with the Escrow Agent as security for CFL’s potential termination fee obligations under the Purchase Agreement described below. The Escrow Amount will be held by the Escrow Agent in accordance with, and released pursuant to the terms and subject to the conditions set forth in, the Escrow Agreement.
The Purchase Agreement contains customary representations, warranties, covenants and agreements of the parties thereto, and completion of the Share Issuance and Sale is subject to the approval of the Company’s stockholders at a special meeting of stockholders to be announced at a later date. The Purchase Agreement also contains other customary closing conditions, including, among others, the execution of certain ancillary agreements and documentation; all receipt of all required consents and approvals necessary to consummate the Share Issuance and Sale; the absence of any injunction or proceeding by a government entity seeking to restrain or prohibit consummation of the CFL Transaction; the absence of any change or event that has had or would reasonably be expected to have a material adverse effect on the Company; and receipt of a clearance by the Committee on Foreign Investment in the United States. The consummation of the Tender Offer will be conditioned upon the consummation of the Share Issuance and Sale and such other conditions to be set forth in an offer to purchase.
The Purchase Agreement also contains customary indemnification and termination provisions. If the Purchase Agreement is terminated under certain circumstances set forth in the Purchase Agreement, the Company may be required to reimburse CFL for its costs and expenses in connection with the Share Issuance and Sale, up to a maximum amount of $205,000, and, in certain cases, may also be required to pay CFL a termination fee of $615,000. In certain instances specified in the Purchase Agreement, upon termination by the Company, the Escrow Agent would be required to release the full Escrow Amount to the Company as a “reverse” termination fee.
Under the terms of the Purchase Agreement and as a condition to consummating the Share Issuance and Sale, at the closing of the Share Issuance and Sale, the Company, CFL and each of the shareholders of CFL (the “CFL Shareholders”) will enter into a stockholders’ agreement (the “Stockholders’ Agreement”). The Stockholders’ Agreement will provide certain limitations on the ability of CFL and the CFL Shareholders to acquire additional securities from the Company, and will provide for certain participation rights to CFL, to enable CFL to participate in future equity issuances by the Company, in order to maintain its then-current beneficial ownership interest in the Company, up to the CFL Shareholders’ then-current ownership percentage based on the number of shares of Common Stock then-outstanding, but no greater than 51.0% of the outstanding shares of Common Stock, determined on a fully-diluted basis, on a given date. The Stockholders’ Agreement will also provide for certain “standstill” covenants prohibiting CFL or the CFL Shareholders or their respective affiliates from taking certain actions with respect to the Company or the Board of Directors. Under the Stockholders’ Agreement, CFL will be entitled to nominate individuals reasonably acceptable to the Nominating and Governance Committee of the Board of Directors for election as directors of the Company, so long as CFL’s beneficial ownership level exceeds certain predefined percentage thresholds of the Company’s issued and outstanding Common Stock. The Stockholders’ Agreement will provide that, upon the closing of the Share Issuance and Sale and for so long as CFL’s beneficial ownership level exceeds 49.5% of the Company’s issued and outstanding Common Stock, CFL will be entitled to nominate five of nine directors on the Board of Directors. The Stockholders’ Agreement will further provide certain restrictions on the transfer of the Common Shares issued and sold to CFL in the Share Issuance and Sale, including, among other restrictions, a lock-up during the one-year period following the closing of the Share Issuance and Sale. The Stockholders’ Agreement will also provide certain demand, shelf and piggyback registration rights to CFL that will require the Company to effect the registration under the Securities Act of 1933, as amended (the “Securities Act”), of the resale of the Common Shares and other shares of Common Stock (including the Call Option Shares) acquired by CFL.
In addition, on August 10, 2016, the Company and its wholly-owned subsidiaries, NAPW, Inc., Noble Voice LLC and Compliant Lead LLC, entered into an Amendment to Master Credit Facility and Consent and Waiver Agreement (the “Amendment”) with White Winston. Pursuant to the Amendment, White Winston consented to the CFL Transaction and waived its participation rights and board representation rights under the Board Representation Agreement between White Winston and the Company dated June 30, 2016 in connection with the CFL transaction. In consideration for the Amendment, the Company agreed that the Pro Rata Warrant shall be fully exercisable, notwithstanding the pro rata formula set forth in the warrant, and paid a fee of $15,000. In addition, White Winston granted the Company an option to repurchase its outstanding, in-the-money warrants following consummation of the Tender Offer on the terms set forth in the Amendment. |
Summary of Significant Accounting Policies (Policies) |
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Jun. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
Use of Estimates | Use of Estimates - The preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the unaudited interim condensed consolidated financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future intervening events. Accordingly, the actual results could differ significantly from estimates.
Significant estimates underlying the financial statements include the fair value of acquired assets and liabilities associated with acquisitions; assessment of goodwill, other intangible assets and long-lived assets for impairment; allowances for doubtful accounts and assumptions related to the valuation of stock-based compensation. |
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Principles of Consolidation | Principles of Consolidation - The accompanying unaudited 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. |
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Short-Term Investments | Short-Term Investments - All highly liquid investments that have an original maturity of greater than 90 days but less than one year at the date of purchase are classified as short-term investments. The Company classifies short-term investments as held to maturity and carries them at amortized cost if the Company has the positive intent and ability to hold the securities to maturity. |
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Revenue Recognition | Revenue Recognition – Revenue is recognized when all of the following conditions exist: (1) persuasive evidence of an arrangement exists, (2) services are performed, (3) the sales price is fixed or determinable, and (4) collectability is reasonably assured.
Membership Fees and Related Services
Membership fees are collected up-front and member benefits become available immediately; however those benefits must remain available over the 12 month membership period. At the time of enrollment, membership fees are recorded as a liability under deferred revenue and are recognized as revenue ratably over the 12 month membership period. Members who are enrolled in an annual payment 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.
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.
Lead Generation
The Company derives lead generation revenues pursuant to arrangements with for-profit educational centers. Under these arrangements, the Company matches educational centers with potential candidates, pursuant to specific parameters defined in each arrangement. The Company invoices the educational centers on a monthly basis based upon the number of leads provided. Revenues related to lead generation are recognized at the time the educational centers are invoiced.
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.
Product Sales and Other Revenue
Products offered to members relate to custom made plaques and an annual registry book. Product sales are recognized as liabilities under 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 comprehensive loss.
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. Partner revenue is recognized as jobs are posted to their hosted sites. |
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Advertising and Marketing Expenses | 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 months ended June 30, 2016 and 2015, the Company incurred advertising and marketing expenses of approximately $521,000 and $1,212,000, respectively. For the six months ended June 30, 2016 and 2015, the Company incurred advertising and marketing expenses of approximately $1,185,000 and $2,721,000, respectively. These amounts are included in sales and marketing expenses in the accompanying condensed consolidated statements of comprehensive loss. At June 30, 2016 and December 31, 2015, there were no prepaid advertising expenses recorded in the accompanying condensed consolidated balance sheets. |
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Net Loss per Share | Net Loss per Share - The Company computes basic net loss per share by dividing net loss per share available to common stockholders by the weighted average number of common shares outstanding for the period and excludes the effects of any potentially dilutive securities. Diluted earnings per share, if presented, would include the dilution that would occur upon the exercise or conversion of all potentially dilutive securities into common stock using the “treasury stock” and/or “if converted” methods as applicable. The computation of basic net loss per share for the three and six months ended June 30, 2016 and 2015 excludes the potentially dilutive securities summarized in the table below because their inclusion would be anti-dilutive.
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Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements
In May 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-12, “Revenue from Contracts with Customers (Topic 606) – Narrow-Scope Improvements and Practical Expedients” (“ASU 2016-12”), which further amended ASU 2016-09 by providing additional clarity in recognizing revenue from contracts that have been modified prior to the transition period to the new standard, as well as providing additional disclosure requirements for businesses and other organizations that make the transition to the new standard by adjusting amounts from prior reporting periods via retrospective application. The Company is continuing to evaluate the expected impact of this standard on its consolidated financial statements.
In April 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing” (“ASU 2016-10”). ASU 2016-10 clarifies two aspects of Topic 606: (a) identifying performance obligations; and (b) the licensing implementation guidance. The update is effective for annual periods beginning after December 15, 2017 including interim reporting periods therein. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.
In March 2016, the FASB issued ASU No. 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”). ASU 2016-09 was issued as part of the FASB’s simplification initiative and affects all entities that issue share-based payment awards to their employees. The amendments in this update cover such areas as the recognition of excess tax benefits and deficiencies, the classification of those excess tax benefits on the statement of cash flows, an accounting policy election for forfeitures, the amount an employer can withhold to cover income taxes and still qualify for equity classification and the classification of those taxes paid on the statement of cash flows. ASU 2016-09 is effective for annual and interim periods beginning after December 15, 2016. This guidance can be applied either prospectively, retrospectively or using a modified retrospective transition method, depending on the area covered in this update. Early adoption is permitted. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.
In March 2016, the FASB issued ASU No. 2016-08, “Revenue from contracts with customers (Topic 606): Principal versus Agent Considerations Reporting Revenue Gross versus Net”. The amendments are intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations by amending certain existing illustrative examples and adding additional illustrative examples to assist in the application of the guidance. The effective date and transition of these amendments is the same as the effective date and transition of ASU 2014-09. Public entities should apply the amendments in ASU 2014-09 for annual reporting periods beginning after December 15, 2017, including interim reporting periods therein. Private entities must apply the amendments one year later. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.
In February 2016, the FASB issued new lease accounting guidance ASU No. 2016-02, “Leases” (“ASU 2016-02”). Under the new guidance, at the commencement date, lessees will be required to recognize a lease liability, which is a lessee‘s obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. The new guidance is not applicable for leases with a term of 12 months or less. Lessor accounting is largely unchanged. Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted upon issuance. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.
In August 2014, the FASB issued ASU 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern” (“ASU 2014-15”). ASU 2014-15 provides guidance on management’s responsibility in evaluating whether there is substantial doubt about a company’s ability to continue as a going concern and about related footnote disclosures. For each reporting period, management will be required to evaluate whether there are conditions or events that raise substantial doubt about a company’s ability to continue as a going concern within one year from the date the financial statements are issued. The amendments in ASU 2014-15 are effective for annual reporting periods ending after December 15, 2016, and for annual and interim periods thereafter. Early adoption is permitted. The Company will adopt the methodologies prescribed by ASU 2014-15 by the date required, and does not anticipate that the adoption of ASU 2014-15 will have a material effect on its financial position or results of operations.
In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”). ASU 2014-09 provides guidance for revenue recognition and affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets and supersedes the revenue recognition requirements in Topic 605, “Revenue Recognition,” and most industry-specific guidance. The core principle of ASU 2014-09 is the recognition of revenue when a company transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled to in exchange for those goods or services. ASU 2014-09 defines a five-step process to achieve this core principle and, in doing so, companies will need to use more judgment and make more estimates than under the current guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. ASU 2014-09 was initially effective for fiscal years beginning after December 15, 2017 and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). Early adoption is not permitted. The Company is currently evaluating the method and impact the adoption of ASU 2014-09 will have on the Company’s consolidated financial statements and disclosures. In July 2015, the FASB deferred the effective date of ASU 2014-09 for one year, and proposed some modifications to the original provisions.
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Summary of Significant Accounting Policies (Tables) |
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Jun. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share | The computation of basic net loss per share for the three and six months ended June 30, 2016 and 2015 excludes the potentially dilutive securities summarized in the table below because their inclusion would be anti-dilutive.
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Capitalized Technology (Tables) |
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Research and Development [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Capitalized Technology | Capitalized Technology, net is as follows:
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Intangible Assets (Tables) |
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Intangible Assets, Net (Excluding Goodwill) [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Intangible Assets | Intangible assets, net is as follows:
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Schedule of Future Annual Estimated Amortization Expense | Future annual estimated amortization expense is summarized as follows:
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Master Credit Facility (Tables) |
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||
Schedule of Company's Master Credit Facility | At June 30, 2016, the Company’s Master Credit Facility is comprised of the following:
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Stock-Based Compensation (Tables) |
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Warrant [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Warrants Activity | The following table summarizes the Company’s warrant activity for the six months ended June 30, 2016:
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Schedule of Unvested Award activity | A summary of the changes in the Company’s unvested warrants is as follows:
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Stock Options [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Stock Option Activity | The following table summarizes the Company’s stock option activity for the six months ended June 30, 2016:
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Schedule of Unvested Award activity | A summary of the changes in the Company’s unvested stock options is as follows:
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Fair Value of Financial Instruments (Tables) |
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Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||
Summary of Fair Value Measurements for Liabilities Measured on a Recurring Basis | The following table presents a summary of fair value measurements for certain financial instruments measured at fair value on a recurring basis:
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Schedule of Fair Value Assumptions Used to Value Warrant Liability | The warrant liability was valued using the Monte Carlo model and the following assumptions at June 30, 2016:
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Summary of Changes in Fair Value of Level 3 Financial Liabilities | The following table sets forth a summary of the changes in the fair value of the Level 3 financial liabilities that are measured at fair value on a recurring basis:
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Segment Information (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Segment Information | The following tables present key financial information of the Company’s reportable segments as of and for the three and six months ended June 30, 2016 and 2015:
|
Liquidity, Financial Condition and Management's Plans (Details) - USD ($) |
3 Months Ended | 6 Months Ended | ||||
---|---|---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Line of Credit Facility [Line Items] | ||||||
Accumulated deficit | $ 43,135,924 | $ 43,135,924 | $ 40,890,017 | |||
Net cash used in operating activities | 2,233,108 | $ 2,816,220 | ||||
Cash and cash equivalents | 1,292,244 | $ 5,329,441 | 1,292,244 | 5,329,441 | 2,070,693 | $ 1,519,467 |
Net loss | 806,269 | 778,279 | 2,245,907 | 2,321,157 | ||
Revenues | 6,851,028 | $ 10,398,829 | 14,194,171 | 21,101,269 | ||
Working capital deficit | 7,584,000 | 7,584,000 | $ 6,739,000 | |||
Proceeds from line of credit | 1,572,576 | |||||
Revolving Credit Facility [Member] | ||||||
Line of Credit Facility [Line Items] | ||||||
Borrowing capacity | 5,000,000 | 5,000,000 | ||||
Amount drawn on line of credit above availability | $ 435,000 | $ 435,000 |
Summary of Significant Accounting Policies (Narrative) (Details) - USD ($) |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
Dec. 31, 2015 |
|
Incremental Direct Costs [Abstract] | |||||
Advertising and marketing expenses | $ 521,000 | $ 1,212,000 | $ 1,185,000 | $ 2,721,000 | |
Advertising costs |
Summary of Significant Accounting Policies (Schedule of Potentially Dilutive Securities) (Details) - shares |
6 Months Ended | |
---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Anti-dillutive securities | 4,301,802 | 903,358 |
Warrant [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Anti-dillutive securities | 4,112,500 | 362,500 |
Stock options [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Anti-dillutive securities | 144,857 | 340,857 |
Restricted Stock [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Anti-dillutive securities | 44,445 | 200,001 |
Capitalized Technology (Details) - USD ($) |
3 Months Ended | 6 Months Ended | 12 Months Ended | ||
---|---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
Dec. 31, 2015 |
|
Capitalized cost: | |||||
Balance, beginning of period | $ 1,888,791 | $ 1,469,432 | $ 1,469,432 | ||
Additional capitalized cost | 419,359 | ||||
Balance, end of period | $ 1,888,791 | 1,888,791 | 1,888,791 | ||
Accumulated amortization: | |||||
Balance, beginning of period | 1,432,268 | 943,362 | 943,362 | ||
Provision for amortization | 45,236 | $ 90,663 | 153,565 | $ 181,601 | 488,906 |
Balance, end of period | 1,585,833 | 1,585,833 | 1,432,268 | ||
Capitalized Technology, net | $ 302,958 | $ 302,958 | $ 456,523 |
Intangible Assets (Narrative) (Details) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Intangible Assets, Net (Excluding Goodwill) [Abstract] | ||||
Amortization of intangible assets | $ 717,100 | $ 717,100 | $ 1,434,200 | $ 1,448,186 |
Intangible Assets (Schedule of Future Annual Estimated Amortization Expense) (Details) - USD ($) |
Jun. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Intangible Assets, Net (Excluding Goodwill) [Abstract] | ||
2016 (six months) | $ 1,434,200 | |
2017 | 2,802,233 | |
2018 | 2,563,872 | |
2019 | 1,846,697 | |
2020 | 397,000 | |
2021 | 397,000 | |
Thereafter | 1,086,237 | |
Net Carrying Amount | $ 10,527,239 | $ 11,961,439 |
Master Credit Facility (Schedule of Company's Master Credit Facility) (Details) - USD ($) |
Jun. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Line of Credit Facility [Line Items] | ||
Long-term portion | $ 330,563 | |
Revolving Credit Facility [Member] | ||
Line of Credit Facility [Line Items] | ||
Total Master Credit Facility | 1,572,576 | |
Less: Unamortized debt issuance costs | (1,242,013) | |
Total Master Credit Facility, net of unamortized debt issuance costs | 330,563 | |
Less: Current portion of Master Credit Facility | ||
Long-term portion | $ 330,563 |
Commitments and Contingencies (Lease Obligations) (Details) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Commitments and Contingencies Disclosure [Abstract] | ||||
Rent expense | $ 241,000 | $ 324,000 | $ 550,000 | $ 700,000 |
Sub lease income | $ 90,000 | $ 90,000 | 180,000 | 165,000 |
Gain on lease cancellation | $ 423,998 |
Commitments and Contingencies (Legal Proceedings) (Details) - USD ($) |
6 Months Ended | |
---|---|---|
Aug. 10, 2016 |
Jun. 30, 2016 |
|
Settled Litigation [Member] | ||
Loss Contingencies [Line Items] | ||
Litigation settlement amount | $ 500,000 | |
Litigation settlement date | Apr. 28, 2016 | |
Litigation settlement accrual | $ 500,000 | |
Subsequent Event [Member] | Threatened Litigation [Member] | ||
Loss Contingencies [Line Items] | ||
Amount of promissory note repayment sought in litigation matter | $ 445,000 |
Income Taxes (Details) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Income Tax Disclosure [Abstract] | ||||
Effective income tax rate | 14.50% | 39.00% | 20.90% | 38.70% |
Income tax benefit | $ 136,169 | $ 497,196 | $ 594,393 | $ 1,466,822 |
Change in valuation allowance during period | $ 96,000 | $ 374,000 |
Stock-Based Compensation (Schedule of Stock Option Activity) (Details) - Stock Options [Member] - USD ($) |
6 Months Ended | 12 Months Ended |
---|---|---|
Jun. 30, 2016 |
Dec. 31, 2015 |
|
Number of Options | ||
Outstanding - December 31, 2015 | 157,190 | |
Granted | ||
Exercised | ||
Forfeited/Canceled/Expired | (12,333) | |
Outstanding - June 30, 2016 | 144,857 | 157,190 |
Exercisable - June 30, 2016 | 108,522 | |
Weighted Average Exercise Price | ||
Outstanding - December 31, 2015 | $ 3.75 | |
Granted | ||
Exercised | ||
Forfeited/Canceled/Expired | (3.45) | |
Outstanding - June 30, 2016 | 3.78 | $ 3.75 |
Exercisable - June 30, 2016 | $ 3.89 | |
Weighted Average Remaining Contractual Life (in Years) | ||
Outstanding | 7 years 10 months 24 days | 8 years |
Exercisable - June 30, 2016 | 8 years | |
Average Intrinsic Value | ||
Outstanding - December 31, 2015 | ||
Outstanding - June 30, 2016 | ||
Exercisable - June 30, 2016 |
Stock-Based Compensation (Schedule of Unvested Stock Options) (Details) - Stock Options [Member] |
6 Months Ended |
---|---|
Jun. 30, 2016
$ / shares
shares
| |
Number of Options | |
Unvested - December 31, 2015 | shares | 109,522 |
Granted | shares | |
Vested | shares | (70,187) |
Forfeited/Canceled/Expired | shares | (3,000) |
Unvested - June 30, 2016 | shares | 36,335 |
Weighted Average Grant Date Fair Value | |
Unvested - December 31, 2015 | $ / shares | $ 1.72 |
Granted | $ / shares | |
Vested | $ / shares | (1.75) |
Forfeited/Canceled/Expired | $ / shares | (1.65) |
Unvested - June 30, 2016 | $ / shares | $ 1.65 |
Stock-Based Compensation (Summary of Warrants Activity) (Details) - Warrant [Member] - USD ($) |
6 Months Ended | 12 Months Ended |
---|---|---|
Jun. 30, 2016 |
Dec. 31, 2015 |
|
Warrant activity, number of shares: | ||
Warrants outstanding at December 31, 2015 | 362,500 | |
Granted | 3,750,000 | |
Exercised | ||
Forfeited/Canceled/Expired | ||
Warrants outstanding at June 30, 2016 | 4,112,500 | 362,500 |
Exercisable at June 30, 2016 | 1,912,902 | |
Warrant activity, weighted average exercise price: | ||
Warrants outstanding at December 31, 2015 | $ 8.34 | |
Granted | 0.85 | |
Exercised | ||
Forfeited/Canceled/Expired | ||
Warrants outstanding at June 30, 2016 | 1.51 | $ 8.34 |
Exercisable at June 30, 2016 | $ 1.78 | |
Outstanding - weighted average remaining contractual life | 4 years 9 months 18 days | 3 years 6 months |
Exercisable - weighted average remaining contractual life | 4 years 7 months 6 days | |
Outstanding - aggregate intrinsic value | $ 412,500 | |
Exercisable - aggregate intrinsic value | $ 232,560 |
Stock-Based Compensation (Schedule of Unvested Warrants) (Details) - Warrant [Member] |
6 Months Ended |
---|---|
Jun. 30, 2016
$ / shares
shares
| |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Unvested - December 31, 2015 | shares | |
Granted | shares | 3,750,000 |
Vested | shares | (3,750,000) |
Forfeited/Canceled/Expired | shares | |
Unvested - June 30, 2016 | shares | |
Unvested - December 31, 2015 | $ / shares | |
Granted | $ / shares | 0.18 |
Vested | $ / shares | (0.18) |
Forfeited/Canceled/Expired | $ / shares | |
Unvested - June 30, 2016 | $ / shares |
Fair Value of Financial Instruments (Summary of Fair Value Measurements for Liabilities Measured on Recurring Basis) (Details) - USD ($) |
Jun. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Warrant liability | $ 380,000 |
Fair Value of Financial Instruments (Schedule of Fair Value Assumptions Used to Value Warrant Liability) (Details) - Warrant Liabilities [Member] |
6 Months Ended |
---|---|
Jun. 30, 2016
$ / shares
shares
| |
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items] | |
Strike price | $ 0.25 |
Market price | $ 0.40 |
Expected life | 5 years |
Risk-free interest rate | 1.01% |
Dividend yield | 0.00% |
Volatility | 100.00% |
Warrants exercisable | shares | 1,199,598 |
Fair Value of Financial Instruments (Summary of Changes in Fair Value of Level 3 Financial Liabilities) (Details) |
6 Months Ended |
---|---|
Jun. 30, 2016
USD ($)
| |
Fair Value Disclosures [Abstract] | |
Balance, Beginning | |
Initial value of warrant liability | 380,000 |
Balance, ending | $ 380,000 |
Segment Information (Details) - USD ($) |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
Dec. 31, 2015 |
|
Segment Reporting Information [Line Items] | |||||
Membership fees and related services | $ 4,259,144 | $ 6,754,247 | $ 9,299,318 | $ 13,542,927 | |
Lead generation | 1,415,958 | 2,760,022 | 2,935,549 | 5,519,126 | |
Recruitment services | 717,360 | 756,039 | 1,340,669 | 1,602,701 | |
Products sales and other | 404,590 | 64,736 | 491,583 | 300,429 | |
Consumer advertising and marketing solutions | 53,976 | 63,785 | 127,052 | 136,086 | |
Total revenues | 6,851,028 | 10,398,829 | 14,194,171 | 21,101,269 | |
Loss from operations | (941,179) | (1,324,392) | (2,839,784) | (3,827,613) | |
Depreciation and amortization | 811,232 | 870,273 | 1,678,242 | 1,805,196 | |
Income tax (expense) benefit | (136,169) | (497,196) | (594,393) | (1,466,822) | |
Capital expenditures | 37,751 | 64,154 | |||
Net loss | (806,269) | (778,279) | (2,245,907) | (2,321,157) | |
Goodwill | 20,201,190 | 20,201,190 | $ 20,201,190 | ||
Intangible assets, net | 10,617,639 | 10,617,639 | 12,051,839 | ||
Total assets | 37,370,308 | 37,370,308 | 41,427,816 | ||
PDN Network [Member] | |||||
Segment Reporting Information [Line Items] | |||||
Membership fees and related services | |||||
Lead generation | |||||
Recruitment services | 717,360 | 756,039 | 1,340,669 | 1,602,701 | |
Products sales and other | |||||
Consumer advertising and marketing solutions | 53,976 | 63,785 | 127,052 | 136,086 | |
Total revenues | 771,336 | 819,824 | 1,467,721 | 1,738,787 | |
Loss from operations | (289,066) | (636,691) | (720,892) | (1,236,595) | |
Depreciation and amortization | 47,318 | 95,741 | 96,650 | 191,755 | |
Income tax (expense) benefit | 2,630 | (229,652) | (150,909) | (466,632) | |
Capital expenditures | |||||
Net loss | (292,955) | (358,122) | (570,499) | (730,329) | |
Goodwill | 339,451 | 339,451 | 339,451 | ||
Intangible assets, net | 90,400 | 90,400 | 90,400 | ||
Total assets | 2,324,978 | 2,324,978 | 4,167,229 | ||
NAPW Network [Member] | |||||
Segment Reporting Information [Line Items] | |||||
Membership fees and related services | 4,259,144 | 6,754,247 | 9,299,318 | 13,542,927 | |
Lead generation | |||||
Recruitment services | |||||
Products sales and other | 404,590 | 64,736 | 491,583 | 300,429 | |
Consumer advertising and marketing solutions | |||||
Total revenues | 4,663,734 | 6,818,983 | 9,790,901 | 13,843,356 | |
Loss from operations | (232,145) | (592,698) | (1,278,890) | (2,111,758) | |
Depreciation and amortization | 697,166 | 728,821 | 1,469,230 | 1,522,213 | |
Income tax (expense) benefit | 18,059 | (219,086) | (267,672) | (814,121) | |
Capital expenditures | 33,869 | 50,216 | |||
Net loss | (250,204) | (343,612) | (1,011,218) | (1,297,637) | |
Goodwill | 19,861,739 | 19,861,739 | 19,861,739 | ||
Intangible assets, net | 10,155,906 | 10,155,906 | 11,502,106 | ||
Total assets | 33,216,315 | 33,216,315 | 34,985,831 | ||
Noble Voice [Member] | |||||
Segment Reporting Information [Line Items] | |||||
Membership fees and related services | |||||
Lead generation | 1,415,958 | 2,760,022 | 2,935,549 | 5,519,126 | |
Recruitment services | |||||
Products sales and other | |||||
Consumer advertising and marketing solutions | |||||
Total revenues | 1,415,958 | 2,760,022 | 2,935,549 | 5,519,126 | |
Loss from operations | (419,968) | (125,003) | (840,002) | (479,260) | |
Depreciation and amortization | 66,748 | 45,711 | 112,362 | 91,228 | |
Income tax (expense) benefit | (156,858) | (48,458) | (175,812) | (186,069) | |
Capital expenditures | 3,882 | 13,938 | |||
Net loss | (263,110) | $ (76,545) | (664,190) | $ (293,191) | |
Goodwill | |||||
Intangible assets, net | 371,333 | 371,333 | 459,333 | ||
Total assets | $ 1,829,015 | $ 1,829,015 | $ 2,274,756 |
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