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 |
24
|
|
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
37
|
|
ITEM 4.
|
CONTROLS AND PROCEDURES
|
37
|
|
PART II
|
38
|
||
ITEM 1.
|
LEGAL PROCEEDINGS
|
38
|
|
ITEM 1A.
|
RISK FACTORS
|
39
|
|
ITEM 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
39
|
|
ITEM 3.
|
DEFAULTS UPON SENIOR SECURITIES
|
39
|
|
ITEM 4.
|
MINE SAFETY DISCLOSURE
|
39
|
|
ITEM 5.
|
OTHER INFORMATION
|
40
|
|
ITEM 6.
|
EXHIBITS
|
40
|
Professional Diversity Network, Inc.
|
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|
September 30,
|
December 31,
|
||||||
|
2016
|
2015
|
||||||
|
(Unaudited)
|
(Revised) | ||||||
Current Assets:
|
||||||||
Cash and cash equivalents
|
$
|
515,963
|
$
|
2,070,693
|
||||
Accounts receivable, net
|
1,839,474
|
2,510,530
|
||||||
Short-term investments
|
-
|
500,000
|
||||||
Incremental direct costs
|
547,616
|
1,023,916
|
||||||
Prepaid license fee
|
-
|
112,500
|
||||||
Prepaid expenses and other current assets
|
229,689
|
411,592
|
||||||
Total current assets
|
3,132,742
|
6,629,231
|
||||||
|
||||||||
Property and equipment, net
|
313,622
|
444,398
|
||||||
Capitalized technology, net
|
240,463
|
456,523
|
||||||
Goodwill
|
20,201,190
|
20,201,190
|
||||||
Intangible assets, net
|
9,900,539
|
12,051,839
|
||||||
Merchant reserve
|
1,426,927
|
1,260,849
|
||||||
Security deposits
|
189,375
|
383,786
|
||||||
Other assets
|
1,049,026
|
-
|
||||||
Total assets
|
$
|
36,453,884
|
$
|
41,427,816
|
||||
|
||||||||
Current Liabilities:
|
||||||||
Accounts payable
|
$
|
5,359,151
|
$
|
4,465,941
|
||||
Accrued expenses
|
1,519,491
|
837,712
|
||||||
Deferred revenue
|
6,406,542
|
9,966,893
|
||||||
Customer deposits
|
-
|
112,500
|
||||||
Promissory note
|
445,000
|
445,000
|
||||||
Total current liabilities
|
13,730,184
|
15,828,046
|
||||||
|
||||||||
Deferred tax liability
|
3,724,816
|
4,942,908
|
||||||
Line of credit – Master Credit Facility, net of unamortized debt issuance costs
|
827,679
|
-
|
||||||
Deferred rent
|
55,434
|
45,155
|
||||||
Other liabilities
|
47,367
|
426,267
|
||||||
Total liabilities
|
18,385,480
|
21,242,376
|
||||||
|
||||||||
Commitments and contingencies
|
||||||||
|
||||||||
Stockholders' Equity
|
||||||||
Common stock, $0.01 par value; 45,000,000 shares authorized; 1,815,232
shares issued as of September 30, 2016 and December 31, 2015; and 1,808,628 shares outstanding as of September 30, 2016 and December 31, 2015 |
18,097
|
18,097
|
||||||
Additional paid in capital
|
64,956,199
|
63,554,194
|
||||||
Accumulated deficit
|
(46,868,775
|
)
|
(43,349,734
|
)
|
||||
Treasury stock, at cost; 1,048 shares at September 30, 2016 and December 31, 2015
|
(37,117
|
)
|
(37,117
|
)
|
||||
Total stockholders' equity
|
18,068,404
|
20,185,440
|
||||||
|
||||||||
Total liabilities and stockholders' equity
|
$
|
36,453,884
|
$
|
41,427,816
|
Professional Diversity Network, Inc.
|
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited)
|
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
||||||||||||||
|
2016
|
2015
|
2016
|
2015
|
||||||||||||
|
(Revised) | (Revised) | ||||||||||||||
Revenues
|
||||||||||||||||
Membership fees and related services
|
$
|
3,748,334
|
$
|
5,652,873
|
$
|
13,047,652
|
$
|
18,885,308
|
||||||||
Lead generation
|
1,554,370
|
2,334,276
|
4,489,919
|
7,853,402
|
||||||||||||
Recruitment services
|
954,887
|
830,250
|
2,295,556
|
2,432,951
|
||||||||||||
Product sales and other
|
52,857
|
330,769
|
544,440
|
631,198
|
||||||||||||
Consumer advertising and marketing solutions
|
49,719
|
73,011
|
176,771
|
209,097
|
||||||||||||
Total revenues
|
6,360,167
|
9,221,179
|
20,554,338
|
30,011,956
|
||||||||||||
|
||||||||||||||||
Costs and expenses:
|
||||||||||||||||
Cost of revenues
|
745,159
|
1,464,214
|
2,433,550
|
4,647,520
|
||||||||||||
Sales and marketing
|
3,064,454
|
5,132,077
|
10,314,145
|
17,226,640
|
||||||||||||
General and administrative
|
3,010,862
|
3,748,138
|
9,428,493
|
11,593,955
|
||||||||||||
Impairment expense
|
-
|
26,744,249
|
-
|
26,744,249
|
||||||||||||
Depreciation and amortization
|
819,894
|
925,684
|
2,498,136
|
2,730,880
|
||||||||||||
Loss on sale of property and equipment
|
-
|
32,649
|
-
|
32,649
|
||||||||||||
Total costs and expenses
|
7,640,369
|
38,047,011
|
24,674,324
|
62,975,893
|
||||||||||||
|
||||||||||||||||
Loss from operations
|
(1,280,202
|
)
|
(28,825,832
|
)
|
(4,119,986
|
)
|
(32,963,937
|
)
|
||||||||
|
||||||||||||||||
Other (expense) income
|
||||||||||||||||
Interest expense
|
(215,781
|
)
|
(9,229
|
)
|
(216,948
|
)
|
(84,339
|
)
|
||||||||
Interest and other income
|
150
|
2,382
|
801
|
25,566
|
||||||||||||
Other income (expense), net
|
(215,631
|
)
|
(6,847
|
)
|
(216,147
|
)
|
(58,773
|
)
|
||||||||
|
||||||||||||||||
Change in fair value of warrant liability
|
(401,000
|
)
|
2,224
|
(401,000
|
)
|
93,784
|
||||||||||
|
||||||||||||||||
Loss before income tax benefit
|
(1,896,833
|
)
|
(28,830,455
|
)
|
(4,737,133
|
)
|
(32,928,926
|
)
|
||||||||
Income tax expense (benefit)
|
(623,699
|
)
|
2,976,217
|
(1,218,092
|
)
|
1,509,395
|
||||||||||
Net loss
|
$
|
(1,273,134
|
)
|
$
|
(31,806,672
|
)
|
$
|
(3,519,041
|
)
|
$
|
(34,438,321
|
)
|
||||
|
||||||||||||||||
Net loss per common share, basic and diluted
|
$
|
(0.70
|
)
|
$
|
(17.59
|
)
|
$
|
(1.94
|
)
|
$
|
(20.05
|
)
|
||||
|
||||||||||||||||
Weighted average shares used in computing net loss
per common share:
|
||||||||||||||||
Basic and diluted
|
1,809,676
|
1,808,099
|
1,809,676
|
1,717,816
|
Professional Diversity Network, Inc.
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
|
|
Nine Months Ended September 30,
|
|||||||
|
2016
|
2015
|
||||||
Cash flows from operating activities:
|
(Revised) | |||||||
Net loss
|
$
|
(3,519,041
|
)
|
$
|
(34,438,321
|
)
|
||
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||
Depreciation and amortization
|
2,498,136
|
2,730,880
|
||||||
Deferred tax benefit
|
(1,218,092
|
)
|
1,509,395
|
|||||
Gain on lease cancellation
|
(423,998
|
)
|
-
|
|||||
Impairment expense
|
-
|
26,744,249
|
||||||
Stock-based compensation expense
|
217,547
|
350,667
|
||||||
Amortization of deferred financing costs
|
156,594
|
-
|
||||||
Amortization of prepaid license fees
|
112,500
|
168,750
|
||||||
Amortization of premium on short-term investments, net
|
-
|
76,878
|
||||||
Amortization of customer deposits
|
(112,500
|
)
|
(168,750
|
)
|
||||
Change in fair value of warrant liability
|
401,000
|
(93,784
|
)
|
|||||
Accretion of debt discount
|
-
|
7,814
|
||||||
Loss on sale of property and equipment
|
-
|
32,649
|
||||||
Changes in operating assets and liabilities:
|
||||||||
Accounts receivable
|
671,056
|
886,810
|
||||||
Prepaid expenses and other current assets
|
181,903
|
(682,541
|
)
|
|||||
Incremental direct costs
|
476,300
|
(184,420
|
)
|
|||||
Accounts payable
|
893,210
|
(1,630,793
|
)
|
|||||
Accrued expenses
|
681,779
|
1,510,273
|
||||||
Deferred revenue
|
(3,560,351
|
)
|
(1,089,802
|
)
|
||||
Deferred rent
|
10,279
|
63,267
|
||||||
Other liabilities
|
45,098
|
-
|
||||||
Net cash used in operating activities
|
(2,488,580
|
)
|
(4,206,779
|
)
|
||||
|
||||||||
Cash flows from investing activities:
|
||||||||
Proceeds from maturities of short-term investments
|
500,000
|
5,297,000
|
||||||
Purchases of short-term investments
|
-
|
(925,000
|
)
|
|||||
Costs incurred to develop technology
|
-
|
(393,385
|
)
|
|||||
Purchases of property and equipment
|
-
|
(53,596
|
)
|
|||||
Security deposit
|
194,411
|
(14,952
|
)
|
|||||
Net cash provided by investing activities
|
694,411
|
3,910,067
|
||||||
|
||||||||
Cash flows from financing activities:
|
||||||||
Proceeds from the sale of common stock
|
-
|
5,235,300
|
||||||
Repayment of note payable
|
-
|
(1,294,753
|
)
|
|||||
Payment of offering costs
|
-
|
(670,877
|
)
|
|||||
Proceeds from line of credit
|
1,942,625
|
-
|
||||||
Payment of debt issuance costs related to Master Credit Facility
|
(488,082
|
)
|
-
|
|||||
Payment of deferred offering costs related to CFL Transaction
|
(1,049,026
|
)
|
-
|
|||||
Merchant reserve
|
(166,078
|
)
|
(400,000
|
)
|
||||
Shares repurchased on vesting of restricted stock
|
-
|
(195,976
|
)
|
|||||
Payments of capital leases
|
-
|
(15,232
|
)
|
|||||
Net cash provided by financing activities
|
239,439
|
2,658,462
|
||||||
|
||||||||
Net (decrease) increase in cash and cash equivalents
|
(1,554,730
|
)
|
2,361,750
|
|||||
Cash and cash equivalents, beginning of period
|
2,070,693
|
1,519,467
|
||||||
Cash and cash equivalents, end of period
|
$
|
515,963
|
$
|
3,881,217
|
||||
|
||||||||
Supplemental disclosures of other cash flow information:
|
||||||||
Cash paid for income taxes
|
$
|
4,605
|
$
|
4,631
|
||||
Cash paid for interest
|
$
|
21,740
|
$
|
-
|
||||
Non-cash investing and financing activities:
|
||||||||
Issuance of warrants in connection with Master Credit Facility
|
$
|
783,458
|
$
|
-
|
||||
Reclassification of derivative liability to additional paid in capital
|
$
|
781,000
|
$
|
-
|
||||
Working capital adjustment to note payable
|
$
|
-
|
$
|
32,281
|
||||
Increase in goodwill resulting from NAPW legal settlement
|
$
|
-
|
$
|
133,693
|
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)
|
December 31, 2015
|
||||||||||||
As previously
|
||||||||||||
reported
|
Adjustment
|
As revised
|
||||||||||
Deferred revenue
|
$
|
7,507,176
|
$
|
2,459,717
|
$
|
9,966,893
|
||||||
Total current liabilities
|
13,368,329
|
2,459,717
|
15,828,046
|
|||||||||
Total liabilities
|
18,782,659
|
2,459,717
|
21,242,376
|
|||||||||
Accumulated deficit
|
(40,890,017
|
)
|
(2,459,717
|
)
|
(43,349,734
|
)
|
||||||
Stockholders’ equity
|
$
|
22,645,157
|
$
|
(2,459,717
|
)
|
$
|
20,185,440
|
Three Months Ended
|
||||||||||||
September 30, 2015
|
||||||||||||
As previously
|
||||||||||||
reported
|
Adjustment
|
As revised
|
||||||||||
Revenues
|
$
|
9,343,312
|
$
|
(122,133
|
)
|
$
|
9,221,179
|
|||||
Impairment expense
|
24,717,157
|
2,027,092
|
26,744,249
|
|||||||||
Loss from operations
|
(26,676,607
|
)
|
(2,149,225
|
)
|
(28,825,832
|
)
|
||||||
Net loss
|
$
|
(29,657,447
|
)
|
$
|
(2,149,225
|
)
|
$
|
(31,806,672
|
)
|
|||
Net loss per share:
|
||||||||||||
Basic and Diluted (as adjusted for the Reverse Stock Split)
|
$
|
(16.40
|
)
|
$
|
(1.19
|
)
|
$
|
(17.59
|
)
|
Nine Months Ended
|
||||||||||||
September 30, 2015
|
||||||||||||
As previously
|
||||||||||||
reported
|
Adjustment
|
As revised
|
||||||||||
Revenues
|
$
|
30,444,581
|
$
|
(432,625
|
)
|
$
|
30,011,956
|
|||||
Impairment expense
|
24,717,157
|
2,027,092
|
26,744,249
|
|||||||||
Loss from operations
|
(30,504,220
|
)
|
(2,459,717
|
)
|
(32,963,937
|
)
|
||||||
Net loss
|
$
|
(31,978,604
|
)
|
$
|
(2,459,717
|
)
|
$
|
(34,438,321
|
)
|
|||
Net loss per share:
|
||||||||||||
Basic and Diluted (as adjusted for the Reverse Stock Split)
|
$
|
(18.62
|
)
|
$
|
(1.43
|
)
|
$
|
(20.05
|
)
|
Professional Diversity Network, Inc.
|
Condensed Consolidated Notes to Financial Statements (Unaudited)
|
Nine Months Ended
|
||||||||||||
September 30, 2015
|
||||||||||||
As previously
|
||||||||||||
reported
|
Adjustment
|
As revised
|
||||||||||
Net loss
|
$
|
(31,978,604
|
)
|
$
|
(2,459,717
|
)
|
$
|
(34,438,321
|
)
|
|||
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||||||
Impairment expense
|
24,717,157
|
2,027,092
|
26,744,249
|
|||||||||
Changes in operating assets and liabilities: deferred revenue
|
(1,522,427
|
)
|
432,625
|
(1,089,802
|
)
|
|||||||
Cash used in operating activities
|
$
|
(4,206,779
|
)
|
$
|
—
|
$
|
(4,206,779
|
)
|
Professional Diversity Network, Inc.
|
Condensed Consolidated Notes to Financial Statements (Unaudited)
|
|
|
2016
|
|
|
2015
|
|
||
Warrants to purchase common stock
|
|
|
514,064
|
|
|
|
45,314
|
|
Stock options
|
|
|
72,886
|
|
|
|
19,732
|
|
Unvested restricted stock
|
|
|
5,556
|
|
|
|
25,002
|
|
|
|
|
592,506
|
|
|
|
90,048
|
|
Professional Diversity Network, Inc.
|
Condensed Consolidated Notes to Financial Statements (Unaudited)
|
Professional Diversity Network, Inc.
|
Condensed Consolidated Notes to Financial Statements (Unaudited)
|
|
September 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
|
216,060
|
488,906
|
||||||
Balance, end of period
|
$
|
1,648,328
|
$
|
1,432,268
|
||||
Capitalized Technology, net
|
$
|
240,463
|
$
|
456,523
|
Professional Diversity Network, Inc.
|
Condensed Consolidated Notes to Financial Statements (Unaudited)
|
September 30, 2016
|
Useful Lives
(Years)
|
Gross
Carrying
Amount
|
Accumulated
Amortization
|
Net Carrying
Amount
|
||||||||||||
Long-lived intangible assets:
|
||||||||||||||||
Sales Process
|
10
|
$
|
3,970,000
|
$
|
(799,514
|
)
|
$
|
3,170,486
|
||||||||
Paid Member Relationships
|
5
|
890,000
|
(358,472
|
)
|
531,528
|
|||||||||||
Member Lists
|
5
|
8,957,000
|
(3,607,681
|
)
|
5,349,319
|
|||||||||||
Developed Technology
|
3
|
978,000
|
(636,666
|
)
|
341,334
|
|||||||||||
Trade Name/Trademarks
|
4
|
480,000
|
(239,861
|
)
|
240,139
|
|||||||||||
Customer Relationships
|
5
|
280,000
|
(102,667
|
)
|
177,333
|
|||||||||||
|
15,555,000
|
(5,744,861
|
)
|
9,810,139
|
||||||||||||
Indefinite-lived intangible assets:
|
||||||||||||||||
Trade Name
|
90,400
|
|||||||||||||||
|
||||||||||||||||
Intangible assets, net
|
$
|
9,900,539
|
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 (three months)
|
$
|
717,100
|
||
2017
|
2,802,233
|
|||
2018
|
2,563,872
|
|||
2019
|
1,846,697
|
|||
2020
|
397,000
|
|||
2021
|
397,000
|
|||
Thereafter
|
1,086,237
|
|||
|
$
|
9,810,139
|
Professional Diversity Network, Inc.
|
Condensed Consolidated Notes to Financial Statements (Unaudited)
|
Total Master Credit Facility
|
$
|
1,942,625
|
||
Less: Unamortized debt issuance costs
|
(1,114,946
|
)
|
||
Total Master Credit Facility, net of unamortized debt issuance costs
|
827,679
|
|||
Less: Current portion of Master Credit Facility
|
-
|
|||
Long-term portion
|
$
|
827,679
|
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)
|
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
|
19,653
|
$
|
30.00
|
8.0
|
$
|
-
|
||||||||||
Granted
|
57,500
|
8.19
|
||||||||||||||
Exercised
|
-
|
-
|
||||||||||||||
Forfeited/Canceled/Expired
|
(4,287
|
)
|
(31.81
|
)
|
||||||||||||
Outstanding – September 30, 2016
|
72,866
|
$
|
12.69
|
9.5
|
$
|
-
|
||||||||||
|
||||||||||||||||
Exercisable – September 30, 2016
|
30,264
|
$
|
16.29
|
9.2
|
$
|
-
|
Professional Diversity Network, Inc.
|
Condensed Consolidated Notes to Financial Statements (Unaudited)
|
|
Number of
Options
|
Weighted
Average
Grant
Date Fair
Value
|
||||||
Unvested - December 31, 2015
|
13,571
|
$
|
13.76
|
|||||
Granted
|
57,500
|
4.01
|
||||||
Vested
|
(27,552
|
)
|
(7.07
|
)
|
||||
Forfeited/Canceled/Expired
|
(917
|
)
|
(13.83
|
)
|
||||
Unvested – September 30, 2016
|
42,602
|
$
|
4.93
|
Risk-free interest rate
|
|
|
1.14
|
%
|
Expected dividend yield
|
|
|
0.00
|
%
|
Expected volatility
|
|
|
53.96
|
%
|
Expected term
|
|
5.5 years
|
|
Number of
Warrants
|
Weighted
Average
Exercise
Price
|
Weighted
Average
Remaining
Contractual
Life
(in Years)
|
Aggregate
Intrinsic
Value
|
||||||||||||
Outstanding – December 31, 2015
|
45,314
|
$
|
66.72
|
3.5
|
$
|
-
|
||||||||||
Granted
|
468,750
|
6.80
|
||||||||||||||
Exercised
|
-
|
-
|
||||||||||||||
Forfeited/Canceled/Expired
|
-
|
-
|
||||||||||||||
Outstanding – September 30, 2016
|
514,064
|
$
|
12.09
|
4.7
|
$
|
2,127,813
|
||||||||||
|
||||||||||||||||
Exercisable – September 30, 2016
|
389,064
|
$
|
9.54
|
4.5
|
$
|
2,127,813
|
Professional Diversity Network, Inc.
|
Condensed Consolidated Notes to Financial Statements (Unaudited)
|
|
Number of
Warrants
|
Weighted
Average
Grant
Date Fair
Value
|
||||||
Unvested – December 31, 2015
|
-
|
$
|
-
|
|||||
Granted
|
468,750
|
1.67
|
||||||
Vested
|
(468,750
|
)
|
(1.67
|
)
|
||||
Forfeited/Canceled/Expired
|
-
|
-
|
||||||
Unvested – September 30, 2016
|
-
|
$
|
-
|
Professional Diversity Network, Inc.
|
Condensed Consolidated Notes to Financial Statements (Unaudited)
|
August 10,
|
June 30,
|
|||||||
|
2016
|
2016
|
||||||
Strike price
|
$
|
2.00
|
$
|
2.00
|
||||
Market price
|
$
|
6.08
|
$
|
3.20
|
||||
Expected life
|
5 years
|
5 years
|
||||||
Risk-free interest rate
|
1.07
|
%
|
1.01
|
%
|
||||
Dividend yield
|
0.00
|
%
|
0.00
|
%
|
||||
Volatility
|
100
|
%
|
100
|
%
|
Balance – January 1, 2016
|
$
|
-
|
||
Initial value of derivative liability
|
380,000
|
|||
Change in fair value of derivative liability
|
401,000
|
|||
Reclassification of derivative liability to additional paid in capital
|
(781,000
|
)
|
||
Balance – September 30, 2016
|
$
|
-
|
Professional Diversity Network, Inc.
|
Condensed Consolidated Notes to Financial Statements (Unaudited)
|
|
Three Months Ended September 30, 2016
|
|||||||||||||||
|
PDN
Network |
NAPW
Network
|
Noble Voice
|
Consolidated
|
||||||||||||
|
||||||||||||||||
Membership fees and related services
|
$
|
-
|
$
|
3,748,334
|
$
|
-
|
$
|
3,748,334
|
||||||||
Lead generation
|
-
|
-
|
1,554,370
|
1,554,370
|
||||||||||||
Recruitment services
|
954,887
|
-
|
-
|
954,887
|
||||||||||||
Products sales and other
|
-
|
52,857
|
-
|
52,857
|
||||||||||||
Consumer advertising and marketing solutions
|
49,719
|
-
|
-
|
49,719
|
||||||||||||
Total revenues
|
1,004,606
|
3,801,191
|
1,554,370
|
6,360,167
|
||||||||||||
Loss from operations
|
(118,948
|
)
|
(894,361
|
)
|
(266,893
|
)
|
(1,280,202
|
)
|
||||||||
Depreciation and amortization
|
33,471
|
738,473
|
47,950
|
819,894
|
||||||||||||
Income tax expense (benefit)
|
(222,808
|
)
|
(289,767
|
)
|
(111,124
|
)
|
(623,699
|
)
|
||||||||
Capital expenditures
|
-
|
-
|
-
|
-
|
||||||||||||
Net loss
|
(512,771
|
)
|
(604,594
|
)
|
(155,769
|
)
|
(1,273,134
|
)
|
|
Nine Months Ended September 30, 2016
|
|||||||||||||||
|
PDN
Network |
NAPW
Network
|
Noble Voice
|
Consolidated
|
||||||||||||
|
||||||||||||||||
Membership fees and related services
|
$
|
-
|
$
|
13,047,652
|
$
|
-
|
$
|
13,047,652
|
||||||||
Lead generation
|
-
|
-
|
4,489,919
|
4,489,919
|
||||||||||||
Recruitment services
|
2,295,556
|
-
|
-
|
2,295,556
|
||||||||||||
Products sales and other
|
-
|
544,440
|
-
|
544,440
|
||||||||||||
Consumer advertising and marketing solutions
|
176,771
|
-
|
-
|
176,771
|
||||||||||||
Total revenues
|
2,472,327
|
13,592,092
|
4,489,919
|
20,554,338
|
||||||||||||
Loss from operations
|
(839,840
|
)
|
(2,173,251
|
)
|
(1,106,895
|
)
|
(4,119,986
|
)
|
||||||||
Depreciation and amortization
|
130,121
|
2,207,703
|
160,312
|
2,498,136
|
||||||||||||
Income benefit
|
(373,717
|
)
|
(557,439
|
)
|
(286,936
|
)
|
(1,218,092
|
)
|
||||||||
Capital expenditures
|
-
|
-
|
-
|
-
|
||||||||||||
Net loss
|
(1,083,270
|
)
|
(1,615,812
|
)
|
(819,959
|
)
|
(3,519,041
|
)
|
|
At September 30, 2016
|
|||||||||||||||
Goodwill
|
$
|
339,451
|
$
|
19,861,739
|
$
|
-
|
$
|
20,201,190
|
||||||||
Intangible assets, net
|
90,400
|
9,482,806
|
327,333
|
9,900,539
|
||||||||||||
Total assets
|
2,151,870
|
32,410,397
|
1,891,617
|
36,453,884
|
|
Three Months Ended September 30, 2015 (Revised)
|
|||||||||||||||
|
PDN
Network
|
NAPW
Network
|
Noble Voice
|
Consolidated
|
||||||||||||
|
||||||||||||||||
Membership fees and related services
|
$
|
-
|
$
|
5,652,873
|
$
|
-
|
$
|
5,652,873
|
||||||||
Lead generation
|
-
|
-
|
2,334,276
|
2,334,276
|
||||||||||||
Recruitment services
|
830,250
|
-
|
-
|
830,250
|
||||||||||||
Products sales and other
|
-
|
330,769
|
-
|
330,769
|
||||||||||||
Consumer advertising and marketing solutions
|
73,011
|
-
|
-
|
73,011
|
||||||||||||
Total revenues
|
903,261
|
5,983,642
|
2,334,276
|
9,221,179
|
||||||||||||
Loss from operations
|
(491,126
|
)
|
(27,995,556
|
)
|
(339,150
|
)
|
(28,825,832
|
)
|
||||||||
Depreciation and amortization
|
93,922
|
786,148
|
45,614
|
925,684
|
||||||||||||
Income tax benefit
|
2,362,220
|
543,018
|
70,979
|
2,976,217
|
||||||||||||
Capital expenditures
|
-
|
-
|
-
|
-
|
||||||||||||
Net loss
|
(2,857,969
|
)
|
(28,538,574
|
)
|
(410,129
|
)
|
(31,806,672
|
)
|
Professional Diversity Network, Inc.
|
Condensed Consolidated Notes to Financial Statements (Unaudited)
|
|
Nine Months Ended September 30, 2015 (Revised)
|
|||||||||||||||
|
PDN
Network
|
NAPW
Network
|
Noble Voice
|
Consolidated
|
||||||||||||
|
||||||||||||||||
Membership fees and related services
|
$
|
-
|
$
|
18,885,308
|
$
|
-
|
$
|
18,885,308
|
||||||||
Lead generation
|
-
|
-
|
7,853,402
|
7,853,402
|
||||||||||||
Recruitment services
|
2,432,951
|
-
|
-
|
2,432,951
|
||||||||||||
Products sales and other
|
-
|
631,198
|
-
|
631,198
|
||||||||||||
Consumer advertising and marketing solutions
|
209,097
|
-
|
-
|
209,097
|
||||||||||||
Total revenues
|
2,642,048
|
19,516,506
|
7,853,402
|
30,011,956
|
||||||||||||
Loss from operations
|
(1,727,721
|
)
|
(30,417,806
|
)
|
(818,410
|
)
|
(32,963,937
|
)
|
||||||||
Depreciation and amortization
|
285,677
|
2,308,361
|
136,842
|
2,730,880
|
||||||||||||
Income tax expense (benefit)
|
1,895,588
|
(271,103
|
)
|
(115,090
|
)
|
1,509,395
|
||||||||||
Capital expenditures
|
-
|
50,216
|
13,938
|
64,154
|
||||||||||||
Net loss
|
(3,588,298
|
)
|
(30,146,703
|
)
|
(703,320
|
)
|
(34,438,321
|
)
|
|
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)
|
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Three Months Ended
September 30, |
Nine Months Ended
September 30, |
|||||||||||||||
2016
|
2015
|
2016
|
2015
|
|||||||||||||
Percentage of revenue by product:
|
||||||||||||||||
Membership fees and related services
|
58.9
|
%
|
61.3
|
%
|
63.5
|
%
|
62.9
|
%
|
||||||||
Lead generation
|
24.4
|
%
|
25.3
|
%
|
21.8
|
%
|
26.2
|
%
|
||||||||
Recruitment services
|
15.0
|
%
|
9.0
|
%
|
11.2
|
%
|
8.1
|
%
|
||||||||
Products sales and other
|
0.8
|
%
|
3.6
|
%
|
2.6
|
%
|
2.1
|
%
|
||||||||
Consumer advertising and consumer marketing solutions
|
0.8
|
%
|
0.8
|
%
|
0.9
|
%
|
0.7
|
%
|
As of
September 30, |
Change
|
|||||||||||
2016
|
2015
|
(Percent)
|
||||||||||
(in thousands)
|
||||||||||||
PDN Network Registered Users (1)
|
8,951
|
6,837
|
30.9
|
%
|
||||||||
NAPW Network Total Membership (2)
|
880
|
831
|
5.9
|
%
|
(1) | The number of registered users may be higher than the number of actual users due to various factors. For more information, see “Risk Factors—The reported number of our registered users is higher than the number of actual individual users, and a substantial majority of our visits are generated by a minority of our users” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015, as amended on May 4, 2016 (the” 2015 Annual Report”). |
(2) | Includes both paid and unpaid members. |
Three Months Ended
September 30, |
Change
|
|||||||||||
2016
|
2015
|
(Percent)
|
||||||||||
(in thousands)
|
||||||||||||
NAPW Network bookings
|
$
|
2,904
|
$
|
5,224
|
(44.4
|
%)
|
||||||
PDN Network bookings
|
$
|
778
|
$
|
688
|
13.1
|
%
|
(Amount in thousands)
|
||||||||||||||||
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
2016
|
2015
|
2016
|
2015
|
|||||||||||||
Net loss
|
$
|
(1,273
|
)
|
$
|
(31,807
|
)
|
$
|
(3,519
|
)
|
$
|
(34,438
|
)
|
||||
Impairment expense
|
-
|
26,744
|
-
|
26,744
|
||||||||||||
Stock-based compensation expense
|
118
|
114
|
218
|
351
|
||||||||||||
Depreciation and amortization
|
820
|
926
|
2,498
|
2,731
|
||||||||||||
Litigation settlement
|
-
|
-
|
500
|
-
|
||||||||||||
Gain on lease cancellation
|
-
|
-
|
(424
|
)
|
-
|
|||||||||||
Change in fair value of warrant
liability
|
401
|
(2
|
)
|
401
|
(94
|
)
|
||||||||||
Interest expense
|
216
|
9
|
217
|
84
|
||||||||||||
Interest and other income
|
-
|
(2
|
)
|
(1
|
)
|
(26
|
)
|
|||||||||
Income tax expense (benefit)
|
(624
|
)
|
2,976
|
(1,218
|
)
|
1,509
|
||||||||||
Adjusted EBITDA
|
$
|
(342
|
)
|
$
|
(1,042
|
)
|
$
|
(1,328
|
)
|
$
|
(3,139
|
)
|
Three Months Ended
|
||||||||||||||||
September 30,
|
Change
|
Change
|
||||||||||||||
2016
|
2015
|
(Dollars)
|
(Percent)
|
|||||||||||||
(in thousands)
|
||||||||||||||||
Revenues
|
||||||||||||||||
Membership fees and related services
|
$
|
3,748
|
$
|
5,653
|
$
|
(1,905
|
)
|
(33.7
|
%)
|
|||||||
Lead generation
|
1,554
|
2,334
|
(780
|
)
|
(33.4
|
%)
|
||||||||||
Recruitment services
|
955
|
830
|
125
|
15.1
|
%
|
|||||||||||
Products sales and other
|
53
|
331
|
(278
|
)
|
(84.0
|
%)
|
||||||||||
Consumer advertising and marketing solutions
|
50
|
73
|
(23
|
)
|
(31.5
|
%)
|
||||||||||
Total revenues
|
$
|
6,360
|
$
|
9,221
|
$
|
(2,861
|
)
|
(31.0
|
%)
|
Nine Months Ended
|
||||||||||||||||
September 30,
|
Change
|
Change
|
||||||||||||||
2016
|
2015
|
(Dollars)
|
(Percent)
|
|||||||||||||
(in thousands)
|
||||||||||||||||
Revenues
|
||||||||||||||||
Membership fees and related services
|
$
|
13,048
|
$
|
18,885
|
$
|
(5,837
|
)
|
(30.9
|
%)
|
|||||||
Lead generation
|
4,490
|
7,853
|
(3,363
|
)
|
(42.8
|
%)
|
||||||||||
Recruitment services
|
2,295
|
2,433
|
(138
|
)
|
(5.7
|
%)
|
||||||||||
Products sales and other
|
544
|
631
|
(87
|
)
|
(13.8
|
%)
|
||||||||||
Consumer advertising and marketing solutions
|
177
|
209
|
(32
|
)
|
(15.3
|
%)
|
||||||||||
Total revenues
|
$
|
20,554
|
$
|
30,011
|
$
|
(9,457
|
)
|
(31.5
|
%)
|
Three Months Ended
|
||||||||||||||||
September 30,
|
Change
|
Change
|
||||||||||||||
2016
|
2015
|
(Dollars)
|
(Percent)
|
|||||||||||||
(in thousands)
|
||||||||||||||||
NAPW Network
|
$
|
3,801
|
$
|
5,984
|
$
|
(2,183
|
)
|
(36.5
|
%)
|
|||||||
PDN Network
|
1,005
|
903
|
102
|
11.3
|
%
|
|||||||||||
Noble Voice
|
1,554
|
2,334
|
(780
|
)
|
(33.4
|
%)
|
||||||||||
Total revenues
|
$
|
6,360
|
$
|
9,221
|
$
|
(2,861
|
)
|
(31.0
|
%)
|
Nine Months Ended
|
||||||||||||||||
September 30,
|
Change
|
Change
|
||||||||||||||
2016
|
2015
|
(Dollars)
|
(Percent)
|
|||||||||||||
(in thousands)
|
||||||||||||||||
NAPW Network
|
$
|
13,592
|
$
|
19,516
|
$
|
(5,924
|
)
|
(30.4
|
%)
|
|||||||
PDN Network
|
2,472
|
2,642
|
(170
|
)
|
(6.4
|
%)
|
||||||||||
Noble Voice
|
4,490
|
7,853
|
(3,363
|
)
|
(42.8
|
%)
|
||||||||||
Total revenues
|
$
|
20,554
|
$
|
30,011
|
$
|
(9,457
|
)
|
(31.5
|
%)
|
Three Months Ended
|
||||||||||||||||
September 30,
|
Change
|
Change
|
||||||||||||||
2016
|
2015
|
(Dollars)
|
(Percent)
|
|||||||||||||
(in thousands)
|
||||||||||||||||
Costs and expenses:
|
||||||||||||||||
Cost of revenues
|
$
|
745
|
$
|
1,464
|
$
|
(719
|
)
|
(49.1
|
%)
|
|||||||
Sales and marketing
|
3,064
|
5,132
|
(2,068
|
)
|
(40.3
|
%)
|
||||||||||
General and administrative
|
3,011
|
3,748
|
(737
|
)
|
(19.7
|
%)
|
||||||||||
Impairment expense
|
-
|
26,744
|
(26,744
|
)
|
(100.0
|
%)
|
||||||||||
Depreciation and amortization
|
820
|
926
|
(106
|
)
|
(11.4
|
%)
|
||||||||||
Loss on sale of property and equipment
|
-
|
33
|
(33
|
)
|
(100.0
|
%)
|
||||||||||
Total costs and expenses
|
$
|
7,640
|
$
|
38,047
|
$
|
(30,407
|
)
|
(79.9
|
%)
|
Nine Months Ended
|
||||||||||||||||
September 30,
|
Change
|
Change
|
||||||||||||||
2016
|
2015
|
(Dollars)
|
(Percent)
|
|||||||||||||
(in thousands)
|
||||||||||||||||
Costs and expenses:
|
||||||||||||||||
Cost of revenues
|
$
|
2,434
|
$
|
4,647
|
$
|
(2,213
|
)
|
(47.6
|
%)
|
|||||||
Sales and marketing
|
10,314
|
17,227
|
(6,913
|
)
|
(40.1
|
%)
|
||||||||||
General and administrative
|
9,428
|
11,594
|
(2,166
|
)
|
(18.7
|
%)
|
||||||||||
Impairment expense
|
-
|
26,744
|
(26,744
|
)
|
(100.0
|
%)
|
||||||||||
Depreciation and amortization
|
2,498
|
2,731
|
(233
|
)
|
8.5
|
%)
|
||||||||||
Gain on sale of property and equipment
|
-
|
33
|
(33
|
)
|
(100.0
|
%)
|
||||||||||
Total costs and expenses
|
$
|
24,674
|
$
|
62,976
|
$
|
(38,303
|
)
|
(60.8
|
%)
|
|
Three Months Ended
|
|||||||||||||||
|
September 30,
|
Change
|
Change
|
|||||||||||||
|
2016
|
2015
|
(Dollars)
|
(Percent)
|
||||||||||||
|
(in thousands)
|
|||||||||||||||
Total
|
$
|
(216
|
)
|
$
|
(7
|
)
|
$
|
(209
|
)
|
2985.7
|
%
|
|
Nine Months Ended
|
|||||||||||||||
|
September 30,
|
Change
|
Change
|
|||||||||||||
|
2016
|
2015
|
(Dollars)
|
(Percent)
|
||||||||||||
|
(in thousands)
|
|||||||||||||||
Total
|
$
|
(216
|
)
|
$
|
(59
|
)
|
$ |
(157
|
)
|
266.1
|
%
|
|
Three Months Ended
|
|||||||||||||||
|
September 30,
|
Change
|
Change
|
|||||||||||||
|
2016
|
2015
|
(Dollars)
|
(Percent)
|
||||||||||||
|
(in thousands)
|
|||||||||||||||
Total
|
$
|
(401
|
)
|
$
|
2
|
$
|
(403
|
)
|
(201.5
|
%)
|
|
Nine Months Ended
|
|||||||||||||||
|
September 30,
|
Change
|
Change
|
|||||||||||||
|
2016
|
2015
|
(Dollars)
|
(Percent)
|
||||||||||||
|
(in thousands)
|
|||||||||||||||
Total
|
$
|
(401
|
)
|
$
|
94
|
$
|
(495
|
)
|
(527
|
%)
|
|
Three Months Ended
|
||||||||||||||
|
September 30,
|
Change
|
Change
|
||||||||||||
|
2016
|
2015
|
(Dollars)
|
(Percent)
|
|||||||||||
|
(in thousands)
|
||||||||||||||
Total
|
$
|
(624
|
)
|
$
|
2,976
|
$
|
(3,600
|
)
|
(121.0
|
)%
|
|
Nine Months Ended
|
||||||||||||||
|
September 30,
|
Change
|
Change
|
||||||||||||
|
2016
|
2015
|
(Dollars)
|
(Percent)
|
|||||||||||
|
(in thousands)
|
||||||||||||||
Total
|
$
|
(1,218
|
)
|
$
|
1,509
|
$
|
(2,727
|
)
|
(180.7
|
)%
|
|
Three Months Ended
|
|||||||||||||||
|
September 30,
|
Change
|
Change
|
|||||||||||||
|
2016
|
2015
|
(Dollars)
|
(Percent)
|
||||||||||||
|
(in thousands)
|
|||||||||||||||
NAPW Network
|
$
|
(604
|
)
|
$
|
(28,539
|
)
|
$
|
27,935
|
(97.9
|
%)
|
||||||
PDN Network
|
(513
|
)
|
(2,858
|
)
|
2,345
|
(82.1
|
%)
|
|||||||||
Noble Voice
|
(156
|
)
|
(410
|
)
|
254
|
(62.0
|
%)
|
|||||||||
Consolidated Net Loss
|
$
|
(1,273
|
)
|
$
|
(31,807
|
)
|
$
|
30,534
|
(96.0
|
%)
|
|
Nine Months Ended
|
|||||||||||||||
|
September 30,
|
Change
|
Change
|
|||||||||||||
|
2016
|
2015
|
(Dollars)
|
(Percent)
|
||||||||||||
|
(in thousands)
|
|||||||||||||||
NAPW Network
|
$
|
(1,616
|
)
|
$
|
(30,146
|
)
|
$
|
28,530
|
(94.6
|
%)
|
||||||
PDN Network
|
(1,083
|
)
|
(3,588
|
)
|
2,505
|
(69.8
|
%)
|
|||||||||
Noble Voice
|
(820
|
)
|
(704
|
)
|
(116
|
)
|
16.5
|
%
|
||||||||
Consolidated Net Loss
|
$
|
(3,519
|
)
|
$
|
(34,438
|
)
|
$
|
30,919
|
(89.8
|
%)
|
|
September 30,
|
December 31,
|
||||||
|
2016
|
2015
|
||||||
|
(in thousands)
|
|||||||
Cash and cash equivalents
|
$
|
516
|
$
|
2,071
|
||||
Short-term investments
|
$
|
-
|
$
|
500
|
||||
Working capital (deficiency)
|
$
|
(10,597
|
)
|
$
|
(9,199
|
)
|
|
Nine Months Ended
|
|||||||
|
September 30,
|
|||||||
|
2016
|
2015
|
||||||
|
(in thousands)
|
|||||||
Cash provided by (used in):
|
||||||||
Operating activities
|
$
|
(2,489
|
)
|
$
|
(4,207
|
)
|
||
Investing activities
|
694
|
3,910
|
||||||
Financing activities
|
239
|
2,658
|
||||||
Net increase (decrease) in cash and cash equivalents
|
$
|
(1,556
|
)
|
$
|
2,361
|
· | 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; |
· | our expectations regarding future increases in sales and marketing costs and general and administrative expenses; and |
· | our beliefs regarding our liquidity requirements, the availability of cash and capital resources to fund our business in the future and intended use of liquidity. |
· | our ability to realize the anticipated benefits from the 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 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. |
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
ITEM 4. | CONTROLS AND PROCEDURES |
ITEM 1. | LEGAL PROCEEDINGS |
ITEM 1A. | RISK FACTORS |
ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
ITEM 3. | DEFAULTS UPON SENIOR SECURITIES |
ITEM 4. | MINE SAFETY DISCLOSURE |
ITEM 5. | OTHER INFORMATION |
ITEM 6. | EXHIBITS |
2.2
|
Stock Purchase Agreement, dated as of August 12, 2016, by and between the Company and Cosmic Forward Limited, including as Exhibit A the form of Stockholders’ Agreement (incorporated herein by reference to Exhibit 2.1 to Current Report on Form 8-K filed on August 15, 2016).
|
3.1
|
Amended and Restated Certificate of Incorporation of the Company, as amended through October 17, 2016.
|
3.2
|
Second Amended and Restated Bylaws of Professional Diversity Network, Inc., dated November 7, 2016 (incorporated herein by reference to Exhibit 3.2 to Current Report on Form 8-K filed on November 8, 2016).
|
4.9
|
Stockholders’ Agreement, dated as of November 7, 2016, by and among the Company, CFL, Maoji (Michael) Wang, Jingbo Song, Yong Xiong Zheng and Nan Nan Kou (incorporated herein by reference to Exhibit 4.9 to Current Report on Form 8-K filed on November 8, 2016).
|
10.29
|
Employment Agreement between the Company and Katherine Butkevich, dated September 30, 2016 (incorporated herein by reference to Exhibit 10.29 to Current Report on Form 8-K filed on October 4, 2016).
|
10.30
|
Confidential Settlement and Mutual Release of All Claims, dated November 4, 2016 by and between the Company and Matthew B. Proman.
|
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
|
PROFESSIONAL DIVERSITY NETWORK, INC.
|
||||
Date: November 14, 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
|
3.1
|
Amended and Restated Certificate of Incorporation of the Company, as amended through October 17, 2016.
|
10.30
|
Confidential Settlement and Mutual Release of All Claims, dated November 4, 2016 by and between the Company and Matthew B. Proman.
|
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
|
PROFESSIONAL DIVERSITY NETWORK,
INC. |
|||
By:
|
/s/ James Kirsch
|
||
Name:
|
James R. Kirsch
|
||
Title:
|
Chief Executive Officer
|
i. | are essential and material terms of this Agreement, and that the Parties would not agree to settle and compromise the Parties’ disputes in the absence of these covenants; |
ii. | are supported by adequate consideration as set forth in this Agreement; |
iii. | are reasonable and necessary for and tailored to protect Parties’ legitimate business interests, including without limitation the Parties’ reputation, goodwill, confidential information, and customer base; |
iv. | do not and will not prevent Proman from earning a livelihood, and/or place any undue restraint or hardship upon Proman; |
v. | are not in conflict with or injurious to any public interest. |
By PDN
|
By Proman
|
|||
/s/ Christopher Wesser
|
/s/ Matthew Proman
|
|||
Christopher Wesser
|
Matthew Proman
|
|||
EVP, General Counsel & Secretary
|
||||
Dated:
|
Dated:
|
|||
11/4/2016
|
11/4/2016
|
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
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Chief Executive Officer
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(Principal Executive Officer)
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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
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Chief Financial Officer
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(Principal Financial Officer)
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(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
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Chief Executive Officer
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/s/ David Mecklenburger | ||
David Mecklenburger
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Chief Financial Officer
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Document and Entity Information - shares |
9 Months Ended | |
---|---|---|
Sep. 30, 2016 |
Nov. 09, 2016 |
|
Document and Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 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 | Q3 | |
Document Fiscal Year Focus | 2016 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 3,622,851 |
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Common stock, par value per share | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 45,000,000 | 45,000,000 |
Common stock, shares issued | 1,815,232 | 1,815,232 |
Common stock, shares outstanding | 1,808,628 | 1,808,628 |
Treasury stock, shares | 1,048 | 1,048 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS - USD ($) |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
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Revenues | ||||
Membership fees and related services | $ 3,748,334 | $ 5,652,873 | $ 13,047,652 | $ 18,885,308 |
Lead generation | 1,554,370 | 2,334,276 | 4,489,919 | 7,853,402 |
Recruitment services | 954,887 | 830,250 | 2,295,556 | 2,432,951 |
Products sales and other | 52,857 | 330,769 | 544,440 | 631,198 |
Consumer advertising and marketing solutions | 49,719 | 73,011 | 176,771 | 209,097 |
Total revenues | 6,360,167 | 9,221,179 | 20,554,338 | 30,011,956 |
Costs and expenses: | ||||
Cost of revenues | 745,159 | 1,464,214 | 2,433,550 | 4,647,520 |
Sales and marketing | 3,064,454 | 5,132,077 | 10,314,145 | 17,226,640 |
General and administrative | 3,010,862 | 3,748,138 | 9,428,493 | 11,593,955 |
Impairment expense | 26,744,249 | 26,744,249 | ||
Depreciation and amortization | 819,894 | 925,684 | 2,498,136 | 2,730,880 |
Loss on sale of property and equipment | 32,649 | 32,649 | ||
Total costs and expenses | 7,640,369 | 38,047,011 | 24,674,324 | 62,975,893 |
Loss from operations | (1,280,202) | (28,825,832) | (4,119,986) | (32,963,937) |
Other (expense) income | ||||
Interest expense | (215,781) | (9,229) | (216,948) | (84,339) |
Interest and other income | 150 | 2,382 | 801 | 25,566 |
Other income (expense), net | (215,631) | (6,847) | (216,147) | (58,773) |
Change in fair value of warrant liability | (401,000) | 2,224 | (401,000) | 93,784 |
Loss before income tax benefit | (1,896,833) | (28,830,455) | (4,737,133) | (32,928,926) |
Income tax expense (benefit) | (623,699) | 2,976,217 | (1,218,092) | 1,509,395 |
Net loss | $ (1,273,134) | $ (31,806,672) | $ (3,519,041) | $ (34,438,321) |
Net loss per common share, basic and diluted per common share: | $ (0.70) | $ (17.59) | $ (1.94) | $ (20.05) |
Weighted average shares used in computing net loss | ||||
Basic and diluted | 1,809,676 | 1,808,099 | 1,809,676 | 1,717,816 |
Description of Business |
9 Months Ended |
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Sep. 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 through its website, as well as at events hosted at its local chapters across the country. The Noble Voice division typically conducts over 24,000 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.
Reverse Stock Split and Increase in Authorized Shares
On September 27, 2016, the Company effected a 1-for-8 reverse stock split of its common stock (“Reverse Stock Split”) and proportionately reduced the number of shares of common stock the Company is authorized to issue. The par value of the Company’s common stock remained the same. As a result of the Reverse Stock Split, every eight shares of common stock was combined into one share of common stock. Immediately after the September 27, 2016 effective date, the Company had 1,808,628 shares of common stock outstanding. All share and per share amounts have been retroactively restated to reflect the Reverse Stock Split.
On October 17, 2016, following the approval of its stockholders, the Company amended its Amended and Restated Certificate of Incorporation in order to increase the number of authorized shares of its common stock to 45,000,000 shares.
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Liquidity, Financial Condition and Management's Plans |
9 Months Ended |
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Sep. 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
At September 30, 2016, the Company’s principal sources of liquidity were its cash and cash equivalents, the net proceeds from its 2015 public offering and the Master Credit Facility (as defined in Note 6) with White Winston, as described in Note 6. As discussed in Note 14, in November 2016, the Company received net proceeds from the closing of the CFL Transaction (as defined in Note 8) and terminated the Master Credit Facility.
The Company had an accumulated deficit of approximately $46,869,000 at September 30, 2016. During the nine months ended September 30, 2016, the Company generated a net loss of approximately $3,519,000, used cash in operations of approximately $2,489,000, and the Company expects that it will continue to generate operating losses for the foreseeable future. At September 30, 2016, the Company had a cash balance of approximately $516,000. Total revenues were approximately $6,360,000 and $9,221,000 for the three months ended September 30, 2016 and 2015, respectively, and approximately $20,554,000 and $30,012,000 for the nine months ended September 30, 2016 and 2015, respectively. The Company had a working capital deficit of approximately $10,597,000 and $9,199,000 at September 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). During the three months ended September 30, 2016, the Company received additional advances in the aggregate amount of $370,050. As of September 30, 2016, the Company had drawn approximately $791,000 more than its availability under the Master Credit Facility. As described in Note 14, on November 7, 2016, in connection with the Share Issuance described below, the Company repaid all outstanding obligations under the Master Credit Facility and terminated the Master Credit Facility.
On November 7, 2016, the Company consummated the issuance and sale of 1,777,417 shares of the Company’s common stock to Cosmic Forward Limited at a price of $9.60 per share (“Share Issuance”) (see Note 14). In addition, on November 7, 2016, the Company completed the purchase of 312,500 shares of its common stock at a price of $9.60 per share (“Tender Offer”) (see Note 14). The Company received total gross proceeds of $17,100,000 from the Share Issuance, or $14,100,000 after giving effect to the payment for the 312,500 shares of common stock from the Tender Offer. The Company received approximately $9,000,000 in net proceeds from the Share Issuance, after repayment of all amounts outstanding under the Master Credit Facility and the payment of transaction-related expenses.
Management believes that its available funds and cash flow from operations will be sufficient to meet its working capital requirements for the next twelve months from the date of this filing. However, there can be no assurances that the plans and actions proposed by management will be successful, that the Company will generate anticipated revenues, or that unforeseen circumstances will not require additional funding sources in the future or effectuate plans to conserve liquidity. Future efforts to raise additional funds may not be successful or they may not be available on acceptable terms, if at all.
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Summary of Significant Accounting Policies |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies | 3. Summary of Significant Accounting Policies
Basis of Presentation – 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 nine months ended September 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.
Revision of Financial Statements – During the preparation of the Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2016, the Company determined that it had incorrectly recorded a discount against certain deferred revenue acquired in the acquisition of NAPW on September 24, 2014 and miscalculated amortization of such deferred revenue during the quarter ended March 31, 2015. The error resulted in an understatement of “Deferred revenue” and “Goodwill” recorded in the acquisition and subsequently resulted in an overstatement of “Revenues” and an understatement of “Impairment expense” and “Net loss” during each of the quarterly periods during the year ended December 31, 2015 and for the year ended December 31, 2015. The Company assessed the materiality of the misstatement in accordance with SEC Staff Accounting Bulletin No. 99, “Materiality,” and concluded that this misstatement was not material to the Company’s consolidated financial position or results of operations for the prior periods and that amendments of previously filed reports were not required. However, the Company determined that the impact of the corrections would be too significant to record in the third quarter of fiscal 2016. As such, the revision for the correction is reflected in the three and nine months ended September 30, 2015 financial information in this Quarterly Report on Form 10‑Q. Disclosure of the revised amounts will also be reflected in future filings containing the applicable periods.
The effect of this revision on the line items within the Company’s condensed consolidated balance sheets as of December 31, 2015 was as follows:
The effect of this revision on the line items within the Company’s condensed consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2015 was as follows:
The effect of this revision on the line items within the Company’s condensed consolidated statements of cash flows for the nine months ended September 30, 2015 was as follows:
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 this plan may cancel their membership in the program at any time and receive a partial refund (amount remaining in deferred revenue) or due to consumer protection legislation, a full refund based on the policies of the member’s credit card company.
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. Direct sales to customers are most typically a twelve month contract for services and as such the revenue for each contract is recognized ratably over its twelve month term. Event revenue is recognized in the month that the event takes place and e-commerce sales are for one month job postings and the revenue from those sales are recognized in the month the sale is made.
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 September 30, 2016 and 2015, the Company incurred advertising and marketing expenses of approximately $657,000 and $1,506,000, respectively. For the nine months ended September 30, 2016 and 2015, the Company incurred advertising and marketing expenses of approximately $1,842,000 and $4,227,000, respectively. These amounts are included in sales and marketing expenses in the accompanying condensed consolidated statements of comprehensive loss. At September 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 nine months ended September 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 October 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-17, “Consolidation (Topic 810): Interests Held through Related Parties That Are under Common Control” (“ASU 2016-17”). ASU 2016-17 changes how a reporting entity that is a decision maker should consider indirect interests in a variable interest entity (“VIE”) held through an entity under common control. If a decision maker must evaluate whether it is the primary beneficiary of a VIE, it will only need to consider its proportionate indirect interest in the VIE held through a common control party. ASU 2016-17 amends ASU 2015-02 and currently directs the decision maker to treat the common control party’s interest in the VIE as if the decision maker held the interest itself. ASU 2016-17 is effective for public business entities in fiscal years beginning after December 15, 2016, including interim periods within those fiscal years, with early adoption permitted. The Company does not anticipate that the adoption of ASU 2016-17 will have a material effect on its financial position or results of operations.
In October 2016, the FASB issued ASU No. 2016-16, “Income Taxes (Topic 740)” (“ASU 2016-16”), which reduces the complexity in the accounting standards by allowing the recognition of current and deferred income taxes for an intra-entity asset transfer, other than inventory, when the transfer occurs. This guidance is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted using a modified retrospective transition approach. The Company is currently assessing the impact of the adoption of this guidance on its consolidated financial statements.
In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows: Clarification of Certain Cash Receipts and Cash Payments” (“ASU 2016-15”), which eliminates the diversity in practice related to the classification of certain cash receipts and payments in the statement of cash flows, by adding or clarifying guidance on eight specific cash flow issues: debt prepayment or debt extinguishment costs; settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies (including bank-owned life insurance policies); distributions received from equity method investees; beneficial interests in securitization transactions; and separately identifiable cash flows and application of the predominance principle. ASU 2016-15 is effective for annual and interim periods beginning after December 15, 2017 and early adoption is permitted. ASU 2016-15 provides for retrospective application for all periods presented. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses” (“ASU 2016-13”). ASU 2016-13 introduces a new model for estimating credit losses for certain types of financial instruments, including loans receivable, held-to-maturity debt securities and net investments in direct financing leases, amongst other financial instruments. ASU 2016-13 also modifies the impairment model for available-for-sale debt securities and expands the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating the allowance for losses. ASU 2016-13 is effective for public business entities in fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early application of the guidance permitted. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.
In May 2016, the FASB issued 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 FASB issued 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 does not believe the adoption of this guidance will have a material effect 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 $62,495 and $153,984 for the three months ended September 30, 2016 and 2015, respectively, and $216,060 and $335,585 for the nine months ended September 30, 2016 and 2015, respectively, is recorded in depreciation and amortization expense in the accompanying condensed consolidated statements of operations and comprehensive loss.
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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 September 30, 2016 and 2015 and $2,151,300 and $2,165,286 for the nine months ended September 30, 2016 and 2015, respectively, is recorded in depreciation and amortization expense in the accompanying condensed consolidated statements of operations and comprehensive loss.
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Master Credit Facility |
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||
Master Credit Facility | 6. Master Credit Facility
At September 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 were 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 could make advances under the Master Credit Facility provided that the aggregate principal amount outstanding under the Master Credit Facility did not exceed 75% of the then-outstanding balance of the Company’s customer receivables (as defined in the Master Credit Facility). During the three months ended September 30, 2016, the Company received additional advances in the aggregate amount of $370,050. With the discretionary approval of White Winston, as of September 30, 2016, the Company had drawn approximately $791,000 more than its availability under the Master Credit Facility. The Company could 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 originally matured on June 30, 2018 and bore interest at a rate of 8.0% per annum. Interest was 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 was repaid in full, the Company was required to pay an additional fee of 3.0% on the average daily unborrowed portion of the Master Credit Facility. The fee was payable quarterly in arrears. As more fully discussed in Note 14, on November 7, 2016, in connection with the closing of the Share Issuance, the Company repaid in full all amounts owing under the Mater Credit Facility and terminated the Master Credit Facility and the related Board Representation Agreement.
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 were deposited into such account and acted as security for the Master Credit Facility. The Company had 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) 125,000 shares of the Company’s common stock at a price of $2.00 per share (the “Fixed $2.00 Warrant”); (ii) 218,750 shares of the Company’s common stock at a price of $2.00 per share (the “Pro Rata Warrant”), provided that the number of shares for which the Pro Rata Warrants were exercisable would be pro-rata based on the ratio of the actual advances made under the Master Credit Facility to the aggregate face amount of the Master Credit Facility and (iii) 125,000 shares of the Company’s common stock at a price of $20.00 per share (the “Fixed $20.00 Warrant”). The Fixed $2.00 Warrant and the Pro Rata Warrant are exercisable for five years from the date of issuance and the Fixed $20.00 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 had 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 exceeded $2,000,000 until such time as White Winston’s interest (as defined in the Board Representation Agreement) fell below five percent for 60 consecutive days. The number of nominees that White Winston was entitled to designate was determined in accordance with the terms of the Board Representation Agreement and, provided that no event of default had occurred, could not exceed two nominees. If an event of default had occurred and was continuing, White Winston had 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 was entitled to designate in no event could 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 $2.00 Warrant and Fixed $20.00 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 recorded a
$401,000 change in the fair value of the liability during the three and nine months ended September 30, 2016 (see Note 12).
The Company recorded the value of $131,325 attributable to the 68,800 exercisable Pro Rata Warrants at June 30, 2016 as a component of additional paid in capital in the accompanying condensed consolidated balance sheets.
On August 10, 2016, the Company entered into an Amendment to Master Credit Facility and Consent and Waiver Agreement (the “Amendment”) with White Winston in connection with the CFL Transaction (see Note 8). 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 in connection with the CFL Transaction. In consideration for the Amendment, the Company agreed that the Pro Rata Warrant would 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.
As a result of the Amendment, all 218,750 Pro Rata Warrants became exercisable and the derivative liability in the amount of $781,000 pertaining to the Pro Rata Warrants was reclassified to additional paid in capital (see Note 12).
The issuance of the Fixed $2.00 Warrant, the Fixed $20.00 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 nine months ended September 30, 2016, accretion of the costs amounted to $97,933.
The Company incurred cash fees associated with the closing of the Master Credit Facility of $488,082. 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 nine months ended September 30, 2016, accretion of the fees amounted to $58,661.
Contractual interest expense on the Master Credit Facility amounted to $35,000 for the three and nine months ended September 30, 2016.
On November 7, 2016, in connection with the closing of the CFL Transaction described below, the Company (i) repaid in full amounts owed under the Master Credit Facility and (ii) terminated the Master Credit Facility and related agreements between the Company and White Winston, including the Board Representation Agreement. All security interest created under the Master Credit Facility were released upon repayment of the amounts due under and the termination of the Master Credit Facility.
The Fixed $20.00 Warrant issued to White
Winston is still held by White Winston and remains outstanding. On November 7, 2016, White Winston exercised the Fixed $2.00
Warrant and the Pro Rata Warrant to purchase an aggregate of 343,750 shares of common stock.
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Commitments and Contingencies |
9 Months Ended |
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Sep. 30, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | 7. Commitments and Contingencies
Lease Obligations – The Company leases office space, a corporate apartment, office furniture and equipment under various operating lease agreements.
The Company leases an office for its headquarters in Illinois, as well as office spaces for its events business, sales and administrative offices under non-cancelable lease arrangements that provide for payments on a graduated basis with various expiration dates.
Rent expense, amounting to approximately $258,000 and $383,000 for the three months ended September 30, 2016 and 2015, respectively, and approximately $808,000 and $1,083,000 for the nine months ended September 30, 2016 and 2015, respectively, is included in general and administrative expense in the condensed consolidated statements of comprehensive loss. Included in rent expense is sublease income of approximately $93,000 and $90,000 for the three months ended September 30, 2016 and 2015, respectively, and approximately $279,000 and $255,000 for the nine months ended September 30, 2016 and 2015, respectively.
During the nine months ended September 30, 2016, the Company recorded a gain on lease cancellation of approximately $424,000 related to the closing of its Los Angeles, CA office in general and administrative expenses in the accompanying condensed consolidated statements of operations and comprehensive loss.
Legal Proceedings
The Company and its wholly-owned subsidiary, NAPW, Inc., are parties to an action captioned LinkedIn Corp. v. NAPW, Inc. and Professional Diversity Network, Inc., No. 16-CV-299784 (Santa Clara Superior Ct.). The complaint was filed on September 12, 2016. LinkedIn Corp. (“LinkedIn”), the plaintiff, seeks payment of outstanding amounts it claims are owed under a marketing agreement between LinkedIn and NAPW. The Company has prepared but has not yet filed a counterclaim. LinkedIn has agreed to postpone the deadline for the Company to file a responsive pleading to January 5, 2017. The parties have also agreed to mediate their respective claims, with a mediation currently scheduled for December 20, 2016. The case is in its preliminary stages and it is uncertain whether or not its outcome is likely to have a material impact on the Company’s financial position.
The Company and its wholly-owned subsidiary, NAPW, Inc., are parties to litigation captioned Gauri Ramnath, et al. v. Professional Diversity Network, Inc., et al., No. BC604153 (Los Angeles Superior Ct.), a putative class action alleging violations of various California Labor Code (wage & hour) sections. The plaintiffs seek unspecified damages. The complaint was filed in December 2015 and the Company has answered. On April 28, 2016, the parties entered into a mutual settlement agreement and release, on behalf of all putative class participants, in the amount of $500,000. Such amount is recorded in accrued expenses in the accompanying condensed consolidated balance sheet as of September 30, 2016. The parties’ agreement and its amount are subject to Court and state agency approval. The Company has been notified that the Court will hold a hearing to consider final approval on November 28, 2016. The Company anticipates that, if the global settlement is approved, it will have to fund the settlement in late Fourth Quarter of 2016 or early First Quarter of 2017.
The Company and its wholly-owned subsidiary, NAPW, Inc., are parties to an administrative action before the National Labor Relations Board captioned as In re Professional Diversity Network, Cases 31-CA-159810 and 31-CA-162904 (NLRB), alleging violations of the National Labor Relations Act, where employee was allegedly terminated for asserting “union organizing” rights. While the Company disputes that any rights were impacted, the NLRB has issued its preliminary order requiring the Company to take certain remedial actions in the form of posting notices and revising certain policies. The Company is currently working with the agency to comply with the NLRB order. The Company does not anticipate that its outcome will have a material impact on the Company’s financial position.
The Company is a party to an administrative action before the Equal Employment Opportunity Commission captioned as Paul Sutcliffe v. Professional Diversity Network, Inc., No. 533-2016-00033 (EEOC), alleging violations of Title VII and the Age Discrimination in Employment Act, where employee was allegedly terminated due to his race (Caucasian) and his age (over 40). The EEOC has issued a preliminary finding that the Company discriminated against the complainant. The Company is currently weighing its appellate options, but does not anticipate that this case will have a material impact on the Company’s financial position.
On November 4, 2016, the Company entered into a Confidential Settlement and Mutual Release of All Claims (the “Release”) with Matthew B. Proman (“Proman”), pursuant to which the Company agreed among other things that (i) it would pay Proman $300,000 at the closing of the Share Issuance, (ii) the Separation Agreement and Mutual Release of All Claims, dated July 16, 2015 between Proman and the Company (the “Separation Agreement”) would be terminated as of November 4, 2016, and (iii) the Seller Promissory Note in the principal amount of $445,000 dated September 24, 2014 in favor of Proman (the “Promissory Note”) would be terminated as of November 4, 2016. The Company also agreed that notwithstanding the termination of the Separation Agreement pursuant to the Release, Proman’s co-sale right would be preserved and he would continue to hold the options and warrants he held as of November 4, 2016. On November 7, 2016, the Company paid Proman $300,000 pursuant to the Release.
General Legal Matters
From time to time, the Company is involved in legal matters arising in the ordinary course of business. While the Company believes that such matters are currently not material, there can be no assurance that matters arising in the ordinary course of business for which the Company is, or could be, involved in litigation, will not have a material adverse effect on its business, financial condition or results of operations. |
CFL Transaction |
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Sep. 30, 2016 | |
Cfl Transaction | |
CFL Purchase Agreement | 8. CFL Transaction
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 agreed to issue and sell to CFL (the “Share Issuance and Sale”), and CFL agreed to purchase, at a price of $9.60 per share (the “Per Share Price”), upon the terms and subject to the conditions set forth in the Purchase Agreement, a number of shares of the Company’s common stock, par value $0.01 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 a co-sale right, an existing shareholder of the Company would have the right to sell up to 205,925 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, would reduce the number of shares of Common Stock to be purchased by CFL directly from the Company. The Company also commenced a partial issuer tender offer to purchase up to 312,500 shares of Common Stock (the “Tender Offer”). The number of shares of Common Stock that CFL agreed to purchase was that amount that would allow 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”). The parties agreed that, 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 deposited 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 was being held by the Escrow Agent in accordance with, and was released pursuant to the terms and subject to the conditions set forth in, the Escrow Agreement.
The Purchase Agreement contained customary representations, warranties, covenants and agreements of the parties thereto, and completion of the Share Issuance and Sale was subject to the approval of the Company’s stockholders at a special meeting of stockholders. The Purchase Agreement also contained 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 Purchase Agreement also contained customary indemnification and termination provisions.
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”) agreed to enter into a stockholders’ agreement.
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”) agreed to enter into a stockholders’ agreement (“Stockholders’
Agreement”). The Stockholders’ Agreement provides certain limitations on the ability of CFL and the CFL Shareholders
to acquire additional securities from the Company, and provides 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 also provides 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 is 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 provides 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 is entitled to nominate five of nine directors on the Board of Directors.
The Stockholders’ Agreement further provides 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 also provides certain demand, shelf and piggyback registration
rights to CFL that 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.
As described in Note 14, on November 7, 2016, the CFL Transaction closed. |
Employment Agreement |
9 Months Ended |
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Sep. 30, 2016 | |
Employment Agreement | |
Employment Agreement | 9. Employment Agreement
On September 30, 2016, the Company entered into an employment agreement (the “Employment Agreement”) with Katherine Butkevich, the Company’s Chief Executive Officer. The Employment Agreement provides for an initial term of two years, and is subject to extension upon agreement of the Company and Ms. Butkevich unless either party provides advance written notice of its or her intention not to extend. Under the Employment Agreement, Ms. Butkevich will receive an annual base salary of $300,000, subject to increase, but not decrease, in the sole discretion of the Company’s Board of Directors (the “Board”) or the Compensation Committee of the Board (the “Compensation Committee”). Ms. Butkevich will be eligible to receive an annual incentive bonus, at a target amount of not less than her base salary, based upon the achievement of one or more performance goals, targets, measurements and other factors, established for such year by the Compensation Committee. Ms. Butkevich will also participate in all benefit plans and programs, subject to certain conditions and exceptions, as are generally provided by the Company to its other senior executive employees.
Under the terms of Employment Agreement, Ms. Butkevich is subject to non-solicitation, non-competition and non-interference restrictive covenants during her employment and for the 12-month period following her last day of employment with the Company. The Employment Agreement also contains customary confidentiality, work product and return of Company property covenants.
In addition, Ms. Butkevich is entitled to severance pay if she is terminated without “cause” or resigns for “good reason,” each as defined in the Employment Agreement. Upon such termination, provided that she executes a release and waiver agreement, Ms. Butkevich will be entitled to receive an amount equal to the sum of her base salary, any earned but unpaid bonus for the year prior to the year of termination, and the pro rata portion of any bonus earned for the year in which termination occurs, as well as continuation of applicable benefits for a period of 12 months following her termination.
In connection with the approval of the Employment Agreement, Ms. Butkevich also received a non-qualified stock option to purchase 57,500 shares of the Company’s common stock at an exercise price of $8.19 per share. The option will vest in accordance with the following schedule: (i) 1/3 of the shares underlying the option will vest immediately upon award, (ii) 1/3 of the shares underlying the option will vest on March 31, 2017, and (iii) 1/3 of the shares underlying the option will vest on March 31, 2018. |
Income Taxes |
9 Months Ended |
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Sep. 30, 2016 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | 10. Income Taxes
The effective income tax rate for the three months
ended September 30, 2016 and 2015 was 32.9% and (10.3)%, respectively, resulting in a $624,000 income tax benefit and
$2,976,000 income tax expense, respectively. The effective income tax rate for the nine months ended September 30, 2016 and
2015 was 25.7% and (4.6)%, respectively, resulting in a $1,218,000 income tax benefit and $1,509,000 income tax expense,
respectively. During the three months ended September 30, 2016 and 2015, the Company recorded a valuation allowance of
$627,000 and $4,106,000, respectively, and during the nine months ended September 30, 2016 and 2015, the Company recorded a
valuation allowance of $832,000 and $4,106,000, 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 the Company 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 nine months ended September 30, 2016 and has determined a full
valuation allowance continues to be applicable. |
Stock-Based Compensation |
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Stock-Based Compensation | 11. Stock-Based Compensation
Equity Incentive Plans – The Company adopted the 2013 Equity Compensation Plan under which the Company reserved 62,500 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 225,000 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 nine months ended September 30, 2016:
A summary of the changes in the Company’s unvested stock options is as follows:
As discussed in Note 9, the Company granted 57,500 stock options to Ms. Butkevich in connection with her Employment Agreement. These options had a fair value of $230,575, using the Black-Scholes option-pricing model with the following assumptions:
The options are exercisable at an exercise price of $8.19 per share over a ten-year term and vest over three years. The Company recorded $77,000 as compensation expense during the three and nine months ended September 30, 2016 pertaining to this grant.
The Company recorded non-cash compensation expense of approximately $90,000 and $31,000 for the three months ended September 30, 2016 and 2015, respectively, and approximately $135,000 and $74,000 for the nine months ended September 30, 2016 and 2015, respectively, pertaining to stock options.
Total unrecognized compensation expense related to unvested stock options at September 30, 2016 amounts to approximately $182,000 and is expected to be recognized over a remaining weighted average period of 1.4 years.
Warrants
The following table summarizes the Company’s warrant activity for the nine months ended September 30, 2016:
As discussed in Note 6, on June 30, 2016, the Company granted warrants to purchase 468,750 shares of common stock. 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:
On November 7, 2016, warrants to purchase an aggregate of 343,750 shares of common stock were exercised for an aggregate exercise price of $687,500.
Restricted Stock
As of September 30, 2016 and December 31, 2015, there were 5,556 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 September 30, 2016 and 2015, respectively, and approximately $83,000 and $277,000 for the nine months ended September 30, 2016 and 2015, respectively, pertaining to restricted stock.
Total unrecognized compensation expense related to unvested restricted stock at September 30, 2016 amounts to approximately $129,000 and is expected to be recognized over a weighted average period of 1.2 years. |
Fair Value of Financial Instruments |
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Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value of Financial Instruments | 12. 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 September 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:
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:
As discussed in Note 6, on August 10, 2016, the Company entered into an Amendment with White Winston pursuant to which the Company agreed that the Pro Rata Warrant would be fully exercisable, notwithstanding the pro rata formula set forth in the warrant. Accordingly, as the derivative liability was eliminated on August 10, 2016, the Company reclassified $781,000 to additional paid in capital. |
Segment Information |
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Segment Information | 13. 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 nine months ended September 30, 2016 and 2015:
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Subsequent Events |
9 Months Ended |
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Sep. 30, 2016 | |
Subsequent Events [Abstract] | |
Subsequent Events | 14. 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.
Settlement with Matthew Proman
On November 4, 2016, the Company entered into the Release with Matthew Proman (see Note 7).
Exercise of Pro Rata and Fixed $2.00 Warrant
On November 4, 2016, White Winston exercised the Pro Rata Warrant and the Fixed $2.00 Warrant, such that the Company issued to White Winston an aggregate of 343,750 shares of the Company’s common stock for aggregate proceeds of $687,500. The Company used these proceeds to pay down a portion of the outstanding Master Credit Facility.
Payoff and Termination of Master Credit Facility
On November 7, 2016, in connection with the closing of the CFL Transaction described below, the Company (i) repaid in full amounts owed under the Master Credit Facility and (ii) terminated the Master Credit Facility and related agreements between the Company and White Winston, including the Board Representation Agreement. All security interest created under the Master Credit Facility were released upon repayment of the amounts due under and the termination of the Master Credit Facility.
CFL Share Issuance and Completion of the Tender Offer
On November 7, 2016, the Company consummated the issuance and sale of 1,777,417 shares of its common stock to CFL at a price of $9.60 per share, pursuant to the terms of the Purchase Agreement, dated August 12, 2016. In addition, on November 7, 2016, the Company completed the purchase of 312,500 shares of its common stock at a price of $9.60 per share, net to the seller in cash, pursuant to the Tender Offer. The Company received approximately $9,000,000 in net proceeds from the Share Issuance, after the payment for the shares repurchased in the Tender Offer, the repayment of all amounts outstanding under the Master Credit Facility and the payment of transaction-related expenses.
At the closing of the CFL Transaction, the Company entered into a Stockholders’ Agreement, dated November 7, 2016 (the “Stockholders’ Agreement”) with CFL and each of its shareholders: Maoji (Michael) Wang, Jingbo Song, Yong Xiong Zheng and Nan Nan Kou (the “CFL Shareholders”). The Stockholders’ Agreement sets forth the agreement of the Company, CFL and the CFL Shareholders relating to board representation rights, transfer restrictions, standstill provisions, voting, registration rights and other matters following the closing of the Share Issuance. |
Summary of Significant Accounting Policies (Policies) |
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basis of Presentation | Basis of Presentation – 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 nine months ended September 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.
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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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Revision of Financial Statements | Revision of Financial Statements – During the preparation of the Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2016, the Company determined that it had incorrectly recorded a discount against certain deferred revenue acquired in the acquisition of NAPW on September 24, 2014 and miscalculated amortization of such deferred revenue during the quarter ended March 31, 2015. The error resulted in an understatement of “Deferred revenue” and “Goodwill” recorded in the acquisition and subsequently resulted in an overstatement of “Revenues” and an understatement of “Impairment expense” and “Net loss” during each of the quarterly periods during the year ended December 31, 2015 and for the year ended December 31, 2015. The Company assessed the materiality of the misstatement in accordance with SEC Staff Accounting Bulletin No. 99, “Materiality,” and concluded that this misstatement was not material to the Company’s consolidated financial position or results of operations for the prior periods and that amendments of previously filed reports were not required. However, the Company determined that the impact of the corrections would be too significant to record in the third quarter of fiscal 2016. As such, the revision for the correction is reflected in the three and nine months ended September 30, 2015 financial information in this Quarterly Report on Form 10‑Q. Disclosure of the revised amounts will also be reflected in future filings containing the applicable periods.
The effect of this revision on the line items within the Company’s condensed consolidated balance sheets as of December 31, 2015 was as follows:
The effect of this revision on the line items within the Company’s condensed consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2015 was as follows:
The effect of this revision on the line items within the Company’s condensed consolidated statements of cash flows for the nine months ended September 30, 2015 was as follows:
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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 this plan may cancel their membership in the program at any time and receive a partial refund (amount remaining in deferred revenue) or due to consumer protection legislation, a full refund based on the policies of the member’s credit card company.
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. Direct sales to customers are most typically a twelve month contract for services and as such the revenue for each contract is recognized ratably over its twelve month term. Event revenue is recognized in the month that the event takes place and e-commerce sales are for one month job postings and the revenue from those sales are recognized in the month the sale is made.
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 September 30, 2016 and 2015, the Company incurred advertising and marketing expenses of approximately $657,000 and $1,506,000, respectively. For the nine months ended September 30, 2016 and 2015, the Company incurred advertising and marketing expenses of approximately $1,842,000 and $4,227,000, respectively. These amounts are included in sales and marketing expenses in the accompanying condensed consolidated statements of comprehensive loss. At September 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 nine months ended September 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 October 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-17, “Consolidation (Topic 810): Interests Held through Related Parties That Are under Common Control” (“ASU 2016-17”). ASU 2016-17 changes how a reporting entity that is a decision maker should consider indirect interests in a variable interest entity (“VIE”) held through an entity under common control. If a decision maker must evaluate whether it is the primary beneficiary of a VIE, it will only need to consider its proportionate indirect interest in the VIE held through a common control party. ASU 2016-17 amends ASU 2015-02 and currently directs the decision maker to treat the common control party’s interest in the VIE as if the decision maker held the interest itself. ASU 2016-17 is effective for public business entities in fiscal years beginning after December 15, 2016, including interim periods within those fiscal years, with early adoption permitted. The Company does not anticipate that the adoption of ASU 2016-17 will have a material effect on its financial position or results of operations.
In October 2016, the FASB issued ASU No. 2016-16, “Income Taxes (Topic 740)” (“ASU 2016-16”), which reduces the complexity in the accounting standards by allowing the recognition of current and deferred income taxes for an intra-entity asset transfer, other than inventory, when the transfer occurs. This guidance is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted using a modified retrospective transition approach. The Company is currently assessing the impact of the adoption of this guidance on its consolidated financial statements.
In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows: Clarification of Certain Cash Receipts and Cash Payments” (“ASU 2016-15”), which eliminates the diversity in practice related to the classification of certain cash receipts and payments in the statement of cash flows, by adding or clarifying guidance on eight specific cash flow issues: debt prepayment or debt extinguishment costs; settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies (including bank-owned life insurance policies); distributions received from equity method investees; beneficial interests in securitization transactions; and separately identifiable cash flows and application of the predominance principle. ASU 2016-15 is effective for annual and interim periods beginning after December 15, 2017 and early adoption is permitted. ASU 2016-15 provides for retrospective application for all periods presented. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses” (“ASU 2016-13”). ASU 2016-13 introduces a new model for estimating credit losses for certain types of financial instruments, including loans receivable, held-to-maturity debt securities and net investments in direct financing leases, amongst other financial instruments. ASU 2016-13 also modifies the impairment model for available-for-sale debt securities and expands the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating the allowance for losses. ASU 2016-13 is effective for public business entities in fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early application of the guidance permitted. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.
In May 2016, the FASB issued 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 FASB issued 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 does not believe the adoption of this guidance will have a material effect 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) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Effect of Revision on Financial Statements |
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Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share |
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Capitalized Technology (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Research and Development [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Capitalized Technology |
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Intangible Assets (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Intangible Assets, Net (Excluding Goodwill) [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Intangible Assets |
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Schedule of Future Annual Estimated Amortization Expense |
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Master Credit Facility (Tables) |
9 Months Ended | |||||||||||||||||||||||||
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Sep. 30, 2016 | ||||||||||||||||||||||||||
Debt Disclosure [Abstract] | ||||||||||||||||||||||||||
Schedule of Company's Master Credit Facility |
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Stock-Based Compensation (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Chief Executive Officer [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Fair Value Measurement Assumptions |
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Warrant [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Warrants Activity |
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Schedule of Unvested Award activity |
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Employee Stock Options [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Stock Option Activity |
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Schedule of Unvested Award activity |
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Fair Value of Financial Instruments (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Fair Value Assumptions Used to Value Warrant Liability |
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Summary of Changes in Fair Value of Level 3 Financial Liabilities |
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Segment Information (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Segment Information |
|
Description of Business (Narrative) (Details) |
Sep. 27, 2016
shares
|
Oct. 17, 2016
shares
|
Sep. 30, 2016
shares
|
Dec. 31, 2015
shares
|
---|---|---|---|---|
Description Of Business Narrative Details | ||||
Reverse stock split ratio | 8 | |||
Common stock, shares outstanding | 1,808,628 | 1,808,628 | 1,808,628 | |
Common stock, shares authorized | 45,000,000 | 45,000,000 | 45,000,000 |
Summary of Significant Accounting Policies (Narrative) (Details) - USD ($) |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
Dec. 31, 2015 |
|
Incremental Direct Costs [Abstract] | |||||
Advertising and marketing expenses | $ 657,000 | $ 1,506,000 | $ 1,482,000 | $ 4,227,000 | |
Prepaid advertising costs |
Summary of Significant Accounting Policies (Revision of Balance Sheets) (Details) - USD ($) |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Deferred revenue | $ 6,406,542 | $ 9,966,893 |
Total current liabilities | 13,730,184 | 15,828,046 |
Total liabilities | 18,385,480 | 21,242,376 |
Accumulated deficit | (46,868,775) | (43,349,734) |
Stockholders' equity | $ 18,068,404 | 20,185,440 |
Previously Reported [Member] | ||
Deferred revenue | 7,507,176 | |
Total current liabilities | 13,368,329 | |
Total liabilities | 18,782,659 | |
Accumulated deficit | (40,890,017) | |
Stockholders' equity | 22,645,157 | |
Adjustment [Member] | ||
Deferred revenue | 2,459,717 | |
Total current liabilities | 2,459,717 | |
Total liabilities | 2,459,717 | |
Accumulated deficit | (2,459,717) | |
Stockholders' equity | $ (2,459,717) |
Summary of Significant Accounting Policies (Revision of Statements of Operations) (Details) - USD ($) |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Revenues | $ 6,360,167 | $ 9,221,179 | $ 20,554,338 | $ 30,011,956 |
Impairment expense | 26,744,249 | 26,744,249 | ||
Loss from operations | (1,280,202) | (28,825,832) | (4,119,986) | (32,963,937) |
Net loss | $ (1,273,134) | $ (31,806,672) | $ (3,519,041) | $ (34,438,321) |
Net income per share: Basic and Diluted | $ (0.70) | $ (17.59) | $ (1.94) | $ (20.05) |
Previously Reported [Member] | ||||
Revenues | $ 9,343,312 | $ 30,444,581 | ||
Impairment expense | 24,717,157 | 24,717,157 | ||
Loss from operations | (26,676,607) | (30,504,220) | ||
Net loss | $ (29,657,447) | $ (31,978,604) | ||
Net income per share: Basic and Diluted | $ (16.40) | $ (18.62) | ||
Adjustment [Member] | ||||
Revenues | $ (122,133) | $ (432,625) | ||
Impairment expense | 2,027,092 | 2,027,092 | ||
Loss from operations | (2,149,225) | (2,459,717) | ||
Net loss | $ (2,149,225) | $ (2,459,717) | ||
Net income per share: Basic and Diluted | $ (1.19) | $ (1.43) |
Summary of Significant Accounting Policies (Schedule of Potentially Dilutive Securities) (Details) - shares |
9 Months Ended | |
---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Anti-dillutive securities | 592,506 | 89,969 |
Warrant [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Anti-dillutive securities | 514,064 | 45,314 |
Stock options [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Anti-dillutive securities | 72,886 | 19,653 |
Restricted Stock [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Anti-dillutive securities | 5,556 | 25,002 |
Capitalized Technology (Details) - USD ($) |
3 Months Ended | 9 Months Ended | 12 Months Ended | ||
---|---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
Dec. 31, 2015 |
|
Capitalized cost: | |||||
Balance, beginning of period | $ 1,888,791 | $ 1,469,432 | $ 1,469,432 | ||
Additional capitalized cost | 393,385 | 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 | 62,495 | 153,984 | 216,000 | 335,585 | 488,906 |
Balance, end of period | 1,648,328 | $ 1,278,928 | 1,648,328 | $ 1,278,928 | 1,432,268 |
Capitalized Technology, net | $ 240,463 | $ 240,463 | $ 456,523 |
Intangible Assets (Narrative) (Details) - USD ($) |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Intangible Assets, Net (Excluding Goodwill) [Abstract] | ||||
Amortization of intangible assets | $ 717,100 | $ 717,100 | $ 2,151,300 | $ 2,165,286 |
Intangible Assets (Schedule of Future Annual Estimated Amortization Expense) (Details) - USD ($) |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Intangible Assets, Net (Excluding Goodwill) [Abstract] | ||
2016 (three months) | $ 717,100 | |
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 | $ 9,810,139 | $ 11,961,439 |
Master Credit Facility (Schedule of Company's Master Credit Facility) (Details) - USD ($) |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Line of Credit Facility [Line Items] | ||
Long-term portion | $ 827,679 | |
Revolving Credit Facility [Member] | ||
Line of Credit Facility [Line Items] | ||
Total Master Credit Facility | 1,942,625 | |
Less: Unamortized debt issuance costs | (1,114,946) | |
Total Master Credit Facility, net of unamortized debt issuance costs | 827,679 | |
Less: Current portion of Master Credit Facility | ||
Long-term portion | $ 827,679 |
Commitments and Contingencies (Lease Obligations) (Details) - USD ($) |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Commitments and Contingencies Disclosure [Abstract] | ||||
Rent expense | $ 258,000 | $ 383,249 | $ 808,000 | $ 1,083,091 |
Sub lease income | $ 93,000 | $ 90,000 | 279,000 | 255,000 |
Gain on lease cancellation | $ 423,998 |
Commitments and Contingencies (Legal Proceedings) (Details) - USD ($) |
9 Months Ended | ||
---|---|---|---|
Nov. 07, 2016 |
Aug. 10, 2016 |
Sep. 30, 2016 |
|
Threatened Litigation [Member] | |||
Loss Contingencies [Line Items] | |||
Amount of promissory note repayment sought in litigation matter | $ 445,000 | ||
Settled Litigation [Member] | |||
Loss Contingencies [Line Items] | |||
Litigation settlement amount | $ 500,000 | ||
Litigation settlement date | Apr. 28, 2016 | ||
Litigation settlement accrual | $ 500,000 | ||
Settled Litigation [Member] | Matthew Proman [Member] | |||
Loss Contingencies [Line Items] | |||
Litigation settlement amount | 300,000 | ||
Amount of promissory note repayment sought in litigation matter | $ 445,000 | ||
Settled Litigation [Member] | Matthew Proman [Member] | Subsequent Event [Member] | |||
Loss Contingencies [Line Items] | |||
Litigation settlement amount | $ 300,000 |
Employment Agreement (Details) - Chief Executive Officer [Member] |
9 Months Ended |
---|---|
Sep. 30, 2016
USD ($)
shares
| |
CEO annual base salary | $ | $ 300,000 |
Stock options granted | 57,500 |
Vesting Immediately [Member] | |
Stock options granted | 19,166 |
Vesting on March 31, 2017 [Member] | |
Stock options granted | 19,166 |
Vesting on March 31, 2018 [Member] | |
Stock options granted | 19,166 |
Income Taxes (Details) - USD ($) |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Income Tax Disclosure [Abstract] | ||||
Effective income tax rate | 32.90% | (10.30%) | 25.70% | (4.60%) |
Income tax expense (benefit) | $ (623,699) | $ 2,976,217 | $ (1,218,092) | $ 1,509,395 |
Change in valuation allowance during period | $ 627,000 | $ 4,106,000 | $ 832,000 | $ 4,106,000 |
Stock-Based Compensation (Schedule of Stock Option Activity) (Details) - Employee Stock Options [Member] - USD ($) |
9 Months Ended | 12 Months Ended |
---|---|---|
Sep. 30, 2016 |
Dec. 31, 2015 |
|
Number of Options | ||
Outstanding - December 31, 2015 | 19,653 | |
Granted | 57,500 | |
Exercised | ||
Forfeited/Canceled/Expired | (4,287) | |
Outstanding - September 30, 2016 | 72,866 | 19,653 |
Exercisable - September 30, 2016 | 30,264 | |
Weighted Average Exercise Price | ||
Outstanding - December 31, 2015 | $ 30.00 | |
Granted | 8.19 | |
Exercised | ||
Forfeited/Canceled/Expired | (31.81) | |
Outstanding - September 30, 2016 | 12.69 | $ 30.00 |
Exercisable - September 30, 2016 | $ 16.29 | |
Weighted Average Remaining Contractual Life (in Years) | ||
Outstanding | 9 years 6 months | 8 years |
Exercisable - September 30, 2016 | 9 years 2 months 12 days | |
Average Intrinsic Value | ||
Outstanding - December 31, 2015 | ||
Outstanding - September 30, 2016 | ||
Exercisable - September 30, 2016 |
Stock-Based Compensation (Schedule of Unvested Stock Options) (Details) - Employee Stock Options [Member] |
9 Months Ended |
---|---|
Sep. 30, 2016
$ / shares
shares
| |
Number of Options | |
Unvested - December 31, 2015 | shares | 13,571 |
Granted | shares | 57,500 |
Vested | shares | (27,552) |
Forfeited/Canceled/Expired | shares | (917) |
Unvested - September 30, 2016 | shares | 42,602 |
Weighted Average Grant Date Fair Value | |
Unvested - December 31, 2015 | $ / shares | $ 13.76 |
Granted | $ / shares | 4.01 |
Vested | $ / shares | (7.07) |
Forfeited/Canceled/Expired | $ / shares | (13.83) |
Unvested - September 30, 2016 | $ / shares | $ 4.93 |
Stock-Based Compensation (Schedule of Fair Value Assumptions) (Details) |
9 Months Ended | ||
---|---|---|---|
Aug. 10, 2016 |
Jun. 30, 2016 |
Sep. 30, 2016 |
|
Risk-free interest rate | 1.07% | 1.01% | |
Expected dividend yield | 0.00% | 0.00% | |
Expected volatility | 100.00% | 100.00% | |
Expected term | 5 years | 5 years | |
Chief Executive Officer [Member] | |||
Risk-free interest rate | 1.14% | ||
Expected dividend yield | 0.00% | ||
Expected volatility | 53.96% | ||
Expected term | 5 years 6 months |
Stock-Based Compensation (Schedule of Unvested Warrants) (Details) - Warrant [Member] |
9 Months Ended |
---|---|
Sep. 30, 2016
$ / shares
shares
| |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Unvested - December 31, 2015 | shares | |
Granted | shares | 468,750 |
Vested | shares | (468,750) |
Forfeited/Canceled/Expired | shares | |
Unvested - September 30, 2016 | shares | |
Unvested - December 31, 2015 | $ / shares | |
Granted | $ / shares | 1.67 |
Vested | $ / shares | (1.67) |
Forfeited/Canceled/Expired | $ / shares | |
Unvested - September 30, 2016 | $ / shares |
Fair Value of Financial Instruments (Schedule of Fair Value Assumptions Used to Value Warrant Liability) (Details) - $ / shares |
Aug. 10, 2016 |
Jun. 30, 2016 |
---|---|---|
Fair Value Disclosures [Abstract] | ||
Strike price | $ 2.00 | $ 2.00 |
Market price | $ 6.08 | $ 3.20 |
Expected life | 5 years | 5 years |
Risk-free interest rate | 1.07% | 1.01% |
Dividend yield | 0.00% | 0.00% |
Volatility | 100.00% | 100.00% |
Fair Value of Financial Instruments (Summary of Changes in Fair Value of Level 3 Financial Liabilities) (Details) - USD ($) |
9 Months Ended | |
---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Fair Value Disclosures [Abstract] | ||
Balance, Beginning | ||
Initial value of warrant liability | 380,000 | |
Change in fair value of derivative liability | 401,000 | |
Reclassification of derivative liability to additional paid in capital | (781,000) | |
Balance, ending |
Segment Information (Details) - USD ($) |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
Dec. 31, 2015 |
|
Segment Reporting Information [Line Items] | |||||
Membership fees and related services | $ 3,748,334 | $ 5,652,873 | $ 13,047,652 | $ 18,885,308 | |
Lead generation | 1,554,370 | 2,334,276 | 4,489,919 | 7,853,402 | |
Recruitment services | 954,887 | 830,250 | 2,295,556 | 2,432,951 | |
Products sales and other | 52,857 | 330,769 | 544,440 | 631,198 | |
Consumer advertising and marketing solutions | 49,719 | 73,011 | 176,771 | 209,097 | |
Total revenues | 6,360,167 | 9,221,179 | 20,554,338 | 30,011,956 | |
Loss from operations | (1,280,202) | (28,825,832) | (4,119,986) | (32,963,937) | |
Depreciation and amortization | 819,894 | 925,684 | 2,498,136 | 2,730,880 | |
Income tax expense (benefit) | (623,699) | 2,976,217 | (1,218,092) | 1,509,395 | |
Capital expenditures | 64,154 | ||||
Net loss | (1,273,134) | (31,806,672) | (3,519,041) | (34,438,321) | |
Goodwill | 20,201,190 | 20,201,190 | $ 20,201,190 | ||
Intangible assets, net | 9,900,539 | 9,900,539 | 12,051,839 | ||
Total assets | 36,453,884 | 36,453,884 | 41,427,816 | ||
PDN Network [Member] | |||||
Segment Reporting Information [Line Items] | |||||
Membership fees and related services | |||||
Lead generation | |||||
Recruitment services | 954,887 | 830,250 | 2,295,556 | 2,432,951 | |
Products sales and other | |||||
Consumer advertising and marketing solutions | 49,719 | 73,011 | 176,771 | 209,097 | |
Total revenues | 1,004,606 | 903,261 | 2,472,327 | 2,642,048 | |
Loss from operations | (118,948) | (491,126) | (839,840) | (1,727,721) | |
Depreciation and amortization | 33,471 | 93,922 | 130,121 | 285,677 | |
Income tax expense (benefit) | (222,808) | 2,362,220 | (373,717) | 1,895,588 | |
Capital expenditures | |||||
Net loss | (512,771) | (2,857,969) | (1,083,270) | (3,588,298) | |
Goodwill | 339,451 | 339,451 | 339,451 | ||
Intangible assets, net | 90,400 | 90,400 | 90,400 | ||
Total assets | 2,151,870 | 2,151,870 | 4,167,229 | ||
NAPW Network [Member] | |||||
Segment Reporting Information [Line Items] | |||||
Membership fees and related services | 3,748,334 | 5,652,873 | 13,047,652 | 18,885,308 | |
Lead generation | |||||
Recruitment services | |||||
Products sales and other | 52,857 | 330,769 | 544,440 | 631,198 | |
Consumer advertising and marketing solutions | |||||
Total revenues | 3,801,191 | 5,983,642 | 13,592,092 | 19,516,506 | |
Loss from operations | (894,361) | (27,995,556) | (2,173,251) | (30,417,806) | |
Depreciation and amortization | 738,473 | 786,148 | 2,207,703 | 2,308,361 | |
Income tax expense (benefit) | (289,767) | 543,018 | (557,439) | (271,103) | |
Capital expenditures | 50,216 | ||||
Net loss | (604,594) | (28,538,574) | (1,615,812) | (30,146,703) | |
Goodwill | 19,861,739 | 19,861,739 | 19,861,739 | ||
Intangible assets, net | 9,482,806 | 9,482,806 | 11,502,106 | ||
Total assets | 32,410,397 | 32,410,397 | 34,985,831 | ||
Noble Voice [Member] | |||||
Segment Reporting Information [Line Items] | |||||
Membership fees and related services | |||||
Lead generation | 1,554,370 | 2,334,276 | 4,489,919 | 7,853,402 | |
Recruitment services | |||||
Products sales and other | |||||
Consumer advertising and marketing solutions | |||||
Total revenues | 1,554,370 | 2,334,276 | 4,489,919 | 7,853,402 | |
Loss from operations | (266,893) | (339,150) | (1,106,895) | (818,410) | |
Depreciation and amortization | 47,950 | 45,614 | 160,312 | 136,842 | |
Income tax expense (benefit) | (111,124) | 70,979 | (286,936) | (115,090) | |
Capital expenditures | 13,938 | ||||
Net loss | (155,769) | $ (410,129) | (891,959) | $ (703,320) | |
Goodwill | |||||
Intangible assets, net | 327,333 | 327,333 | 459,333 | ||
Total assets | $ 1,891,617 | $ 1,891,617 | $ 2,274,756 |
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