Professional Diversity Network(IPDN) - 2025 Q2 - Quarterly Report

Note Regarding Forward-Looking Statements This section provides cautionary statements regarding forward-looking information, highlighting inherent risks and uncertainties - This Quarterly Report contains "forward-looking statements" concerning expectations, beliefs, projections, plans, and strategies, which are not historical facts[9] - Actual results could differ significantly from forward-looking statements due to various risks and uncertainties, including the ability to raise funds, integration of acquisitions, operating losses, competition, regulatory compliance, and economic conditions[10][12] - The Company undertakes no obligation to update any forward-looking statement to reflect the impact of circumstances or events that arise after the report date[11] PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS This section presents the unaudited consolidated financial statements for Professional Diversity Network, Inc. and its subsidiaries, including the balance sheets, statements of operations and comprehensive loss, statements of stockholders' equity, and statements of cash flows for the periods ended June 30, 2025, and December 31, 2024 (for balance sheet) or June 30, 2024 (for income statement, equity, and cash flow) Consolidated Balance Sheets (Unaudited) Presents the unaudited consolidated balance sheets for the specified periods, detailing assets, liabilities, and equity | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :-------------- | :---------------- | | Cash and cash equivalents | $125,081 | $1,731,155 | | Total current assets | $1,435,088 | $3,226,528 | | Total assets | $7,330,828 | $7,981,801 | | Total current liabilities | $3,354,349 | $2,955,833 | | Total liabilities | $3,489,194 | $3,140,897 | | Total stockholders' equity | $3,841,634 | $4,840,904 | | Accumulated deficit | $(103,612,710) | $(102,414,683) | - Cash and cash equivalents decreased by 92.8% from $1,731,155 at December 31, 2024, to $125,081 at June 30, 2025[16] - Total stockholders' equity decreased by 20.6% from $4,840,904 at December 31, 2024, to $3,841,634 at June 30, 2025[16] Consolidated Statements of Operations and Comprehensive Loss (Unaudited) Presents the unaudited consolidated statements of operations and comprehensive loss for the specified periods, showing revenues, expenses, and net loss | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenues | $1,641,490 | $1,690,460 | $3,146,076 | $3,417,302 | | Total costs and expenses | $2,138,034 | $2,272,810 | $4,347,961 | $4,802,578 | | Loss from continuing operations | $(496,544) | $(582,350) | $(1,201,885) | $(1,385,276) | | Net loss attributable to PDN, Inc. | $(475,965) | $(553,147) | $(1,198,027) | $(1,344,979) | | Basic and diluted loss per share | $(0.23) | $(0.50) | $(0.62) | $(1.21) | - Total revenues decreased by 2.9% for the three months ended June 30, 2025, and by 7.9% for the six months ended June 30, 2025, compared to the prior year periods[18] - Net loss attributable to Professional Diversity Network, Inc. decreased from $(553,147) to $(475,965) for the three months ended June 30, 2025, and from $(1,344,979) to $(1,198,027) for the six months ended June 30, 2025[18] Consolidated Statement of Stockholders' Equity (Unaudited) Presents the unaudited consolidated statement of stockholders' equity for the specified periods, detailing changes in equity components - Total stockholders' equity decreased from $4,840,904 at January 1, 2025, to $3,841,634 at June 30, 2025[20] - Net loss attributable to Professional Diversity Network, Inc. for the six months ended June 30, 2025, was $(1,198,027)[20] - Common stock shares outstanding increased from 1,823,275 at January 1, 2025, to 2,166,350 at June 30, 2025[20] Consolidated Statements of Cash Flows (Unaudited) Presents the unaudited consolidated statements of cash flows for the specified periods, categorizing cash flows from operating, investing, and financing activities | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | | Net cash used in operating activities | $(779,651) | $(767,542) | | Net cash used in investing activities | $(1,303,997) | $(152,917) | | Net cash provided by financing activities | $477,574 | $912,129 | | Net decrease in cash and cash equivalents | $(1,606,074) | $(8,330) | | Cash and cash equivalents, end of period | $125,081 | $619,311 | - Net cash used in investing activities significantly increased to $(1,303,997) for the six months ended June 30, 2025, from $(152,917) in the prior year[21] - Net cash provided by financing activities decreased to $477,574 for the six months ended June 30, 2025, from $912,129 in the prior year[21] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Provides detailed explanations and disclosures supporting the unaudited consolidated financial statements 1. Basis of Presentation and Description of Business Describes the company's operations and structure, including its business units and ownership interests - Professional Diversity Network, Inc. (PDN, Inc.) operates professional networks focused on talent acquisition and professional development for diverse communities including Women, Hispanic Americans, African Americans, Asian Americans, persons with disabilities, Military Professionals, and LGBTQ+[24] - PDN is a holding company operating three business units: TalentAlly, LLC (online professional job seeker communities), NAPW, Inc. (networking for professional women), and RemoteMore USA, Inc. (remote-hiring marketplace for developers)[25][26][27] - As of June 30, 2025, PDN, Inc. owned 82.63% of RemoteMore USA, Inc., consolidating its operations into the financial statements[27] 2. Going Concern and Management's Plans Addresses the company's financial viability, accumulated deficit, and management's strategies to improve liquidity - The Company had an accumulated deficit of $103,612,710 and a working capital deficit of $1,919,261 at June 30, 2025, along with a net loss from continuing operations of $1,233,147 for the six months ended June 30, 2025, raising substantial doubt about its ability to continue as a going concern[29] - Management plans to address liquidity by increasing revenues, raising capital through common stock issuance, continuing cost reduction efforts, or pursuing strategic mergers/acquisitions[30] - There can be no assurances that business plans will be successful or that additional funding will be available on acceptable terms[30] 3. Summary of Significant Accounting Policies Outlines the key accounting principles and methods used in preparing the financial statements Allowance for Credit Losses Details the accounting policy and changes in the allowance for credit losses | Metric | June 30, 2025 | December 31, 2024 | | :---------------------- | :-------------- | :---------------- | | Balance, beginning of period | $61,923 | $66,526 | | Provision for credit losses | $18,416 | $13,986 | | Write-offs | $- | $(18,589) | | Balance, end of period | $80,339 | $61,923 | - The allowance for credit losses increased to $80,339 at June 30, 2025, from $61,923 at December 31, 2024, with a provision for credit losses of $18,416 for the period[38] Other Receivables Explains the nature and collectibility assessment of non-trade receivables - Other receivables represent non-trade amounts owed to the Company, which are periodically reviewed for credit risk[39] - As of June 30, 2025, and December 31, 2024, the balance in other receivables was deemed collectible, with no allowance for credit losses recognized[39] Property and Equipment Describes the accounting for property and equipment, including depreciation methods and expenses - Property and equipment are stated at cost less accumulated depreciation, recorded on a straight-line basis over estimated useful lives of three to five years[40] - Depreciation expense for the six months ended June 30, 2025, was approximately $8,351, compared to $5,009 in the prior year[40] Lease Obligations Outlines the accounting for lease agreements, including recognition of lease assets and liabilities - The Company leases office space under a non-cancelable operating lease expiring in September 2027, with operating lease expense recognized on a straight-line basis[41][42] - Operating lease assets and liabilities are recognized at lease commencement, with the Company electing to combine lease and non-lease components[43][44] Capitalized Technology Costs Explains the capitalization and amortization policies for computer software development costs - The Company capitalizes certain external and internal computer software costs incurred during the application development stage, amortizing them over estimated useful lives, generally not exceeding three years[45] Business Combinations Describes the accounting method for business acquisitions, including fair value recognition and goodwill measurement - Business combinations are accounted for using the acquisition method, recognizing acquired assets and assumed liabilities at fair value, with goodwill measured as the excess of consideration transferred[46] - Estimates for acquired assets and liabilities are inherently uncertain and subject to refinement during a measurement period of up to one year[46] Goodwill and Intangible Assets Details the impairment testing policies for goodwill and indefinite-lived intangible assets - Goodwill and indefinite-lived intangibles are tested for impairment annually (December 31) or on an interim basis if circumstances indicate a decrease in fair value[47][48] - Impairment assessment involves a qualitative evaluation, followed by a quantitative comparison of the reporting unit's fair value to its carrying value if impairment is likely[49] Contingent Liabilities Explains the criteria for accruing and disclosing potential liabilities from uncertain events - A liability is accrued if an adverse outcome is probable and the loss amount is reasonably estimable; otherwise, the matter is disclosed without accrual[50] Treasury Stock Describes the accounting treatment for treasury stock as a reduction of stockholders' equity - Treasury stock is recorded at cost as a reduction of stockholders' equity[51] Revenue Recognition Outlines the principles for recognizing revenue from various sources and handling deferred revenue - Revenue is recognized when persuasive evidence of an arrangement exists, services are performed, the sales price is fixed or determinable, and collectability is reasonably assured[51] - Deferred revenue includes customer payments received prior to service performance, with annual membership fees recognized ratably over the membership period[51] Advertising and Marketing Expenses Explains the policy for expensing advertising and marketing costs - Advertising and marketing expenses are expensed as incurred or the first time the advertising takes place[52] - For the six months ended June 30, 2025, advertising and marketing expenses were approximately $310,402[52] Concentrations of Credit Risk Discusses the company's exposure to credit risk, primarily in cash and accounts receivable - The Company's credit risk is primarily concentrated in cash and cash equivalents and accounts receivable, with cash placed in high credit quality institutions[53] Income Taxes Describes the accounting for income taxes, including deferred taxes and valuation allowances - Income taxes are accounted for under ASC 740, recognizing deferred tax liabilities and assets based on differences between financial statement and tax bases[54] - A valuation allowance is provided for deferred tax assets when their realization is not more likely than not, and no deferred tax liabilities were recorded as of June 30, 2025[54][55] Fair Value of Financial Assets and Liabilities Explains the valuation of financial instruments, noting their approximation of fair value - Financial instruments like cash and cash equivalents, short-term investments, and accounts payable are carried at cost, approximating fair value due to their short-term nature[58] Net Loss per Share Details the calculation of basic and diluted net loss per share, including anti-dilutive securities - Basic net loss per share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding[59] - Potentially dilutive securities, totaling 79,909 as of June 30, 2025 (vs. 28,187 in 2024), were excluded from diluted EPS calculation as their inclusion would be anti-dilutive[59][60] Recent Accounting Pronouncements Discusses the company's evaluation of newly issued accounting standards - The Company is evaluating ASU 2023-09 (Income Taxes), effective for fiscal years after December 15, 2024, which enhances effective tax rate reconciliation disclosures[61] - The Company is evaluating ASU 2024-03 (Expense Disaggregation Disclosures), effective for annual periods after December 15, 2026, requiring disaggregated expense disclosures for certain categories[62] 4. Business Combinations Provides details on recent acquisition activities, including the RemoteMore and Expo Experts transactions RemoteMore Details the acquisition of additional interest in RemoteMore - The Company acquired an additional 10.01% interest in RemoteMore on February 25, 2025, for approximately $300,000, increasing its total ownership to 82.63% as of June 30, 2025[63] Expo Experts Details the acquisition of Expo Experts - In January 2023, the Company purchased the assets and operations of Expo Experts, LLC for $600,000 ($400,000 cash and $200,000 in restricted shares), integrating its recruiting event business into the TalentAlly Network[64][65] 5. Revenue Recognition Provides detailed information on the company's revenue recognition policies and disaggregation Nature of Goods and Services Describes the various types of goods and services that generate revenue and their recognition methods - Recruitment services revenue is derived from job postings, recruitment media, career fairs, and corporate memberships, recognized ratably over contract terms or when services are provided[70] - Membership fees for NAPW Network are collected upfront and recognized ratably over the membership period (typically 12 months), while monthly fees are recognized in the month collected[71][72] - Contracted software development revenue from RemoteMore is recognized in the period work is performed, and consumer advertising revenue is recognized as jobs are posted to hosted sites[74][75] Revenue Concentration Discusses the concentration of revenue from specific alliance sales relationships - For the six months ended June 30, 2025, approximately 2% of recruitment services revenue came from an alliance sales relationship, down from 6% in 2024, as management of job boards transitioned in-house[76] Disaggregation of Revenue Explains how revenue is categorized by product line and timing of transfer - Revenue is disaggregated by product line and timing of transfer of products and services, aligning with reportable segments[77] Contract Balances Details the balances of contract liabilities (deferred revenue) and their recognition - Contract liabilities (deferred revenue) were $1,571,480 at June 30, 2025, down from $1,842,036 at December 31, 2024, representing consideration received in advance from customers[79] | Metric | June 30, 2025 | June 30, 2024 | | :------------------------------------ | :----------- | :----------- | | Recognized revenue associated with contract liabilities | $(949,165) | $(1,243,015) | Transaction Price Allocated to the Remaining Performance Obligations Explains the company's policy regarding disclosure of remaining performance obligations - The Company applies optional exemptions and does not disclose information about remaining performance obligations with an original expected duration of one year or less[81][82] 6. Capitalized Technology Presents information on capitalized technology costs and their changes over periods | Metric | June 30, 2025 | December 31, 2024 | | :---------------------- | :-------------- | :---------------- | | Capitalized cost, end of period | $270,747 | $327,372 | | Period | 2025 | 2024 | | :---------------------- | :----------- | :----------- | | Three months ended June 30 | $28,125 | $24,150 | | Six months ended June 30 | $56,625 | $47,117 | - Capitalized technology, net, decreased to $270,747 at June 30, 2025, from $327,372 at December 31, 2024[83] 7. Intangible Assets Provides details on intangible assets, their net value, and amortization expenses | Metric | June 30, 2025 | December 31, 2024 | | :---------------------- | :-------------- | :---------------- | | Intangible assets, net | $118,067 | $134,733 | | Period | 2025 | 2024 | | :---------------------- | :----------- | :----------- | | Three months ended June 30 | $8,333 | $27,594 | | Six months ended June 30 | $16,667 | $55,188 | - Intangible assets, net, decreased to $118,067 at June 30, 2025, from $134,733 at December 31, 2024, with estimated remaining amortization expense of $16,667 for the remainder of 2025[85] 8. Long-term Investments Details the company's long-term equity investments and their valuation - The Company holds a 9% equity investment in QBSG Limited (formerly Koala Crypto Limited) measured at cost ($1,350,000) and a 6% Profit Participation right in QBSG Limited valued at $1,156,000 as of June 30, 2025, after an unrealized loss of $44,000[87][89][91] - In January 2025, the Company acquired a 13% interest in AI Geometric Ltd for $1,300,000, measured at cost[92] - The fair value of the Profit Participation investment in QBSG is estimated using a combination of valuation methodologies, incorporating significant unobservable inputs and subject to change[91] 9. Commitments and Contingencies Outlines the company's lease obligations and ongoing legal proceedings Lease Obligations Details the company's operating lease for its corporate headquarters and future payment commitments - The Company leases its corporate headquarters with a lease term expiring in September 2027; cash lease payments for the six months ended June 30, 2025, were approximately $53,922[93] | Year ended December 31, | Operating Lease Liabilities | | :---------------------- | :-------------------------- | | Remaining of 2025 | $54,535 | | 2026 | $110,908 | | 2027 | $84,560 | | Total Lease Payments | $250,003 | | Less: present value discount | $(16,806) | | Present value of lease liabilities | $233,197 | Legal Proceedings Describes the class-action lawsuit against the company and its potential financial impact - The Company is a party to a class-action lawsuit (Deborah Bayne, et al. vs. NAPW, Inc. and Professional Diversity Network, Inc.) alleging FLSA and NYLL violations, with a $450,000 litigation settlement reserve recorded in Q1 2020[95][96] - Summary judgment was granted against NAPW for willful failure to pay overtime, but damages remain unsettled, and an unfavorable outcome could have a material adverse effect[96] General Legal Matters Addresses other legal matters arising in the ordinary course of business - The Company is involved in legal matters arising in the ordinary course of business, which are not currently considered material, but there is no assurance they will not have a material adverse effect[97] 10. CFL and Aurous Vertex Limited Transaction Details significant equity transactions involving CFL and Aurous Vertex Limited - CFL beneficially holds approximately 12.4% of the Company's outstanding common stock as of June 30, 2025, a decrease due to dilution from other equity offerings[100] - Aurous Vertex Limited purchased 250,000 shares for $1.5 million in December 2024 and exercised an option to purchase an additional 100,000 shares for $338,500 in February 2025, holding approximately 16.16% of outstanding shares as of June 30, 2025[101][102][109] 11. Stockholders' Equity Provides information on the company's preferred and common stock Preferred Stock Describes the authorized but unissued preferred stock and board's issuance authority - The Company has no preferred stock issued but its Board of Directors can issue up to 1,000,000 shares of undesignated preferred stock without further stockholder action[103] Common Stock Details the outstanding common stock, recent issuances, and reverse stock split - As of June 30, 2025, the Company had 2,166,350 shares of common stock outstanding, with 45,000,000 shares authorized[104] - In February 2025, the Company issued 110,000 common shares from the exercise of pre-funded warrants, generating $11,000 in proceeds[106] - A 10-for-1 reverse stock split was implemented in March 2025, retrospectively adjusting all share amounts and prices[110] 12. Stock-Based Compensation Explains the company's equity incentive plans and stock-based compensation expenses Equity Incentive Plans Describes the company's equity compensation plan and reserved shares - The 2023 Equity Compensation Plan, approved in June 2023, supersedes the 2013 Plan and reserves 75,000 shares of common stock for awards to directors, officers, employees, and consultants[112] Stock Options Details the valuation of stock options and related compensation expense - The fair value of options is estimated using the Black-Scholes option pricing model, considering variables like stock price volatility, expected life, and risk-free rate[113] - The Company recorded no non-cash stock-based compensation expense for stock options for the six months ended June 30, 2025, compared to $5,410 in the prior year[116] - There is no unrecognized stock-based compensation expense related to unvested stock options at June 30, 2025[117] Restricted Stock Provides information on restricted stock awards and associated compensation expense - The Company recorded non-cash stock-based compensation expense of $10,402 for restricted stock awards for the six months ended June 30, 2025, a significant decrease from $137,943 in the prior year[119] - Total unrecognized stock-based compensation expense related to 78,409 unvested restricted stock units at June 30, 2025, was approximately $134,863, expected to be fully recognized by the second quarter of 2026[120] 13. Income Taxes Presents details on income tax expense and deferred tax assets with valuation allowances - The Company recorded no income tax expense for the three and six months ended June 30, 2025, compared to $3,781 and $6,271, respectively, in the prior year periods[124] - A valuation allowance of $11,573,104 was applied to deferred income tax assets at June 30, 2025, due to uncertainty regarding their realization, increasing by $245,375 during the six months ended June 30, 2025[125] 14. Segment Information Provides financial data disaggregated by the company's operating segments - The Company operates in three segments: TalentAlly Network (job board software, career fairs), NAPW Network (professional women's networking), and RemoteMore (contracted software development)[126] - The executive committee (CEO and CFO) acts as the Chief Operating Decision Maker (CODM), assessing performance and allocating resources across segments[127] | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :---------------------- | :------------------------------- | :------------------------------- | | TalentAlly Network | $886,164 | $1,153,224 | | NAPW Network | $86,378 | $108,355 | | RemoteMore | $668,948 | $428,881 | | Total revenues | $1,641,490 | $1,690,460 | | Segment | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------- | :----------------------------- | :----------------------------- | | TalentAlly Network | $1,807,613 | $2,267,759 | | NAPW Network | $182,008 | $235,701 | | RemoteMore | $1,156,455 | $913,842 | | Total revenues | $3,146,076 | $3,417,302 | 15. Subsequent Events Details significant events that occurred after the reporting period - On July 1, 2025, the Company completed a warrant exchange, surrendering 500,000 warrants for cancellation in exchange for 333,333 shares of common stock[130] - In July 2025, the Company issued two unsecured convertible promissory notes totaling $400,000 to non-affiliated investors, bearing 12% interest and convertible into common stock at specified prices[131] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides management's perspective on the Company's financial condition, changes in financial condition, and results of operations for the three and six months ended June 30, 2025, compared to the prior year, highlighting key trends, risks, and future outlook Basis of Presentation Outlines the scope and context for management's discussion and analysis of financial results - This MD&A should be read in conjunction with the accompanying consolidated financial statements and notes, and the audited consolidated financial statements in the 2024 Form 10-K[132] - Forward-looking statements in this MD&A are not guarantees of future performance and involve risks and uncertainties that could cause actual results to differ materially[133] Overview Provides a high-level description of the company's business model and operating segments - The Company operates professional networks focused on diversity, employment, education, and training, serving various diverse communities[134] - Business segments include TalentAlly Network (job seeking communities), NAPW Network (women's professional networking), and RemoteMore (remote software developer marketplace)[135] - The Company aims to help employers with diversity needs, provide networking for women, and connect companies with reliable, cost-efficient developers[136] Sources of Revenue Details the various streams from which the company generates its total revenues - Revenue is generated from membership fees, recruitment services, contracted software development, and consumer advertising/marketing solutions[137] | Revenue Source | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | | Membership fees and related services | 5.7% | 6.9% | | Recruitment services | 57.2% | 65.8% | | Contracted software development | 36.8% | 26.7% | | Consumer advertising and marketing solutions | 0.3% | 0.6% | - Recruitment services revenue decreased from 65.8% to 57.2% of total revenue, while contracted software development increased from 26.7% to 36.8% YoY for the six months ended June 30[138] Cost of Revenue Explains the primary components contributing to the cost of generating revenue across segments - Cost of revenue primarily consists of costs for job fair events, revenue sharing with partners, web hosting for TalentAlly, member conference costs for NAPW, and payments to outside developers for RemoteMore[142] | Segment | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------- | :------------------------------- | :------------------------------- | | TalentAlly Network | 31.9% | 37.3% | | NAPW Network | 0.8% | 1.1% | | RemoteMore | 67.3% | 61.6% | - RemoteMore's contract costs, paid to external developers, significantly increased to 67.3% of total cost of revenues in 2025, up from 61.6% in 2024, reflecting its revenue growth[143][154] Results of Operations Analyzes the company's financial performance over the reporting periods, focusing on revenue and expense trends Total Revenues Examines the overall changes in the company's total revenues for the reported periods | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Change (Dollars) | Change (%) | | :------------------------------------ | :---------------------------------------------- | :---------------------------------------------- | :--------------- | :--------- | | Total revenues | $1,641 | $1,690 | $(49) | -2.9% | | Metric | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | Change (Dollars) | Change (%) | | :------------------------------------ | :-------------------------------------------- | :-------------------------------------------- | :--------------- | :--------- | | Total revenues | $3,146 | $3,417 | $(271) | -7.9% | - The decrease in total revenues for both periods was predominantly attributable to a slowdown in corporate spending on Diversity, Equity, and Inclusion (DEI) initiatives, impacting recruitment services[145][146] Revenues by Segment Analyzes revenue performance across the company's distinct operating segments - TalentAlly Network revenues decreased by 23.0% (QoQ) and 20.2% (YoY) due to reduced corporate DEI spending[148][151] - NAPW Network revenues decreased by 21.1% (QoQ) and 22.9% (YoY) due to lower renewal rates and reduced new member acquisition in a competitive market[149][152] - RemoteMore revenue significantly increased by 55.7% (QoQ) and 26.5% (YoY) due to increased demand for qualified, remote software developers and focused sales/marketing efforts[150][152] Costs and Expenses Details the changes in various operational costs and expenses for the reported periods | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Change (Dollars) | Change (%) | | :------------------------------------ | :---------------------------------------------- | :---------------------------------------------- | :--------------- | :--------- | | Total pre-tax cost and expenses | $2,138 | $2,272 | $(134) | -5.9% | | Metric | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | Change (Dollars) | Change (%) | | :------------------------------------ | :-------------------------------------------- | :-------------------------------------------- | :--------------- | :--------- | | Total cost and expenses | $4,348 | $4,802 | $(454) | -9.5% | - Cost of revenues increased by 48.4% (QoQ) and 28.9% (YoY), primarily driven by a $232,000 (QoQ) and $229,000 (YoY) increase in RemoteMore's contract costs, reflecting its revenue growth[154][155] - Sales and marketing expenses decreased by 36.0% (QoQ) and 33.5% (YoY) due to reductions in payroll, commissions, and marketing consulting costs[156][157] - General and administrative expenses decreased by 17.7% (QoQ) and 14.4% (YoY) due to reductions in salaries, benefits, and share-based compensation[158][159] Costs and Expenses by Segment Analyzes the allocation and changes in costs and expenses across the company's operating segments - TalentAlly Network's costs and expenses decreased by 22.9% (QoQ) and 24.1% (YoY), mainly due to reductions in sales & marketing and general & administrative costs[163][164] - NAPW Network's costs and expenses decreased by 14.9% (QoQ) and 24.5% (YoY), predominantly from reduced depreciation, amortization, and general & administrative costs[165][166] - RemoteMore's costs and expenses increased by 39.5% (QoQ) and 23.3% (YoY), predominantly due to higher costs of sales directly tied to its growth[167] - Corporate Overhead expenses decreased by 14.8% (QoQ) and 2.8% (YoY), driven by reductions in payroll, bonuses, and insurance, partially offset by increased legal and filing costs[168][169] Income Tax Expense (Benefit) Discusses the company's income tax provisions and their impact on financial results | Period | 2025 (in thousands) | 2024 (in thousands) | Change (Dollars) | Change (%) | | :------------------------------------ | :------------------ | :------------------ | :--------------- | :--------- | | Three months ended June 30 | $0 | $4 | $(4) | -100.0% | | Six months ended June 30 | $0 | $6 | $(6) | -100.0% | - The Company recorded no income tax expense for both the three and six months ended June 30, 2025, a 100% decrease from the prior year periods[170][171] Net loss from Continuing Operations, Net of Tax Reports the company's net loss from ongoing business activities after accounting for taxes | Period | 2025 (in thousands) | 2024 (in thousands) | Change (Dollars) | Change (%) | | :------------------------------------ | :------------------ | :------------------ | :--------------- | :--------- | | Three months ended June 30 | $(492) | $(586) | $94 | 16.0% | | Six months ended June 30 | $(1,233) | $(1,393) | $160 | 11.5% | - Consolidated net loss from continuing operations decreased by $94,000 (16.0%) for the three months and $160,000 (11.5%) for the six months ended June 30, 2025, compared to the prior year[174] Liquidity and Capital Resources Assesses the company's ability to meet its short-term and long-term financial obligations | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :------------------------------------ | :------------------------------- | :------------------------------- | | Cash and cash equivalents | $125 | $1,731 | | Working deficiency from continuing operations | $(1,919) | $271 | - Cash and cash equivalents significantly decreased by $1.6 million to $125,000 at June 30, 2025, from $1.731 million at December 31, 2024, primarily due to $780,000 cash used in operations and a $1.3 million strategic investment in AI Geometric Ltd[176][178] - The Company's working capital shifted from a surplus of $271,000 to a deficit of $1,919,000, raising substantial doubt about its going concern ability[176][178] - Post-quarter, the Company raised $400,000 through convertible promissory notes and implemented cost-reduction measures, believing these actions, combined with existing cash, will fund operations for the next 12 months[179] Cash and Cash Equivalents Defines and reports the company's most liquid assets - Cash and cash equivalents include short-term, highly liquid investments with original maturities of three months or less, such as cash on deposit with banks and investments in money market funds[185] Net Cash Used in Operating Activities Details the cash flows generated or used by the company's core business operations - Net cash used in operating activities was approximately $780,000 for the six months ended June 30, 2025, compared to $768,000 in the prior year[186][187] - Adjustments to net loss for non-cash items included stock-based compensation ($22,000), depreciation and amortization ($82,000), provision for doubtful accounts ($18,000), unrealized loss on investment ($44,000), and noncash lease expense ($46,000) for the six months ended June 30, 2025[186] Net Cash Used in Investing Activities Reports cash flows related to the acquisition and disposal of long-term assets and investments - Net cash used in investing activities was approximately $1,304,000 for the six months ended June 30, 2025, primarily due to the $1.3 million investment in AI Geometric Ltd[188] - This compares to $153,000 used in investing activities in the prior year, which was for developed technology and computer equipment purchases[188] Net Cash Provided by Financing Activities Details cash flows from debt, equity, and dividend transactions - Net cash provided by financing activities was approximately $478,000 for the six months ended June 30, 2025, representing proceeds from the sale of common stock and short-term debt[189] - This is a decrease from $912,000 in the prior year, which included proceeds from common stock sales and minority partners[190] Non-GAAP Financial Measure (Adjusted EBITDA) Presents Adjusted EBITDA as a non-GAAP metric for evaluating operational performance - Adjusted EBITDA is presented as a non-GAAP measure to provide insight into operating performance, excluding non-cash and non-recurring items, and is used by management and analysts[191] | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :------------------------------------ | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Loss from Continuing Operations, net of tax | $(492) | $(586) | $(1,233) | $(1,393) | | Adjusted EBITDA | $(454) | $(468) | $(1,063) | $(1,120) | - Adjusted EBITDA improved to $(454,000) for the three months and $(1,063,000) for the six months ended June 30, 2025, from $(468,000) and $(1,120,000) respectively, in the prior year[193] Off-Balance Sheet Arrangements Discloses any significant financial arrangements not recorded on the balance sheet - The Company has not engaged in any off-balance sheet activities since its inception[194] Critical Accounting Policies and Estimates Highlights the accounting policies requiring significant judgment and estimation Accounts Receivable and Allowance for Credit Losses Explains the accounting for trade receivables and the estimation of uncollectible amounts - Accounts receivable are recorded at net realizable value less an allowance for credit losses, with expected credit losses evaluated based on current conditions and future forecasts[199][201] Goodwill and Intangible Assets Details the accounting for goodwill and intangible assets, including impairment testing - Goodwill and indefinite-lived intangibles are tested for impairment annually or on an interim basis, involving a qualitative evaluation and comparison of fair value to carrying value[203][204][205] Capitalized Technology Costs Describes the company's policy for capitalizing and amortizing technology development costs - The Company capitalizes certain external and internal computer software costs incurred during the application development stage, amortizing them over estimated useful lives, generally not exceeding three years[207] Business Combinations Outlines the accounting treatment for acquisitions and the recognition of acquired assets and liabilities - Business combinations are accounted for using the acquisition method, recognizing acquired assets and assumed liabilities at fair value, with goodwill measured as the excess of consideration transferred[208] Revenue Recognition Reiterates the key principles and methods used for recognizing revenue from various sources - Principal revenue sources include recruitment services, consumer marketing/advertising, career fair events, membership subscriptions, and contracted software development[209] - Recruitment and consumer advertising revenues are recognized when services are performed or based on impressions, while membership fees are recognized ratably over the membership period[209][210][211] - Revenues from RemoteMore's software solutions contracts are recognized in the month work is performed[212] Revenue Concentration Discusses the company's reliance on specific revenue sources or customer relationships - For the six months ended June 30, 2025, approximately 2% of recruitment services revenue came from an alliance sales relationship, down from 6% in 2024, as management of job boards transitioned in-house[214] Lease Obligations Details the accounting for the company's lease agreements and related financial impacts - The Company leases office space under a non-cancelable operating lease expiring in September 2027, with operating lease expense recognized on a straight-line basis[215][216] - Operating lease assets and liabilities are recognized at lease commencement, using the incremental borrowing rate (IBR) if the implicit borrowing rate is not determinable[217][218] Recent Accounting Pronouncements Informs about new accounting standards under evaluation by the company - The Company is evaluating ASU 2023-09 (Income Taxes), effective for fiscal years after December 15, 2024, which enhances effective tax rate reconciliation disclosures[220] - The Company is evaluating ASU 2024-03 (Expense Disaggregation Disclosures), effective for annual periods after December 15, 2026, requiring disaggregated expense disclosures for certain categories[221] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK This section states that the Company has no applicable quantitative and qualitative disclosures about market risk - The Company has no market risk disclosures to report[222] ITEM 4. CONTROLS AND PROCEDURES Management, including the CEO and Interim CFO, concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - Disclosure controls and procedures were evaluated and deemed effective as of June 30, 2025, under the supervision of the Chief Executive Officer and Interim Chief Financial Officer[223] - No changes in internal control over financial reporting occurred during the second quarter of fiscal 2025 that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[224] PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS This section details ongoing legal proceedings, specifically a class-action lawsuit against NAPW, Inc. and Professional Diversity Network, Inc. alleging violations of labor laws, and notes the potential for material adverse effects from an unfavorable outcome - The Company is involved in a class-action lawsuit (Deborah Bayne, et al. vs. NAPW, Inc. and Professional Diversity Network, Inc.) alleging FLSA and NYLL violations for unpaid overtime and inaccurate wage statements[226][227] - Summary judgment was granted against NAPW for willful failure to pay overtime, but damages are unsettled. A $450,000 litigation settlement reserve was recorded in Q1 2020[227] - An unfavorable outcome in this proceeding could have a material adverse effect on the Company's financial condition, results of operations, and cash flows[227] ITEM 1A. RISK FACTORS This section refers readers to the comprehensive risk factors detailed in the Company's 2024 Annual Report on Form 10-K, along with additional risks in this Quarterly Report, which could materially affect the business - Readers should carefully consider the risk factors described in Part I, Item 1A, "Risk Factors" of the 2024 Annual Report on Form 10-K and Part II, Item 1A of this Quarterly Report, as they could materially affect the business[229] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS This section indicates that there are no unregistered sales of equity securities or use of proceeds to report - Not applicable for this reporting period[230] ITEM 3. DEFAULTS UPON SENIOR SECURITIES This section states that there are no defaults upon senior securities to report - None to report[231] ITEM 4. MINE SAFETY DISCLOSURES This section indicates that mine safety disclosures are not applicable to the Company's operations - Not applicable for this reporting period[232] ITEM 5. OTHER INFORMATION This section states that there is no other information to report - None to report[233] ITEM 6. EXHIBITS This section lists all exhibits filed as part of the 10-Q report, including various agreements, certifications, and XBRL documents - The report includes exhibits such as Securities Purchase Agreements, Profit Participation Agreement, Warrant Exchange Agreement, Convertible Note Purchase Agreements, Employment Agreements, and certifications[234] SIGNATURES Confirms the official signing and submission of the quarterly report by the authorized financial officer - The report was signed on August 14, 2025, by Yiran Gu, Chief Financial Officer of Professional Diversity Network, Inc[238]