Professional Diversity Network(US:IPDN)2021-05-17 16:53PART I - FINANCIAL INFORMATION Item 1. Financial Statements Q1 2021 financials show revenue growth, narrowed net loss, declining assets, and significant going concern doubts Condensed Consolidated Balance Sheets Total assets decreased to $6.04 million by March 31, 2021, mainly from discontinued operations, sharply reducing stockholders' equity Condensed Consolidated Balance Sheet Highlights (Unaudited) | Balance Sheet Item | March 31, 2021 ($) | December 31, 2020 ($) | | :--- | :--- | :--- | | Total Assets | 6,037,747 | 8,673,343 | | Total Current Assets | 3,811,447 | 3,521,421 | | Long-term assets from discontinued operations | 198,186 | 3,085,178 | | Total Liabilities | 5,073,519 | 5,327,511 | | Total Current Liabilities | 4,495,851 | 4,677,474 | | Total Stockholders' Equity | 964,228 | 3,345,832 | - The significant drop in stockholders' equity is primarily due to an adjustment from discontinued operations of ($2,591,724) and a net loss of ($770,689) for the quarter17 Condensed Consolidated Statements of Operations Q1 2021 total revenues increased 51.1% to $1.48 million, driven by recruitment services, narrowing the loss from continuing operations Q1 2021 vs Q1 2020 Statement of Operations (Unaudited) | Metric | Three Months Ended Mar 31, 2021 ($) | Three Months Ended Mar 31, 2020 ($) | YoY Change (%) | | :--- | :--- | :--- | :--- | | Total Revenues | 1,484,852 | 982,297 | +51.1% | | Recruitment services | 1,175,080 | 566,687 | +107.3% | | Membership fees and related services | 263,205 | 383,831 | -31.4% | | Total costs and expenses | 2,308,329 | 2,411,301 | -4.3% | | Loss from continuing operations | (755,615) | (1,422,431) | +46.9% | | Net Loss | (770,689) | (1,492,096) | +48.3% | | Net Loss Per Share (Basic & Diluted) | (0.06) | (0.17) | +64.7% | Condensed Consolidated Statements of Cash Flows Q1 2021 saw increased net cash used in operating activities to ($733,734), with $1.0 million from financing, ending the quarter with $2.34 million in cash Q1 2021 vs Q1 2020 Cash Flow Summary (Unaudited) | Cash Flow Activity | Three Months Ended Mar 31, 2021 ($) | Three Months Ended Mar 31, 2020 ($) | | :--- | :--- | :--- | | Net cash used in operating activities | (733,734) | (558,305) | | Net cash used in investing activities | (6,128) | (4,705) | | Net cash provided by financing activities | 1,000,000 | 1,500,000 | | Net increase in cash | 224,774 | 936,990 | | Cash, end of period | 2,342,343 | 1,555,203 | Notes to Condensed Consolidated Financial Statements Notes detail going concern doubts, $2.9 million cash seizure from China operations impacting Nasdaq listing, and segment performance showing PDN growth - The company's ability to continue as a going concern is in substantial doubt due to an accumulated deficit of $93.8 million and negative cash flow from operations2426 - In April 2021, approximately $2.9 million (RMB 18.8 million) was seized from the company's discontinued China operations bank account, causing stockholders' equity to fall below the $2.5 million Nasdaq listing requirement4748 - The company settled a legal dispute with White Winston by paying $600,000 in cash and issuing 150,000 shares of common stock, for a total settlement value of $766,50086 Segment Revenue and Operating Income (Loss) - Q1 2021 | Segment | Total Revenues ($) | Income (Loss) from Continuing Operations ($) | | :--- | :--- | :--- | | PDN Network | 1,220,217 | 312,823 | | NAPW Network | 264,636 | (246,419) | | Corporate Overhead | - | (889,880) | | Consolidated | 1,484,853 | (823,476) | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2021 revenue growth from PDN Network, offset by NAPW decline, reduced G&A, and ongoing liquidity concerns with working capital deficiency and Nasdaq compliance Results of Operations Q1 2021 total revenues increased 51.1% to $1.48 million, driven by recruitment services and PDN Network growth, reducing net loss from continuing operations Revenue by Type - Q1 2021 vs Q1 2020 (in thousands) | Revenue Type | Q1 2021 ($) | Q1 2020 ($) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Membership fees and related services | 263 | 384 | (121) | (31.5)% | | Recruitment services | 1,175 | 567 | 608 | 107.2% | | Consumer advertising and marketing | 45 | 30 | 15 | 50.0% | | Total revenues | 1,484 | 982 | 502 | 51.1% | Revenue by Segment - Q1 2021 vs Q1 2020 (in thousands) | Segment | Q1 2021 ($) | Q1 2020 ($) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | PDN Network | 1,220 | 597 | 623 | 104.3% | | NAPW Network | 264 | 385 | (121) | (31.4)% | | Total revenues | 1,484 | 982 | 502 | 51.1% | - General and administrative expenses decreased by $343,000, primarily because a $450,000 litigation settlement reserve was recorded in Q1 2020 with no comparable event in Q1 2021137 Liquidity and Capital Resources The company faces precarious liquidity with a $684,000 working capital deficiency and $93.8 million accumulated deficit, raising going concern doubts, exacerbated by a $2.9 million cash seizure - The company had a working capital deficiency of ($684,000) as of March 31, 2021, and management states that available funds may not be sufficient to meet working capital requirements for the next twelve months149156 - On February 1, 2021, the company raised $1,000,000 in gross proceeds from a private placement sale of 500,000 shares of common stock at $2.00 per share154 - The seizure of approximately $2.9 million from the PDN China Account resulted in the company's stockholders' equity falling below the $2.5 million required for continued listing on the Nasdaq Capital Market156 Discontinued Operations China operations were suspended in March 2020, with Q1 2021 net loss from discontinued operations significantly reduced to $15,074 from $69,665 in the prior year Results from Discontinued Operations | Metric | Three Months Ended Mar 31, 2021 ($) | Three Months Ended Mar 31, 2020 ($) | | :--- | :--- | :--- | | Revenues | - | - | | General and administrative | 9,470 | 60,614 | | Net loss from discontinued operations | (15,074) | (69,665) | Item 3. Quantitative and Qualitative Disclosures About Market Risk This item is not applicable, consistent with practices for smaller reporting companies - Not applicable184 Item 4. Controls and Procedures Management concluded disclosure controls were ineffective as of March 31, 2021, due to persistent material weaknesses in internal control over financial reporting, with remediation ongoing - The Chief Executive Officer and Interim Chief Financial Officer concluded that the company's disclosure controls and procedures were not effective as of the end of the period covered by the report185 - Material weaknesses identified include lack of proper policies for revenue sharing arrangements, inadequate procedures for estimating allowance for doubtful accounts, and insufficiently formal accounting procedures, particularly for foreign subsidiary data191193 - Remediation plans for 2021 include expanding corporate accounting staff, updating accounting policies, and improving financial reporting processes with monthly and quarterly closing checklists192195 PART II - OTHER INFORMATION Item 1. Legal Proceedings The company details three significant legal matters, including a $766,500 settlement, a $746,142 judgment against NAPW, and an ongoing labor law case with a $450,000 reserve - Settled with White Winston Select Asset Funds for $600,000 cash and 150,000 shares of common stock198 - A judgment of $746,142 was entered against subsidiary NAPW for a former lease; a $780,000 reserve has been recorded199 - A labor law case (Deborah Bayne, et al. vs. NAPW, Inc.) is scheduled for trial in 2021; a $450,000 litigation reserve was recorded in Q1 2020200 Item 1A. Risk Factors As a smaller reporting company, this item's information is not required - Smaller reporting companies are not required to provide the information required by this item202 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds On February 1, 2021, the company sold 500,000 shares of common stock in a private placement at $2.00 per share, generating $1,000,000 in gross proceeds - On February 1, 2021, the Company sold 500,000 shares of common stock in a private placement at $2.00 per share for gross proceeds of $1,000,000204 Other Items (3, 4, 5, 6) Items 3, 4, and 5 reported no defaults, mine safety disclosures, or other information, while Item 6 lists the exhibits filed with the Form 10-Q - Item 3 (Defaults Upon Senior Securities), Item 4 (Mine Safety Disclosure), and Item 5 (Other Information) are reported as 'None' or 'Not applicable'205206207 - Item 6 lists the exhibits filed with the report, including CEO/CFO certifications and XBRL data files208209