Professional Diversity Network(IPDN) - 2021 Q3 - Quarterly Report

PART I Financial Statements Unaudited consolidated financial statements show asset growth from acquisitions and financing, persistent deficit, and revenue increase from recruitment services despite net loss Condensed Consolidated Balance Sheets Total assets increased to $9.80 million by Sep 30, 2021, driven by cash and goodwill, while equity improved from stock issuances Condensed Consolidated Balance Sheet Highlights (Unaudited) | Metric | September 30, 2021 ($) | December 31, 2020 ($) | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $4,092,473 | $2,117,569 | | Goodwill | $1,274,785 | $339,451 | | Total assets | $9,800,120 | $8,673,343 | | Liabilities & Equity | | | | Total current liabilities | $4,740,337 | $4,677,474 | | Total liabilities | $5,449,827 | $5,327,511 | | Accumulated deficit | $(94,509,710) | $(93,022,835) | | Total stockholders' equity | $4,350,293 | $3,345,832 | Condensed Consolidated Statements of Operations Q3 2021 revenue grew 29.0% to $1.68 million, with net loss significantly narrowing due to recruitment services growth Q3 2021 vs Q3 2020 Statement of Operations (Unaudited) | Metric | Three Months Ended Sep 30, 2021 ($) | Three Months Ended Sep 30, 2020 ($) | | :--- | :--- | :--- | | Total revenues | $1,683,015 | $1,305,522 | | Recruitment services revenue | $1,368,440 | $930,330 | | Loss from continuing operations | $(92,502) | $(920,582) | | Net loss attributable to PDN, Inc. | $(80,562) | $(941,687) | | Net loss per share | $(0.01) | $(0.07) | Nine Months 2021 vs 2020 Statement of Operations (Unaudited) | Metric | Nine Months Ended Sep 30, 2021 ($) | Nine Months Ended Sep 30, 2020 ($) | | :--- | :--- | :--- | | Total revenues | $4,628,032 | $3,239,649 | | Recruitment services revenue | $3,695,205 | $2,069,250 | | Loss from continuing operations | $(1,457,507) | $(4,148,699) | | Net loss attributable to PDN, Inc. | $(1,486,875) | $(4,272,655) | | Net loss per share | $(0.11) | $(0.39) | Condensed Consolidated Statements of Cash Flows Net cash used in operations improved, while financing activities provided $4.44 million from stock sales, increasing cash to $4.09 million Cash Flow Summary for Nine Months Ended Sep 30 (Unaudited) | Cash Flow Activity | 2021 ($) | 2020 ($) | | :--- | :--- | :--- | | Net cash used in operating activities | $(1,193,188) | $(2,834,475) | | Net cash used in investing activities | $(1,279,278) | $(77,577) | | Net cash provided by financing activities | $4,444,950 | $4,927,905 | | Net increase in cash | $1,974,904 | $2,051,836 | - The acquisition of an equity interest in RemoteMore USA, Inc. was a significant investing activity, costing $863,333[19] - Financing activities were driven by proceeds from the sale of common stock, totaling approximately $4.44 million[19] Notes to Condensed Consolidated Financial Statements Notes detail accounting policies, going concern doubt, RemoteMore acquisition, discontinued China operations, and stock issuances - The company's accumulated deficit of $94.5 million and negative cash from operations raise substantial doubt about its ability to continue as a going concern. Future operations depend on raising capital and increasing revenue[26][27] - On September 20, 2021, the company acquired a 45.62% interest in RemoteMore USA, Inc. for an estimated purchase price of $1,363,333, resulting in $935,334 of goodwill[62][63] - The company's China operations have been discontinued. In April 2021, approximately $2.9 million was seized from the PDN China bank account by a Chinese court related to a case involving the company's former CEO[45][46] - The company raised approximately $4.5 million in gross proceeds during the first nine months of 2021 through three separate sales of common stock[95][96][28] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) MD&A highlights 42.9% revenue growth, reduced net loss, but expresses substantial doubt about going concern due to recurring losses Results of Operations Total revenues increased 42.9% for nine months, driven by PDN Network growth, while G&A expenses decreased, narrowing net loss Revenue by Type - Nine Months Ended Sep 30 | Revenue Type | 2021 (in thousands) | 2020 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Recruitment services | $3,695 | $2,069 | 78.6% | | Membership fees and related services | $761 | $1,056 | (27.9)% | | Total revenues | $4,628 | $3,239 | 42.9% | Revenue by Segment - Nine Months Ended Sep 30 | Segment | 2021 (in thousands) | 2020 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | PDN Network | $3,845 | $2,180 | 76.4% | | Other | $783 | $1,059 | (26.1)% | | Total revenues | $4,628 | $3,239 | 42.9% | - General and administrative expenses for the nine months ended Sep 30, 2021, decreased by $1.99 million (37.6%) compared to the prior year, mainly due to reduced professional services charges and litigation settlement reserves[138] Liquidity and Capital Resources Cash and working capital improved from stock sales, but recurring losses and negative cash flow raise substantial doubt about going concern - The company had cash and cash equivalents of $4,092,473 as of September 30, 2021, compared to $2,117,569 at December 31, 2020[152] - Management states that recurring losses and negative cash flows raise substantial doubt about the company's ability to continue as a going concern[153] - The company raised approximately $4.45 million in cash from financing activities during the first nine months of 2021 through the sale of common stock[166][155][156] - Management anticipates that available funds may not be sufficient to meet working capital requirements for the next twelve months, necessitating further capital raises or revenue increases[158] Critical Accounting Policies and Estimates Management identifies critical accounting policies requiring significant judgment for receivables, goodwill, software, business combinations, and revenue - Key critical accounting policies involve significant estimates for accounts receivable allowances, goodwill and intangible asset impairment, capitalized technology costs, business combinations, and revenue recognition[172][173][174] Quantitative and Qualitative Disclosures About Market Risk Not applicable as the company is a smaller reporting company - Not applicable for this filing[183] Controls and Procedures Disclosure controls were ineffective due to persistent material weaknesses in revenue recognition and accounting procedures, with remediation ongoing - Management concluded that the company's disclosure controls and procedures were not effective as of September 30, 2021[184] - Material weaknesses in internal controls persist, including issues with revenue recognition policies, estimating allowance for doubtful accounts, and lack of formal accounting procedures[189][190] - Remediation efforts in fiscal 2021 include expanding accounting staff, updating policies, and implementing a more robust accounting software which went live on October 1, 2021[190] PART II Legal Proceedings Updates on legal matters include settlement of White Winston dispute, a judgment against NAPW, and a class-action labor lawsuit - The White Winston matter was settled; the company paid $600,000 in cash and issued 150,000 shares of common stock[194] - A judgment of $855,002 was entered against subsidiary NAPW in a lease dispute, for which the company has reserved[195] - The company is defending a labor law case (Deborah Bayne, et al. vs. NAPW, Inc.) and has recorded a $450,000 litigation settlement reserve[196] Risk Factors Not required for smaller reporting companies - Smaller reporting companies are not required to provide the information required by this item[198] Unregistered Sales of Equity Securities and Use of Proceeds Company reports three significant equity sales in 2021, raising approximately $4.5 million in gross proceeds - February 1, 2021: Sold 500,000 shares in a private placement for gross proceeds of $1,000,000[199] - July 9, 2021: Sold 1,470,588 shares in a registered direct offering for gross proceeds of $2,499,999.60[200] - September 22, 2021: Sold 948,767 shares through a stock purchase agreement for gross proceeds of approximately $1,000,000[201] Defaults Upon Senior Securities None reported - None[202] Mine Safety Disclosures Not applicable - Not applicable[203] Other Information None reported - None[204] Exhibits The report lists several exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL documents - Exhibits filed include Sarbanes-Oxley certifications (31.1, 31.2, 32.1) and various Inline XBRL documents[206]