PROFESSIONAL DIVERSITY NETWORK, INC. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes thereto in Item 8, "Financial Statements," in Part II of this Annual Report. This discussion contains forward-looking statements, which are based on our assumptions about the future of our business. Our actual results will likely differ materially from those contained in the forward-looking statements. Please read "Special Note Regarding Forward-Looking Statements" for additional information regarding forward-looking statements
used in this Annual Report. Overview We are an operator of professional communities with a focus on diversity, employment, education and training. We use the term "diversity" (or "diverse") to describe communities, or "affinities," that are distinct based on a wide array of criteria, including ethnic, national, cultural, racial, religious or gender classification. We serve a variety of such communities, including Women, Hispanic-Americans, African-Americans, Asian-Americans, persons with disabilities, Military Professionals, and Lesbian, Gay, Bisexual, and Transgender (LGBTQ+). We currently operate in three business segments. PDN Network, our primary business segment, includes online professional job seeking communities with career resources tailored to the needs of various diverse cultural groups and employers looking to hire members of such groups. Our secondary business segment consists of the NAPW Network, a women-only professional networking organization. Our third business segment consists of RemoteMore, which connects companies with reliable, cost-efficient developers with less effort and friction, and empowers software developers to get meaningful jobs regardless of their location.
We believe that the combination of our solutions allows us to approach recruiting and professional networking in a unique way and thus create enhanced value for our members and customers by:
? Helping employers address their workforce diversity needs by connecting them
with the right candidates from our diverse job seeking communities such as
African Americans, Hispanics, Asians, Veterans, individuals with disabilities
and members of the LGBTQ+ community (with the ability to roll out to our other
affinities);
? Providing a robust online and in-person network for our women members to make
professional and personal connections; and
? Connecting companies with reliable, cost-efficient developers to meet their
software needs.
Sources of Revenue
We generate revenue from (i) paid membership subscriptions and related services,
(ii) recruitment services, (iii) contracted software development, and (iv)
consumer advertising and consumer marketing solutions. The following table sets
forth our revenues from each significant product as a percentage of total
revenue for the periods presented. The period-to-period comparison of financial
results is not necessarily indicative of future results.
Year Ended December 31,
2022 2021
Revenues:
Membership fees and related services 7.7 % 16.1 %
Recruitment services 58.5 % 76.2 %
Contracted software development 31.8 % 5.0 %
Consumer advertising and marketing solutions 2.0 % 2.7 %
26
Membership Fees and Related Services. We offer paid membership subscriptions
through our NAPW Network, a women-only professional networking organization,
operated by our wholly-owned subsidiary. Members gain access to networking
opportunities through a members-only website at www.iawomen.com and "virtual"
events which occur in a webcast setting, as well as through in-person networking
local chapters nationwide, additional career and networking events such as the
National Networking Summit Series, Power Networking Events and the PDN Network
events. NAPW members also receive ancillary (non-networking) benefits such as
educational discounts, shopping, and other membership perks. The basic package
is the Initiator level, which provides online benefits only. Upgrades to an
Innovator membership include the Initiator benefits, as well as membership in
local chapters, and access to live in-person events. The most comprehensive
level, the Influencer, provides all the aforementioned benefits plus admission
to exclusive "live" events and expanded opportunities for marketing and
promotion, including the creation and distribution of a press release, which is
prepared by professional writers and sent over major newswires. Additionally,
all memberships offer educational programs with discounts or at no cost, based
on the membership level. NAPW Membership is renewable and fees are payable on an
annual or monthly basis, with the first fee payable at the commencement of the
membership. We offer to new purchasers of our NAPW memberships the opportunity
to purchase a commemorative wall plaque at the time of purchase. They may
purchase up to two plaques at that time.
Recruitment Services. We provide recruitment services through PDN Network to
medium and large employers seeking to diversify their employment ranks. Our
recruitment services include recruitment advertising, job postings, contingent
search and hiring, and career fairs. The majority of recruitment services
revenue comes from job recruitment advertising. We also offer to businesses
subject to the regulations and requirements of the Equal Employment Opportunity
Office of Federal Contract Compliance Program ("OFCCP") our OFCCP compliance
product, which combines diversity recruitment advertising with job postingsand compliance services.
Contracted software Development. RemoteMore generates revenue by providing contracted programmers to assist customers with their software solutions through customized software development.
Consumer Advertising and Marketing Solutions. We work with partner organizations to provide them with integrated job boards on their websites, which offer their members or customers the ability to post recruitment advertising and job openings. We generate revenue from fees charged for those postings. Cost of Revenue
Cost of revenue primarily consists of costs of producing job fair and other
events, revenue-sharing with partner organizations, costs of web hosting and
operating our websites for the PDN Network. Costs of hosting member conferences
and local chapter meetings are also included in the cost of revenue for NAPW
Network. Costs of paying outside developers are included in the cost of revenue
for RemoteMore.
Year Ended December 31,
2022 2021
Cost of revenues:
PDN Network 34.0 % 69.9 %
NAPW Network 10.5 % 11.3 %
RemoteMore 55.5 % 18.8 %
27
Results of Operations
Revenues
Total Revenues
The following tables set forth our revenues for the years ended December 31,
2022 and 2021:
Year Ended December 31, Change Change
2022 2021 (Dollars) (Percent)
(in thousands)
Revenues:
Membership fees and related (35.1
services $ 639 $ 985 $ (346 ) )%
Recruitment services 4,862 4,647 215 4.6 %Contracted software development 2,646 303 2,343 773.3 % Consumer advertising and marketing
3 1.8
solutions 167 164 %
Total revenues $ 8,314 $ 6,099 $ 2,215 36.3 %
Total revenues increased approximately$2,215,000 , or 36.3% from$6,099,000 for the year endedDecember 31, 2021 to approximately$8,314,000 for the year endedDecember 31, 2022 . The increase was predominately attributable to approximately$2,343,000 of contracted software development related to RemoteMore, as compared to the same period in the prior year due to RemoteMore having a full year of operations in 2022 as compared to only three months of operations in 2021. Also contributing to the increase was an increase in recruitment services revenues of approximately$215,000 , partially offset by an approximate$346,000 decrease in membership fees and related services revenues, as compared to the same period in the prior year. Revenues by Segment
The following table sets forth each operating segment's revenues for the years
ended
Year Ended December 31, Change Change
2022 2021 (Dollars) (Percent)
(in thousands)
PDN Network $ 5,029 $ 4,811 $ 218 4.5 %
NAPW Network 639 985 (346 ) (35.1 )%
RemoteMore 2,646 303 2,343 773.3 %
Total revenues $ 8,314 $ 6,099 $ 2,215 36.3 %
During the year ended December 31, 2022 , our PDN Network generated approximately
$5,029,000 in revenues compared to $4,811,000 in revenues during the year ended
December 31, 2021 , an increase of approximately $218,000 or 4.5%. The increase
in revenues was primarily due to an increase in job placement commission of
approximately $179,000 . Event and partner sales revenue combined for an increase
of approximately $69,000 over the same period in the prior year. Partially
offsetting the increases were decreases in diversity recruitment initiatives of
our clients of approximately $30,000 as there was a softening in client hiring
due to the macroeconomic environment change in the latter half of 2022.
During the year ended December 31, 2022 , NAPW Network revenues were
approximately $639,000 , compared to revenues of $985,000 during the year ended
December 31, 2021 , a decrease of approximately $346,000 or 35.1%. The decrease
in revenues was primarily due to an approximate $277,000 decrease in renewal
membership and approximately $69,000 decrease in new membership, as compared to
the same period in the prior year. We believe that the membership services that
the NAPW Network provides to our customers turned into a discretionary spending
decision during 2021 and continued into 2022, as a result of the financial and
economic impact of COVID-19. We continue to research services and price points
to reverse the impact of lower membership.
28
During the year ended December 31, 2022 , RemoteMore revenue was approximately
$2,646,000 , compared to revenues of approximately $303,000 during the same
period in the prior year, an increase of approximately $2,343,000 . This is due
to the current period having a full twelve months of operations versus the same
period in 2021, which only had approximately 3 months of operations from the
acquisition date of September 20, 2021 .
Costs and Expenses
The following tables set forth our costs and expenses for the years ended
December 31, 2022 and 2021:
Year Ended December 31, Change Change
2022 2021 (Dollars) (Percent)
(in thousands)
Cost and expenses:
Cost of revenues $ 4,260 $ 1,524 $ 2,736 179.5 %
Sales and marketing 2,806 2,457 349 14.2 %
General and administrative 3,574 4,623 (1,049 ) (22.7 )%Depreciation and amortization 776 385
391 101.6 % Total cost and expenses:$ 11,416 $ 8,989 $ 2,427 27.0 %
Total costs and expenses increased for the year endedDecember 31, 2022 to approximately$11,416,000 compared to$8,989,000 for the year endedDecember 31, 2021 . The approximate$2,427,000 , or 27.0%, increase in costs and expenses was primarily attributable to the following:
? The increase in cost of revenues of approximately
the prior year, is predominately a result of an increase in contractor costs
of approximately,
having a full twelve months of operations versus the same period in 2021,
which only had approximately 3 months of operations from the acquisition date
of
were approximately
increased revenues, and approximately
costs, as compared to the same period in the prior year.
? The increase in sales and marketing of approximately
the same period in 2021, is a result of increases in marketing and advertising
costs of approximately
Partially offsetting the increase were decreases in agency commissions of
approximately
? The decrease in general and administrative expenses of approximately
settlement of litigation resulting in a one-time, non-cash gain of
approximately
share-based compensation of approximately
approximately
payroll related costs of approximately
decrease in general and administrative expense were increases of approximately
related costs.
? The increase in depreciation and amortization of approximately
compared to the same period in 2021, is predominately due to $397,000 of
amortization related to RemoteMore intangible assets.
Costs and Expenses by Segment
The following table sets forth each operating segment's costs and expenses for
the years ended
Year Ended December 31, Change Change
2022 2021 (Dollars) (Percent)
(in thousands)
PDN Network $ 4,614 $ 3,741 $ 873 23.3 %
NAPW Network 835 1,835 (1,000 ) (54.5 )%
RemoteMore 3,654 655 2,999 457.8 %
Corporate Overhead 2,313 2,758 (445 ) (16.1 )%Total cost and expenses:$ 11,416 $ 8,989 $ 2,427
27.0 % 29 Costs and expenses related to our PDN Network increased approximately$873,000 or 23.3%, during the year endedDecember 31, 2022 , as compared to the prior year, primarily due to increases of approximately$455,000 related to non-payroll sales and marketing expenses,$324,000 in payroll related costs,$138,000 related to employee commissions, and$110,000 related to other miscellaneous taxes. Partially offsetting the period-to-period increase were reductions of bad debt expense of approximately$185,000 , reimbursed expenses from NAPW and RemoteMore of approximately$67,500 , and other expenses of$98,000 . Costs and expenses related to the NAPW Network decreased approximately$1,000,000 , or 54.5%, during the year endedDecember 31, 2022 , as compared to the prior year. The decrease was predominately due to settlement of litigation resulting in a one-time, non-cash gain of approximately$908,000 . Also contributing to the decrease were approximately$242,000 in payroll related costs primarily due to restructuring of the sales force in the first quarter of 2021, and litigation and settlement costs of approximately$154,000 . Partially offsetting the decrease were increases in conference expenses incurred primarily related to the October Gala event of approximately$238,000 and$66,000 of
other related charges.
Cost and expenses related to RemoteMore increased approximately$2,999,000 in 2022 during the year endedDecember 31, 2022 , as compared to the prior year, predominately consisting of contractor costs of approximately$2,100,000 , amortization of intangibles of approximately$397,000 , other purchased services of approximately$230,000 , salaries and wages of approximately$132,000 , reimbursed expenses to PDN of approximately$60,000 , and other operating costs of approximately$80,000 . Corporate overhead expenses decreased approximately$445,000 or 16.1% during the yearDecember 31, 2022 , as compared to the prior year, primarily as a result of a decrease of approximately$187,000 in filing fees, registrations and other miscellaneous taxes,$165,000 in reduced legal fees,$153,000 in share-based compensation, and$83,000 of payroll related costs. Partially offsetting the decrease was approximately$100,000 in increased accounting expenses, and approximately$42,000 of other charges, as compared to the prior year. Other Income (Expenses) Other income for the year endedDecember 31, 2022 was approximately$(4,000) , compared to other income of approximately$8,000 during the year endedDecember 31, 2021 . The decrease in other income during the current year was primarily due to approximately$12,000 in foreign currency exchange losses related to RemoteMore's operations. Income Tax Benefit Year Ended December 31, Change Change 2022 2021 (Dollars) (Percent) (in thousands) Income tax benefit$ (13 ) $ (22 ) $ 9 40.9 % During the years endedDecember 31, 2022 , and 2021, we recorded a benefit for income tax of$13,000 and$22,000 . The decrease in income tax benefit during the current period was primarily due to a reduction in our deferred tax liabilities in the current year. Discontinued Operations
In
30
The following table presents results from discontinued operations for the years
ended
Year Ended December 31,
2022 2021
(in thousands)
Revenues $ - $ -
General and administrative 65 90Non-operating (expense) income (0 ) (1 ) Loss from discontinued operations before income tax (65 ) (89 ) Income tax expense -
-
Net loss from discontinued operations$ (65 )
$ (89 )
Net loss from Continuing Operations
The following table sets forth each operating segment's net income or loss for
the periods presented. The period-to-period comparison is not necessarily
indicative of future results.
Year Ended December 31, Change Change
2022 2021 (Dollars) (Percent)
(in thousands)
PDN Network $ 414 $ 1,066 $ (652 ) (61.1 )%
NAPW Network (221 ) (840 ) 619 (73.7 )%
RemoteMore (1,020 ) (353 ) (667 ) 189.0 %
Corporate Overhead (2,266 ) (2,733 ) 467 (17.1 )%
Consolidated net loss from
continuing operations $ (3,092 ) $ (2,860 ) $ (232 ) 8.1 %
Consolidated Net Loss from Continuing Operations. As the result of the factors
discussed above, during the year ended December 31, 2022 , we incurred a net loss
of approximately $3,092,000 from continuing operations, a increase in net loss
of approximately $232,000 or 8.1% from a net loss of $2,860,000 for the year
ended December 31, 2021 .
Non-GAAP Financial Measure
Adjusted EBITDA
We believe Adjusted EBITDA provides a meaningful representation of our operating
performance that provides useful information to investors regarding our
financial condition and results of operations. Adjusted EBITDA is commonly used
by financial analysts and others to measure operating performance. Furthermore,
management believes that this non-GAAP financial measure may provide investors
with additional meaningful comparisons between current results and results of
prior periods as they are expected to be reflective of our core ongoing
business. However, while we consider Adjusted EBITDA to be an important measure
of operating performance, Adjusted EBITDA and other non-GAAP financial measures
have limitations, and investors should not consider them in isolation or as a
substitute for analysis of our results as reported under GAAP. Further, Adjusted
EBITDA, as we define it, may not be comparable to EBITDA, or similarly titled
measures, as defined by other companies.
31
The following table provides a reconciliation of net loss from continuing
operations to Adjusted EBITDA for the years ended
Years Ended December 31,
2022 2021
(in thousands)
Loss from Continuing Operations $ (3,092 ) $ (2,861 )
Share-based compensation 481 634
Litigation settlement reserve (909 ) 175
Loss attributable to noncontrolling interest 555 193
Depreciation and amortization 776 385
Other income (expense) 4 (8 )
Income tax benefit (13 ) (22 )
Adjusted EBITDA $ (2,198 ) $ (1,504 ) Liquidity and Capital Resources
The following table summarizes our liquidity and capital resources as ofDecember 31, 2022 and 2021: As of December 31, 2022 2021 (in thousands) Cash and cash equivalents$ 1,237 $ 3,403
Working capital (deficit) from continuing operations
As ofDecember 31, 2022 , we had cash and cash equivalents of$1,237,000 compared to cash and cash equivalents of$3,403,000 atDecember 31, 2021 . Our principal sources of liquidity are our cash and cash equivalents, including net proceeds from the issuances of common stock. As ofDecember 31, 2022 , we had a working capital deficit of approximately$187,000 , compared to a working capital of approximately$834,000 as ofDecember 31, 2021 . We had an accumulated deficit of approximately$98,383,000 atDecember 31, 2022 . During the years endedDecember 31, 2022 and 2021, we generated a net loss from continuing operations of approximately$3,092,000 and$2,860,000 and used cash from continuing operations of approximately$2,250,000 and$1,841,000 . During 2022, we continued our focus on cost cutting initiatives and improving our overall profitability and shareholder value through new sales and marking initiatives and through business collaborations. However, we have continued to generate negative cash flows from operations, and we expect to incur net losses for the short-term foreseeable future. These conditions raise substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent on our ability to further implement our business plan of increased sales and market share through the generation of organic growth in revenues from our existing operating segments, raise capital, and make strategic acquisitions. The consolidated financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.
In
OnFebruary 1, 2021 , we entered into a private placement with Ms.Yiran Gu , in which the Company sold 250,000 shares of its common stock at a price per share of$2.00 for gross proceeds of$1,000,000 .
On
OnSeptember 22, 2021 , we entered into a stock purchase agreement withCosmic Forward Limited , in which the Company sold 474,384 shares of its common stock at a price per share of$2.10 for gross proceeds of approximately$1,000,000 . InFebruary 2022 , in connection with theSeptember 2021 acquisition of the 45.62% interest inRemoteMore USA, Inc. , and as a component of the$500,000 to be paid within one year, the Company issued 139,860 shares of its common stock, with a value of$400,000 , to the co-founders of RemoteMore (see Note 4 - Business Combinations). InSeptember 2022 , in connection with the acquisition of a 9% interest inKoala Crypto Limited the Company issued 863,392 shares of its common stock to Seller in a private placement (the "Consideration Shares"). The Consideration Shares were valued at$1,350,000 (see Note 8 - Long-term Investments). InDecember 2022 , the Company entered into a stock purchase agreement with Ms.Hongjun Chen , in which the Company sold 1,162,791 shares of its common stock at a price per share of$0.86 for gross proceeds of approximately$1,000,000 .
32
InMarch 2021 , we entered into a stock purchase agreement ("Stock Purchase Agreement") to purchase a significant equity stake inRemoteMore USA Inc. ("RemoteMore"), aDelaware corporation. OnSeptember 20, 2021 , we acquired 45.62% of the outstanding shares ofRemoteMore USA ("RemoteMore") stock, as well as certain assets, including contracts in place, certain domain names and other intellectual property. Based on the significant influence that our management has over the operations and guidance of RemoteMore, we have consolidated RemoteMore's account balances and operations in our consolidated financial statements. InMarch 2023 , we exercised our option to purchase an additional 20% interest in RemoteMore for$116,667 furthering our interest in RemoteMore to 65.62%. InJanuary 2023 , we announced that our newly formed wholly-owned subsidiary,Expo Experts Events, LLC , pursuant to an asset purchase agreement withExpo Experts, LLC ("Expo Experts"), anOhio limited liability company, has purchased the assets and operations of Expo Experts for a total consideration of$600,000 funded by the payment of$400,000 in cash and the issuance of restricted shares of PDN common stock valued at$200,000 based on the volume weighted-average price as of twenty (20) days prior to the closing date. OnJanuary 31, 2022 , the Company announced its Board of Directors had approved the repurchase of up to$2 million of its outstanding common stock from time to time on the open market or in privately negotiated transactions. The timing and amount of any shares repurchased would be determined by the Company's management based on its evaluation of market conditions and other factors. Repurchases could also be made under a Rule 10b5-1 plan of the Securities Exchange Act of 1934, which would permit shares to be repurchased when the Company might otherwise be precluded from doing so under insider trading laws. Since inception of the Stock Buyback Plan throughDecember 20, 2022 , the Company purchased 530,421 shares of its common shares, for a total of approximately$855,000 at an average cost of approximately$1.62 per share (excluding commissions). Transactions occurred in open market purchases and pursuant to a trading plan under Rule 10b5-1. As ofDecember 20, 2022 , the Company suspended the Stock Buyback Plan. While we believe that our cash and cash equivalents of approximately$1,237,000 , atDecember 31, 2022 , and cash flow from operations, may be sufficient to meet our working capital requirements for the fiscal year 2023, our available funds and cash flow from operations may not be sufficient to meet our working capital requirements without the need to increase revenues or raise capital by the issuance of common stock. There can be no assurances that our business plans and actions will be successful, that we will generate anticipated revenues, or that unforeseen circumstances similar to COVID-19 will not require additional funding sources in the future or effectuate plans to conserve liquidity. Future efforts to raise additional funds may not be successful or they may not be available on acceptable terms, if at all. Cash and cash equivalents consist primarily of cash on deposit with banks and investments in money market funds. Our PDN Network sells recruitment services to employers, generally on a one-year contract basis. This revenue is also deferred and recognized over the life of the contract. Our payment terms for PDN Network customers range from 30 to 60 days. We consider the difference between the payment terms and payment receipts a result of transit time for invoice and payment processing and to date have not experienced any liquidity issues as a result of the payments extending past the specified terms. Our NAPW network collects membership fees generally at the commencement of the membership term or at renewal periods thereafter. The memberships we sell are for one year and we defer recognition of the revenue from membership sales and renewals and recognize it ratably over the twelve-month period. Since 2018, we have also offered a monthly membership forIAW USA for which we collect a fee on a monthly basis. Year Ended December 31, 2022 2021 (in thousands) Cash (used in) provided by continued operations Operating activities$ (2,250 ) $ (1,841 ) Investing activities (61 ) (1,288 ) Financing activities 145 4,445 Effect of exchange rate fluctuations on cash and cash equivalents 2 2 Cash (used in) provided by discontinued operations Operating activities (2 ) (33 ) Net (decrease) increase in cash and cash equivalents$ (2,166 ) $ 1,285 Cash and Cash Equivalents
The Company considers cash and cash equivalents to include all short-term, highly liquid investments that are readily convertible to known amounts of cash and have original maturities of three months or less.
33
Net cash used in operating activities from continuing operations during the year endedDecember 31, 2022 was$2,250,000 . We had a net loss from continuing operations of$3,092,000 during the year endedDecember 31, 2022 , which included a gain on settlement of$908,564 in litigation settlement reserves, share-based compensation expense of$481,000 and depreciation and amortization expense of$776,000 , predominately due to amortization of intangible assets related to the acquisition of RemoteMore, reduction of our merchant reserve of$381,000 and noncash lease expense of$91,000 . Changes in operating assets and liabilities provided approximately$40,000 of cash during the year endedDecember 31, 2022 , consisting primarily of a$90,000 increase in accounts payable, a$71,000 increase in accounts receivable, a$103,000 increase in prepaid expenses, and a$102,000 increase in accrued liabilities, which was partially offset by a$224,000 decrease in deferred revenues and$101,000 in lease liability. Net cash used in operating activities from continuing operations during the year endedDecember 31, 2021 was$1,841,000 . We had a net loss from continuing operations of$2,861,000 during the year endedDecember 31, 2021 , which included$175,000 in litigation settlement reserves, share-based compensation expense of$634,000 and depreciation and amortization expense of$385,000 , predominately due to amortization of intangible assets related to the acquisition of RemoteMore, reduction of our merchant reserve of$380,000 and amortization of right-of-use assets of$66,000 . Changes in operating assets and liabilities used approximately$599,000 of cash during the year endedDecember 31, 2021 , consisting primarily of a$482,000 decrease in accounts payable, a$384,000 decrease in accounts receivable and a$96,000 decrease in prepaid expenses, which was partially offset by a$77,000 increase in accrued liabilities and a$249,000 increase in deferred revenues.
Net cash used in investing activities from continuing operations during the year endedDecember 31, 2022 was approximately$61,000 , which consisted primarily of$45,000 in costs associated with internally developed technology and$16,000 associated with the purchases of computer equipment. During the year endedDecember 31, 2021 , net cash used in investing activities from continuing operations was$1,288,243 and consisted of investment deposits.
Net Cash Provided by Financing Activities
Net cash provided by financing activities from continuing operations during the year endedDecember 31, 2022 , was approximately$145,000 , which reflected the proceeds from the sale of, and the reacquisition of, common stock as described above.
Net cash provided by financing activities from continuing operations during the
year ended
Off-Balance Sheet Arrangements
Since inception, we have not engaged in any off-balance sheet activities as defined in Regulation S-K Item 303(a)(4).
Critical Accounting Policies and Estimates
Our management's discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted inthe United States , orU.S. GAAP. The preparation of these consolidated financial statements requires us to exercise considerable judgment with respect to establishing sound accounting policies and in making estimates and assumptions that affect the reported amounts of our assets and liabilities, our recognition of revenues and expenses, and disclosure of commitments and contingencies at the date of the consolidated financial statements. We base our estimates on our historical experience, knowledge of our business and industry, current and expected economic conditions, the attributes of our products, the regulatory environment, and in certain cases, the results of outside appraisals. We periodically re-evaluate our estimates and assumptions with respect to these judgments and modify our approach when circumstances indicate that modifications are necessary. These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. 34
While we believe that the factors we evaluate provide us with a meaningful basis for establishing and applying sound accounting policies, we cannot guarantee that the results will always be accurate. Since the determination of these estimates requires the exercise of judgment, actual results could differ from such estimates.
While our significant accounting policies are more fully described in Note 3 to our consolidated financial statements included at the end of this Annual Report, we believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating our reported financial results and affect the more significant judgments and estimates that we use in the preparation of our consolidated financial statements. Accounts Receivable Our policy is to reserve for uncollectible accounts based on our best estimate of the amount of probable credit losses in our existing accounts receivable. We periodically review our accounts receivable to determine whether an allowance for doubtful accounts is necessary based on an analysis of past due accounts and other factors that may indicate that the realization of an account may be in doubt. Account balances deemed to be uncollectible are charged to the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.
The Company accounts for goodwill and intangible assets in accordance with ASC 350, Intangibles -Goodwill and Other ("ASC 350"). ASC 350 requires that goodwill and other intangibles with indefinite lives should be tested for impairment annually or on an interim basis if events or circumstances indicate that the fair value of an asset has decreased below its carrying value.Goodwill is tested for impairment at the reporting unit level on an annual basis (December 31 for the Company) and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. The Company considers its market capitalization and the carrying value of its assets and liabilities, including goodwill, when performing its goodwill impairment test. When conducting its annual goodwill impairment assessment, the Company initially performs a qualitative evaluation of whether it is more likely than not that goodwill is impaired. If it is determined by a qualitative evaluation that it is more likely than not that goodwill is impaired, the Company then compares the fair value of the Company's reporting unit to its carrying or book value. If the fair value of the reporting unit exceeds its carrying value, goodwill is not impaired and the Company is not required to perform further testing. If the carrying value of a reporting unit exceeds its fair value, the Company will measure any goodwill impairment losses as the amount by which the carrying amount of a reporting unit exceeds its fair value, not to exceed the total amount of goodwill allocated to that reporting unit. Capitalized Technology Costs
We account for capitalized technology costs in accordance with ASC 350-40,Internal-Use Software ("ASC 350-40"). In accordance with ASC 350-40, we capitalize certain external and internal computer software costs incurred during the application development stage. The application development stage generally includes software design and configuration, coding, testing and installation activities. Training and maintenance costs are expensed as incurred, while upgrades and enhancements are capitalized if it is probable that such expenditures will result in additional functionality. Capitalized software costs are amortized over the estimated useful lives of the software assets on a straight-line basis, generally not exceeding three years. 35 Business Combinations
ASC 805, Business Combinations ("ASC 805"), applies the acquisition method of
accounting for business combinations to all acquisitions where the acquirer
gains a controlling interest, regardless of whether consideration was exchanged.
ASC 805 establishes principles and requirements for how the acquirer : a)
recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed, and any non-controlling interest in the
acquiree; b) recognizes and measures the goodwill acquired in the business
combination or a gain from a bargain purchase; and c) determines what
information to disclose to enable users of the financial statements to evaluate
the nature and financial effects of the business combination. Accounting for
acquisitions requires the Company to recognize, separately from goodwill, the
assets acquired and the liabilities assumed at their acquisition-date fair
values. Goodwill as of the acquisition date is measured as the excess of
consideration transferred and the net of the acquisition-date fair values of the
assets acquired and the liabilities assumed. While the Company uses its best
estimates and assumptions to accurately value assets acquired and liabilities
assumed at the acquisition date, the estimates are inherently uncertain and
subject to refinement. As a result, during the measurement period, which may be
up to one year from the acquisition date, the Company may record adjustments to
the assets acquired and liabilities assumed with the corresponding offset to
goodwill. Upon the conclusion of the measurement period or final determination
of the values of assets acquired or liabilities assumed, whichever comes first,
any subsequent adjustments are recorded to the consolidated statements of
comprehensive loss.
Revenue Recognition
Our principal sources of revenue are recruitment revenue, consumer marketing and
consumer advertising revenue, membership subscription fees, and product sales.
Recruitment revenue includes revenue recognized from direct sales to customers
for recruitment services and events, as well as revenue from our direct
ecommerce sales. Revenues from recruitment services are recognized when the
services are performed, evidence of an arrangement exists, the fee is fixed or
determinable and collectability is probable. Our recruitment revenue is derived
from 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.
Consumer marketing and consumer advertising revenue is recognized either based
upon a fixed-fee for revenue-sharing agreements in which payment is required at
the time of posting or billed based upon the number of impressions (the number
of times an advertisement is displayed) recorded on the websites as specified in
the customer agreement.
Revenue generated from NAPW Network membership subscriptions is recognized ratably over the 12-month membership period, although members pay their annual fees at the commencement of the membership period. We also offer a monthly membership for which we collect fees on a monthly basis and we recognize revenue in the same month as the fees are collected. Revenue from related membership services is 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.
Revenues generated from RemoteMore consist of contracts entered into to provide customers with software solutions and are recognized in the month work is performed.
Revenue Concentration We, in alliance with another company, partner to sell two recruitment services products. This alliance member builds, hosts, and manages the Company's job boards and website. This alliance member also bills customers, collects fees, and provides customer services. For the year endedDecember 31, 2022 and 2021, the Company recorded approximately 11.4% and 11.1% of its recruitment services revenue from this alliance sales relationship.
Recent Accounting Pronouncements
See Note 3 to our consolidated financial statements.
36
Special Note Regarding Forward-Looking Statements
This Annual Report on Form 10-K, including Part I, Item 1. "Business" and Part II, Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations," contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements concern expectations, beliefs, projections, plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. Specifically, this Annual Report contains forward-looking statements regarding:
? our beliefs regarding our ability to capture and capitalize on market trends;
? our expectations on the future growth and financial health of the online
diversity recruitment industry and the industry participants, and the drivers
of such growth;
? our expectations regarding continued membership growth;
? our beliefs regarding the increased value derived from the synergies among our
segments; 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.
These and other forward-looking statements reflect our current views about future events and are subject to risks, uncertainties and assumptions. We wish to caution readers that certain important factors may have affected and could in the future affect our actual results and could cause actual results to differ significantly from those expressed in any forward-looking statement. The most important factors that could prevent us from achieving our goals, and cause the assumptions underlying forward-looking statements and the actual results to differ materially from those expressed in or implied by those forward-looking statements include, but are not limited to, the following:
? our ability to raise funds in the future to support operations;
? 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;
? our history of operating losses;
? 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 intellectual property protection for our
intellectual property;
? the outcome of current or future litigation regarding our business, including
intellectual property claims;
? general and economic business conditions; and
? legal and regulatory developments.
Additional factors, risks and uncertainties that may affect our results, are
discussed in Item 1A. "Risk Factors" of this Annual Report beginning on page 13,
and in our subsequent filings with the SEC . You should consider these factors,
risks and uncertainties when evaluating any forward-looking statements and you
should not place undue reliance on any forward-looking statement.
Forward-looking statements represent our views as of the date of this Annual
Report, and we undertake no obligation to update any forward-looking statement
to reflect the impact of circumstances or events that arise after the date of
this Annual Report.
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