Professional Diversity Network Inc

Item 1. FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS (Unaudited)

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited)

CONSOLIDATED STATEMENT OF STOCKHOLDERS’** EQUITY (Unaudited)**

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1. Basis of Presentation and Description of Business

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, they donot include all of the information and notes required by GAAP for complete financial statements. The accompanying consolidated financial statements include all adjustments, which consist of normal recurring adjustments and transactions or events discretely impacting the interim periods, considered necessary by management to fairly state our results of operations, financial position and cash flows. The operating results for interim periods arenot necessarily indicative of results that* maybe expected for any other interim period or for the full year. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our2023* Form10-K.

Professional Diversity Network, Inc. (“the Company”, “PDN, Inc.”, “we,” “our,” or “us,”) is both the operator of the Professional Diversity Network (the “PDN Network,” or the “Professional Diversity Network”) and a holding company for NAPW, Inc., a wholly-owned subsidiary of the Company and the operator of the National Association of Professional Women (the “NAPW Network” or “NAPW”). The PDN Network operates online professional networking communities with career resources specifically tailored to the needs of different diverse cultural groups including: Women, Hispanic-Americans, African-Americans, Asian-Americans, persons with disabilities, Military Professionals, Lesbians, Gay, Bisexual, Transgender and Queer (LGBTQ+), as well as face-to-face and virtual recruiting events for Engineering, Technology and Security Clearance positions, designed to attract diverse candidates who* may*also have STEM-based backgrounds through our wholly-owned company Expo Experts Events, LLC. The networks’ purposes, among others, are to assist their registered users in their efforts to connect with like-minded individuals, identify career opportunities within the network and connect with prospective employers. The Company’s technology platform is integral to the operation of its business.

The NAPW Network is a networking organization for professional women, whereby its members can develop their professional networks, further their education and skills, and promote their business and career accomplishments. NAPW provides its members with opportunities to network and develop valuable business relationships with other professionals through its website, as well as at virtual and in-person events hosted at its local chapters across the country.

RemoteMore USA is an innovative, global entity that provides remote-hiring marketplace services for developers and companies. RemoteMore connects companies with reliable, cost-efficient, vetted developers, and empowers software developers to find meaningful jobs regardless of their location. As of* March 31, 2024*, PDN, Inc. owned 72.62% of RemoteMore USA, Inc. (“RemoteMore USA” or “RemoteMore”). The Company consolidates RemoteMore USA’s operations into its consolidated financial statements.

2. Going Concern and Management’s Plans

At* March 31, 2024*, the Company’s principal sources of liquidity were its cash and cash equivalents.

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The Company had an accumulated deficit of $100,694,550 at* March 31, 2024*. During thethree months ended* March 31, 2024*, the Company generated a loss from continuing operations, net of tax, of $802,926. During thethree months ended* March 31, 2024*, the Company used cash in continuing operations of $543,098. At* March 31, 2024*, the Company had a cash balance of $97,108. Total revenues were $1,726,842 and $1,955,209 for thethree months ended* March 31, 2024and2023*, respectively. The Company had a working capital deficit from continuing operations of $1,753,207 and $1,106,825 at* March 31, 2024* and* December 31, 2023*. These conditions raise substantial doubt about its ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company’s ability to further implement its business plan, raise capital, and generate revenues. The consolidated financial statements donot include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Cash on hand and cash flow from operations* maynot* be sufficient to meet our working capital requirements through the fiscal period ending* December 31,2024, however in order to accomplish our business plan objectives, the Company will need to increase revenues, raise capital through the issuance of common stock, issue capital in relation to its line of equity, continue its cost reduction efforts, or through a strategic merger or acquisition. There can beno assurances that our business plans and actions will be successful, that we will generate anticipated revenues, or that unforeseen circumstances willnot require additional funding sources in the future or require an acceleration of plans to conserve liquidity. Future efforts to improve liquidity through the issuance of our common stock maynot* be successful, or if available, they* may**not* be available on acceptable terms.

3. Summary of Significant Accounting Policies

Use of Estimates – The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due toone or more future intervening events. Accordingly, the actual results could differ significantly from estimates.

Significant estimates underlying the financial statements include: the fair value of acquired assets and liabilities associated with acquisitions, the assessment of goodwill for impairment, intangible assets and long-lived assets for impairment, allowances for doubtful accounts and assumptions related to the valuation allowances on deferred taxes, impact of applying the revised federal tax rates on deferred taxes, the valuation of stock-based compensation and the valuation of stock warrants.

Principles of Consolidation - The accompanying consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries, and those subsidiaries where less than50% is owned but consolidation is required. All significant intercompany balances and transactions have been eliminated in consolidation.

Cash Equivalents - The Company considers cash equivalents to include all short-term, highly liquid investments that are readily convertible to known amounts of cash and have original maturities ofthree months or less.

Accounts Receivable and Allowance for Credit Losses - The Company’s accounts receivable consists principally of uncollateralized amounts billed to customers. These receivables are generally due within30 to90 days of the period in which the corresponding sales occur and donot bear interest. They are recorded at net realizable value less an allowance for credit losses and are classified as account receivable, net on the consolidated balance sheets.

The Company adopted ASU2016-13, Financial Instruments - Credit Losses, in thefirst quarter of fiscal2023. This accounting standard requires companies to measure expected credit losses on financial instruments based on the total estimated amount to be collected over the lifetime of the instrument. Prior to the adoption of this accounting standard, the Company recorded incurred loss reserves against receivable balances based on current and historical information.

The Company considers both current conditions and reasonable and supportable forecasts of future conditions when evaluating expected credit losses for uncollectible receivable balances. In our determination of the allowance for credit losses, we pool receivables by days outstanding and apply an expected credit loss percentage to each pool. The expected credit loss percentage is determined using historical loss data adjusted for current conditions and forecasts of future economic conditions. Current conditions considered include predefined aging criteria, as well as specified events that indicate the balance due isnot collectible. Reasonable and supportable forecasts used in determining the probability of future collection consider publicly available macroeconomic data and whether future credit losses are expected to differ from historical losses.

The Company isnot party to any off-balance sheet arrangements that would require an allowance for credit losses in accordance with this accounting standard.

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Allowance for Credit Losses

The following table summarizes the activity related to the Company’s allowance for credit losses:

The numbers presented above relate solely to our portfolio of trade accounts receivable asno allowance for credit losses was recognized on other receivables as presented on our consolidated balance sheets.

Other Receivables – Other receivables represents amounts that are owed to the Company that arenot considered trade receivables. The Company periodically reviews its other receivables for credit risk to determine whether an allowance is necessary and other factors that* mayindicate that the realization of an account maybe 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. As of March 31, 2024* and* December 31, 2023*, the balance in other receivables as reported on the consolidated balance sheets was deemed collectible.

Property and Equipment - Property and equipment is stated at cost, including any cost to place the property into service, less accumulated depreciation. Depreciation is recorded on a straight-line basis over the estimated useful lives of the assets which currently range from three tofive years. Leasehold improvements are amortized over the shorter of their estimated useful lives or the term of the lease. Maintenance, repairs and minor replacements are charged to operations as incurred; major replacements and betterments are capitalized. The cost of any assets sold or retired and related accumulated depreciation are removed from the accounts at the time of disposition, and any resulting profit or loss is reflected in income or expense for the period. Depreciation expense during thethree months ended* March 31, 2024and2023* was approximately $1,840 and $2,475 and is recorded in depreciation and amortization expense in the accompanying consolidated statements of operations.

Lease Obligations - The Company leases office space under a non-cancelable operating lease that expires in* September 2027.*The Company's facility lease provides for periodic rent increases and contains escalation clauses and renewal options. The Company's lease terms include options to extend.

The Company recognizes operating lease expense on a straight-line basis over the lease term and variable lease payments are expensed as incurred. Lease costs are primarily recorded within SG&A expenses in the Company's consolidated statements of loss and comprehensive loss.

The Company determines if a contract contains a lease at lease inception. If the borrowing rate implicit in the lease isnot determinable, the Company uses its incremental borrowing rate ("IBR") based on information available at lease commencement including prevailing financial market conditions to determine the present value of future lease payments. The Company has elected the option to combine lease and non-lease components as a single component for the Company's entire population of lease assets.

Operating lease assets and lease liabilities are recognized at the lease commencement date. Operating lease liabilities represent the present value of lease paymentsnot yet paid. Operating lease assets represent the right to use an underlying asset and are based upon the operating lease liabilities adjusted for prepayments or accrued lease payments, initial direct costs, and lease incentives. The Company has electednot to apply the recognition requirements to short-term leases of12 months or less and instead recognizes lease payments as expense on a straight-line basis over the lease term. The Company’s lease agreements donot contain any material residual value guarantees or material restrictive covenants. Leased assets are presented net of accumulated amortization. Variable lease payment amounts that cannot be determined at the commencement of the lease, such as increases in lease payments based on changes in index rates or usage, arenot included in the ROU assets or liabilities; instead, these are expensed as incurred and recorded as variable lease expense.

Capitalized Technology Costs - In accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)350-40, Internal-Use Software, the Company capitalizes 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, generallynot exceedingthree years.

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Business Combinations - ASC805, Business Combinations (“ASC805”), 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. ASC805 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* maybe up toone* 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 interim consolidated statements of operations.

Goodwill and Intangible Assets - The Company accounts for goodwill and intangible assets in accordance with ASC350, Intangibles – Goodwill and Other (“ASC350”). ASC350 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 31for the Company) and between annual tests if an event occurs or circumstances change that would more likely thannot* 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 thannot that goodwill is impaired. If it is determined by a qualitative evaluation that it is more likely thannot 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 isnot impaired and the Company isnot 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.

Long-Term Restricted Cash – Long-term restricted cash of approximately $184,000 is related to a frozen Chinese bank account that had previously been included in long-term assets from discontinued operations (see Discontinued Operations below).

Contingent Liabilities– Our determination of the treatment of contingent liabilities in the consolidated financial statements is based on our view of the expected outcome of the applicable contingency. In the ordinary course of business, we consult with legal counsel on matters related to litigation and other experts both within and outside our Company. We accrue a liability if the likelihood of an adverse outcome is probable and the amount of loss is reasonably estimable. We disclose the matter, but donot accrue a liability if the likelihood of an adverse outcome is reasonably possible and an estimate of loss isnot determinable. Legal and other costs incurred in conjunction with loss contingencies are expensed as incurred.

Treasury Stock – Treasury stock is recorded at cost as a reduction of stockholders’ equity in the accompanying balance sheets.

Revenue Recognition – Revenue is recognized when all of the following conditions exist: (1) persuasive evidence of an arrangement exists, (2) services are performed, (3) the sales price is fixed or determinable, and (4) collectability is reasonably assured. (See Note5 – Revenue Recognition.)

Deferred revenue includes customer payments which are received prior to performing services and revenues are recognized upon the completion of these services. Annual membership fees collected at the time of enrollment are recognized as revenue ratably over the membership period, which are typically for a12-month membership period.

Discontinued Operations

China Operations

In* March 2020,our Board of Directors decided to suspend all operations in China. The Company previously disclosed in its Form10*-K for the year ending* December 31, 2019 (the“2019* 10-K”) and subsequent filings, that the assets of PDN China were frozen by Chinese local authorities in* November 2019in connection with the criminal investigation of alleged illegal public fund raising by Gatewang Group (the “Gatewang Case”), a separate company organized under the laws of the People’s Republic of China (“Gatewang”), with which Mr. Maoji (Michael) Wang, the former Chairman and CEO of the Company was affiliated. A subsequent investigation led by a special committee of the Board concluded that it didnot* find any evidence that the Company or PDN China has engaged in the criminal activity of illegal fund-raising as alleged against Gatewang. The Company subsequently discontinued all of its operations in China.

In* December 2023,Management determined that there will beno* further activity related to the operations in China and as a result, eliminated all balance sheet accounts in the consolidated balance sheets for the fiscal year ending* December 31, 2023.This included the extinguishment of contract debt as allowed under Chinese business law that all aged liabilities withno* claims beyond a certain time limit wereno longer collectible by the counterparty and as such, management removed these liabilities from the balance sheet. Concurrently, remaining current assets were also written off. The results for operations of China are presented in the consolidated statements of operations and comprehensive loss as loss from discontinued operations. The Company has a bank account with a bank balance of approximately $184,000 that is currently in a frozen state due to the litigation related to the Company's former CEO. The Company had petitioned the Chinese courts in2020 to return the funds to PDN, however at that time, the courts had determined that they didnot have the appropriate time to review PDN's request. Three years have elapsed and there has beenno further activity on the case or notification to PDN regarding the bank account and related funds within. The amount is included in the consolidated balance sheets as long-term restricted cash. In fiscal2024, the Company intends to re-engage its petition to the Chinese courts for the return of its funds.

All historical operating results for the Company’s China operations are included in a loss from discontinued operations, net of tax, in the accompanying consolidated statements of operations. For thethree months ended* March 31, 2023*, loss from discontinued operations was approximately $11,730 consisting of general and administrative expenses. There wasno activity for thethree months ended* March 31, 2024*.

Advertising and Marketing Expenses – Advertising and marketing expenses are expensed as incurred or thefirst time the advertising takes place. The production costs of advertising are expensed thefirst time the advertising takes place. For thethree months ended* March 31, 2024*, the Company incurred advertising and marketing expenses of approximately $235,463 and $281,473. These amounts are included in sales and marketing expenses in the accompanying statements of operations. At* March 31, 2024* and* December 31, 2023*, there wereno prepaid advertising expenses recorded in the accompanying consolidated balance sheets.

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Concentrations of Credit Risk - Financial instruments, which potentially subject the Company to concentration of credit risk, consist principally of cash and cash equivalents and accounts receivable. The Company places its cash with high credit quality institutions. At times, such amounts* maybe in excess of the FDIC insurance limits. The Company hasnot* experienced any losses in such accounts and believes that it isnot exposed to any significant credit risk on the account.

Income Taxes - The Company accounts for income taxes in accordance with ASC740, Income Taxes (“ASC740”), which requires that the Company recognize deferred tax liabilities and assets based on the differences between the financial statement basis and tax basis of assets and liabilities, using enacted tax rates in effect for the year in which the differences are expected to reverse. The Company estimates the degree to which tax assets and credit carryforwards will result in a benefit based on expected profitability by tax jurisdiction. A valuation allowance for such tax assets and loss carryforwards is provided when it is determined to be more likely thannot that the benefit of such deferred tax asset willnot be realized in future periods. If it becomes more likely thannot that a tax asset will be used, the related valuation allowance on such assets would be reduced.

ASC740 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with ASC740-20 and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. There wereno deferred tax liabilities, as of* March 31, 2024*, recorded in the accompanying consolidated balance sheets . The Company is currentlynot aware of any issues under review that could result in significant payments, accruals or material deviation from its position.

The Company* maybe subject to potential income tax examinations by federal or state authorities. These potential examinations mayinclude questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal and state tax laws. Management doesnot* expect that the total amount of unrecognized tax benefits will materially change over the nexttwelve months. Tax years that remain open for assessment for federal and state tax purposes include the years ended* December 31, 2020through2023.*

The Company’s policy for recording interest and penalties associated with audits is to record such expense as a component of income tax expense. There wereno amounts accrued for penalties or interest as of* March 31, 2024*.

Fair Value of Financial Assets and Liabilities - Financial instruments, including cash and cash equivalents, short-term investments and accounts payable, are carried at cost. Management believes that the recorded amounts approximate fair value due to the short-term nature of these instruments.

Net Loss per Share - The Company computes basic net loss per share by dividing net loss available to common stockholders by the weighted average number of common shares outstanding for the period and excludes the effects of any potentially dilutive securities. Diluted earnings per share, if presented, would include the dilution that would occur upon the exercise or conversion of all potentially dilutive securities into common stock using the “treasury stock” and/or “if converted” methods as applicable. The computation of basic net loss per share for thethree months ended* March 31, 2024and2023* excludes the potentially dilutive securities summarized in the table below because their inclusion would be anti-dilutive.

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Reclassifications - Certain prior year amounts in the Consolidated Statements of Cash Flows have been reclassified to conform to the current year presentation.

Recent Accounting Pronouncements

In* November 2023,the FASB issued ASU2023*-07, which updates reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses and information used to assess segment performance. This update is effective for fiscal years beginning after* December 15, 2023,and interim periods within fiscal years beginning after December 15, 2024,*with early adoption permitted. This update will be applied retrospectively for all prior periods presented in the financial statements.

In* December 2023,the FASB issued ASU2023*-09, which is intended to enhance the transparency and decision usefulness of income tax disclosures. ASU2023-09 primarily enhances and expands both the annual income tax rate reconciliation disclosure and the annual income taxes paid disclosure. This update is effective for fiscal years beginning after* December 15, 2024and may*be adopted on a prospective or retrospective basis, with early adoption permitted.

The Company is currently evaluating the impact of the adoption of these standards on its disclosures.

4. Business Combinations

RemoteMore

The Company acquired an initial 45.62% interest in RemoteMore, a software developer recruiting company in2021 for approximately $1.36 million. During2022 and2023, an additional 27% interest was acquired for approximately $352,000 for a total of 72.62% interest in RemoteMore as of* March 31, 2024.*

Expo Experts

In* January 2023,the Company purchased the assets and operations of Expo Experts, LLC (“Expo Experts”), an Ohio limited liability company, 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 oftwenty* (20) days prior to the closing date. Expo Experts specializes in producing premier face-to-face and virtual recruiting events for Engineering, Technology and Security Clearance positions, as well as being designed to attract diverse candidates who* may*also have STEM-based backgrounds.

Expo Experts’ accounts and operations have been reflected in the PDN Network for segment reporting purposes (see Note14 - Segment Information**).**

5. Revenue Recognition

The Company recognizes revenue under the core principle of ASC606 – Revenue from Contracts with Customers (“ASC606”), to depict the transfer of control to its customers in an amount reflecting the consideration to which it expects to be entitled. In order to achieve that core principle, the Company has applied the followingfive-step approach: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when a performance obligation is satisfied.

The Company’s contracts with customers* mayprovide for multiple promised goods and services. The Company typically analyzes the contract and identifies the performance obligations by evaluating whether the promised goods and services are capable of being distinct within the context of the contract at contract inception. Promised goods and services that arenot* distinct at contract inception are combined. The next step after identifying the performance obligations is determining the transaction price, which includes the impact of variable consideration, based on contractually fixed amounts and an estimation of variable consideration. The Company allocates the transaction price to each performance obligation based on relative stand-alone selling price. Judgment is exercised to determine the stand-alone selling price of each distinct performance obligation. The Company estimates the stand-alone selling price by reference to the total transaction price less the sum of the observable stand-alone selling prices of other goods or services promised in the contract. In general, transaction price is determined by estimating the fixed amount of consideration to which we are entitled for transfer of goods and services and all relevant sources and components of variable consideration. Revenues are generally recognized when control of the promised goods or services is transferred to their customers either at a point in time or over time, in an amount that reflects the consideration it expects to be entitled to in exchange for those goods or services.

Many of the Company’s contracts haveone performance obligation and all consideration is allocated to that performance obligation and recognized at a point in time contemporaneous when the service is performed or with the date of the event.

Payment is typically due in full, at net30, from the moment control of the goods or services have begun to transfer, unless both parties have negotiated an installment-based payment arrangement through the term of the contract. The Company* may*have contracts where there is an extended timing difference between payment and the time when control of the goods or services is transferred to the customer.

Nature of Goods and Services

The following is a description of principal activities from which the Company generates its revenue:

Recruitment Services

The Company’s recruitment services revenue is derived from the Company’s agreements through single and multiple job postings, recruitment media, talent recruitment communities, basic and premier corporate memberships, hiring campaign marketing and advertising, e-newsletter marketing and research and outreach services. Recruitment revenue includes revenue recognized from direct sales to customers for recruitment services and events, as well as revenue from the Company’s direct e-commerce sales. Direct sales to customers are most typically atwelve-month contract for services and as such the revenue for each contract is recognized ratably over itstwelve-month term. Event revenue is recognized in the period that the event takes place and e-commerce sales are forsixty toninety-day job postings and the revenue from those sales are recognized when the service is provided. The Company’s recruitment services mainly consist of the following products:

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Membership Fees and Related Services

Membership fees are typically month to month; however, members* mayprepay for a12*-month period. Memberships are collected up-front and member benefits become available immediately. At the time of enrollment, membership fees are recorded as deferred revenue and are recognized as revenue ratably over the membership period. Members who are enrolled in12-month plan* may*cancel their membership in the program at any time and receive a partial refund (amount remaining in deferred revenue) or due to consumer protection legislation, a full refund based on the policies of the member’s credit card company.

Monthly membership revenues are recognized in the same month fees are collected.

Revenue from related membership services are derived from fees for development and set-up of a member’s personal on-line profile and/or press release announcements. Fees related to these services are recognized as revenue at the time the on-line profile is complete and press release is distributed.

Products offered to members relate to custom made plaques. Product sales are recognized as deferred revenue at the time the initial order is placed. Revenue is then recognized at the time these products are shipped. The Company’s shipping and handling costs are included in cost of sales in the accompanying consolidated statements of operations.

Contracted Software Development

Revenues for RemoteMore are generated from providing customized software solutions to customers and are recognized in the period work is performed.

Consumer Advertising and Marketing Solutions

The Company provides career opportunity services to its various partner organizations through advertising and job postings on their websites. The Company works with its partners to develop customized websites and job boards where the partners can generate advertising, job postings and career services to their members, students and alumni. Consumer advertising and marketing solutions revenue is recognized as jobs are posted to their hosted sites.

Revenue Concentration

The Company is in an alliance with another company to build, host, and manage the Company’s job boards and website. This alliance member also sellstwo of the Company’s recruitment services products and bills customers, collects fees, and provides customer services. For thethree months ended* March 31, 2024and2023*, the Company recorded approximately 6% and 10% of its recruitment services revenue from this alliance sales relationship.

Disaggregation of Revenue

Revenue is disaggregated by product line and timing of transfer of products and services and is in line with our reportable segments as described in Note14 - Segment Information.

Contract Balances

The Company’s rights to consideration for work completed, butnot billed at the reporting date, is classified as a receivable, as it has an unconditional right to payment or only conditional for the passage of time. The Company hasno recorded contract assets as of* March 31, 2024* or* December 31, 2023*

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Consideration received in advance from customers is recorded as a contract liability, if a contract exists under ASC606, until services are delivered or obligations are met and revenue is earned. Contract liability represents the excess of amounts invoiced over amounts recognized as revenues. Contract liabilities to be recognized in the succeedingtwelve-month period are classified as current contract liabilities and the remaining amounts, if any, are classified as non-current contract liabilities. Contract liabilities of $2,175,064 and 1,999,841 are included in current deferred revenues, on the consolidated balance sheets as of* March 31, 2024* and* December 31, 2023*, respectively.

For thethree months ended* March 31, 2024and2023*, we recognized revenue associated with contract liabilities that were included in the contract liabilities balance at the beginning of the period as follows:

Deferred revenue includes customer payments which are received prior to performing services and revenues are recognized upon the completion of these services. Annual membership fees collected at the time of enrollment are recognized as revenue ratably over the membership period, which are typically for a12-month membership period.

Transaction Price Allocated to the Remaining Performance Obligations

The Company applies the optional exemptions and doesnot disclose: a) information about remaining performance obligations that have an original expected duration ofone year or less or b) transaction price allocated to unsatisfied performance obligations for which variable consideration is allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied promise to transfer a distinct good or service that forms part of a single performance obligation in accordance with the series guidance.

The typical duration of all event related and other contracts isone year or less and, as a result, the Company applies the optional exemptions and doesnot disclose information about remaining performance obligations that have an original expected duration ofone year or less.

6. Capitalized Technology

Capitalized Technology, net is as follows:

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For thethree months ended* March 31, 2024and2023*, amortization expense related to capitalized technology was approximately $22,967 and $10,606, respectively, and is recorded in depreciation and amortization expense in the accompanying consolidated statements of operations.

7. Intangible Assets

Intangible assets, net was as follows:

As of* March 31, 2024*, estimated amortization expense in future fiscal years is summarized as follows:

For thethree months ended* March 31, 2024and2023*, amortization expense related to intangible assets was approximately $27,594 and $119,693, and is recorded in depreciation and amortization expense in the accompanying consolidated statements of operations.

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8. Long-term Investments

On* September 27, 2022,*the Company entered into a Stock Purchase Agreement (the “SPA”) with Koala Malta Limited, a private limited liability company registered under the laws of Malta (the “Seller”).

Upon the execution of the SPA, the Company purchased 65,700 issued ordinary shares of Koala Crypto Limited (“KCL”) from Seller, representing 9 percent of the total issued share capital of KCL, and in exchange, 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 in the aggregate based on the volume weighted average price of the common stock of the Company for the20 trading days immediately prior to the date of the SPA. The shares of KCL are recorded in the consolidated balance sheet as ‘other assets’.

Upon execution of the SPA, the Company, the Seller and KCL also entered into a Shareholders’ Agreement. The Shareholders’ Agreement imposes certain transfer restrictions on the Seller and the Company as shareholders of KCL, provides for certain governance and approval rights among the parties, and gives the Company a put option with respect to its investment in KCL in the event of a change of control of the Seller. At the same time, Alan Tak Wai Yau, an individual and the majority shareholder of Koala Capital Limited, which is the parent company of the Seller (“Koala Capital”), provided the Company with a share charge over15 percent of the issued share capital of Koala Capital (the “Share Charge”) and Koala Capital provided the Company with a guaranty and indemnity (the “Guarantee”), which Share Charge and Guarantee were granted as security for a number of the Seller’s obligations as set forth therein including obtaining the lifting of the voluntary suspension of KCL’s virtual financial assets license by the Malta Financial Services Authority (“MFSA”). Koala Capital has submitted and responded to all queries raised by the MFSA, and the authorization/supervision unit that was currently reviewing its application has given its initial approval to move on to the next steps in the process and testing is in its final stages.

9. Commitments and Contingencies

Lease Obligations - The Company leases its corporate headquarters. The office lease is for 4,902 square feet of office space and the lease term is for 84 months, commencing on* October 1, 2020.The Company made approximately $22,848 and $22,847 of cash payments for lease expenses related to the office space for thethree* months ended* March 31, 2024and2023*, respectively. The weighted average remaining lease terms as of thethree months ended* March 31, 2024and2023*, are 3.5 years and 4.5 years. The weighted average discount rate for operating leases for thethree months ended* March 31, 2024and2023*, is6%.

The present value of the remaining lease liabilities as of* March 31, 2024* are as follow:

As of* March 31, 2024* and,* December 31, 2023*, right of use assets were $281,019 and $298,485, and related lease obligations remaining, related to the Company's office lease, were $344,746 and $365,712, as recorded on the Company’s consolidated balance sheets.

Other

PDN China’s bank account with a balance of approximately $184,000, at* December 31, 2023,*was frozen by the Chinese government due to the Gatewang Case. The Company has classified this entire cash balance as long-term restricted cash presented on the consolidated balance sheets.

Legal Proceedings

The Company and its wholly owned subsidiary, NAPW, Inc., are parties to a proceeding captioned Deborah Bayne, et al. vs. NAPW, Inc. and Professional Diversity Network, Inc.,No. 18-cv-3591 (E.D.N.Y.), filed on* June 20, 2018,and alleging violations of the Fair Labor Standards Act and certain provisions of the New York Labor Law. The class is defined as “all individuals employed in New York from June 20, 2012through October 15, 2021by NAPW and PDN to sell memberships to the women’s networking organization known as the National Association of Professional Women and the International Association of Women,” excluding corporate officers, shareholders, directors and administrative employees. As it stands, the class currently consists of164* putative class members and60 opt-in plaintiffs.

The complaint alleges that NAPW (and PDN in its capacity as an alleged joint employer) violated similar provisions of the FLSA and the NYLL by (i) failing to pay overtime wages as required by both the FLSA and the NYLL, (ii) failing to provide accurate wage statements under the NYLL, and (iii) willfully violating both of those statutes. The Court, in an order issued on* March 25, 2024,granted summary judgment against NAPW on the claims related to willful failure to pay overtime wages. The Court dismissed, without prejudice, claims based on failure to provide accurate wage statements under the NYLL based on lack of subject matter jurisdiction. The Court found that questions of fact remain as to whether PDN was a joint employer with NAPW. Damages remain unsettled particularly in light of the Court’s dismissal of the Plaintiff’s claims related to failure to provide accurate wage statements. During thefirst* quarter of2020, the Company recorded a $450,000 litigation settlement reserve in the event of an unfavorable outcome in this proceeding. While the Plaintiff seeks damages substantially in excess of this reserve (including unpaid overtime, liquidated damages and penalties), NAPW and PDN continue to adamantly dispute the amount of damages claimed.

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General Legal Matters

From time to time, the Company is involved in legal matters arising in the ordinary course of business. While the Company believes that such matters are currentlynot material, there can beno assurance that matters arising in the ordinary course of business for which the Company is, or could be, involved in litigation, willnot have a material adverse effect on its business, financial condition or results of operations.

10. CFL Transaction

On* August 12, 2016,*the Company entered into a stock purchase agreement (the “Purchase Agreement”), with CFL, a Republic of Seychelles company wholly-owned by a group of Chinese investors. Pursuant to the Purchase Agreement, the Company agreed to issue and sell to CFL, and CFL agreed to purchase a number of shares of the Company’s common stock such that CFL would hold approximately 51% of the outstanding shares of common stock, determined on a fully-diluted basis.

At the closing of the CFL transaction, the Company entered into a Stockholders’ Agreement, dated* November 7, 2016 (*the “Stockholders’ Agreement”) with CFL and each of its shareholders: Maoji (Michael) Wang, Jingbo Song, Yong Xiong Zheng and Nan Kou (the “CFL Shareholders”). The Stockholders’ Agreement sets forth the agreement of the Company, CFL and the CFL Shareholders relating to board representation rights, transfer restrictions, standstill provisions, voting, registration rights and other matters following the transaction.

As of* March 31, 2024*, CFL beneficially holds shares of the Company’s outstanding common stock equal to approximately 23.4%. The decrease in CFL’s percentage of the Company’s total outstanding common stock is a result of dilution from other equity offerings.

11. Stockholders’** Equity**

Preferred Stock – The Company hasno preferred stock issued. The Company’s amended and restated certificate of incorporation and amended and restated bylaws include provisions that allow the Company’s Board of Directors to issue, without further action by the stockholders, up to 1,000,000 shares of undesignated preferred stock.

Common Stock – The Company hasone class of common stock outstanding with a total number of shares authorized of 45,000,000. As of* March 31, 2024*, the Company had 11,492,225 shares of common stock outstanding.

In* June 2023,the Company entered into a stock purchase agreement with Tumim Stone Capital LLC (“Investor”). Under the terms and subject to the conditions of the stock purchase agreement, the Company has the right, butnot* the obligation, to sell to the Investor, and the Investor is obligated to purchase, up to $12,775,000 worth of newly issued shares (the “Purchase Shares”) of the Company’s common ‎stock, subject to certain limitations and the satisfaction (or, where permissible, the waiver) of the conditions set forth in the stock purchase agreement. Pursuant to the stock purchase agreement, the Company issued and sold 469,925 Purchase Shares (the “Initial Purchase Shares”) to the Investor, at a price of $4.256 per share (representing the average official closing price of the Common Stock on The Nasdaq Capital Market for thefive consecutive trading days ending on the trading day immediately prior to the date of the stock purchase agreement), for aggregate gross proceeds to the Company of $2,000,000, in an initial purchase. Pursuant to the terms of the stock purchase agreement, as consideration for the Investor’s commitment to purchase shares of common stock at the Company’s direction from time to time, upon the terms and subject to the conditions and limitations set forth in the Purchase Agreement, upon execution of the stock purchase agreement, the Company also issued to the Investor 176,222 shares of common stock (the “Commitment Shares”), valued at $4.256 per share (the same per share value as each Initial Purchase Share sold to the Investor in the Initial Purchase), or a total aggregate value equal to $750,000 for the Commitment Shares.

In* January 2024,*the Company issued 40,217 shares of its common stock to Tumim Stone Capital, in connection with the committed equity line program described above, at a price of approximately $2.36 per share for aggregate gross proceeds of $95,104.

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12. Stock-Based Compensation

Equity Incentive Plans – The Company’s2013 Equity Compensation Plan (the*“2013* Plan”) was adopted for the purpose of providing equity incentives to employees, officers, directors and consultants including options, restricted stock, restricted stock units, stock appreciation rights, other equity awards, annual incentive awards and dividend equivalents. Through a series of amendments to the2013 Plan, the total number of authorized shares available for issuance of common stock under the Plan was 750,000 shares.

On* April 11, 2023,the Board of Directors adopted a new equity incentive plan, the Professional Diversity Network, Inc.2023 Equity Compensation Plan (the“2023* Equity Compensation Plan”). The2023 Equity Compensation Plan was approved by the Company’s stockholders on* June 15, 2023.The2023* Equity Compensation Plan supersedes and replaces the2013 Plan, andno new awards will be granted under the2013 Plan. Any awards outstanding under the2013 Plan remain subject to and will be paid under the2013 Plan. The2023 Equity Compensation Plan reserves 750,000 shares of common stock for issuance of awards to directors, officers, employees and qualifying consultants of the Company and its affiliates.

Stock Options

The fair value of options is estimated on the date of grant using the Black-Scholes option pricing model. The valuation determined by the Black-Scholes pricing model is affected by the Company’s stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but arenot limited to, expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors. The risk-free rate is based on the U.S. Treasury rate for the expected life at the time of grant, volatility is based on the average long-term implied volatilities of peer companies, the expected life is based on the estimated average of the life of options using the simplified method, and forfeitures are estimated on the date of grant based on certain historical data. The Company utilizes the simplified method to determine the expected life of its options due to insufficient exercise activity during recent years as a basis from which to estimate future exercise patterns. The expected dividend assumption is based on the Company’s history and expectation of dividend payouts.

Forfeitures are required to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

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The following table summarizes the Company’s stock option activity for thenine months ended* March 31, 2024and2023*:

The Company recorded non-cash stock-based compensation expense of approximately $2,705 and $2,675 as a component of general and administrative expenses in the accompanying consolidated statements of operations for thethree months ended* March 31, 2024and2023*, respectively, pertaining to granting of stock option awards.

Total unrecognized stock-based compensation expense related to unvested stock options at* March 31, 2024* was approximately $2,259 and is expected to be recognized through thesecond quarter of2024.

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Restricted Stock

For thethree months ended* March 31, 2024and2023*, the following is a summary of restricted stock activity:

The Company recorded non-cash stock-based compensation expense of $80,627 and $30,822 as a component of general and administrative expenses in the accompanying consolidated statements of operations for thethree months ended* March 31, 2024and2023*, respectively, pertaining to granting of restricted stock awards.

Total unrecognized stock-based compensation expense related to 110,488 unvested restricted stock units at* March 31, 2024* was approximately $283,325 and is expected to be fully recognized by thethird quarter of2025.

13. Income Taxes

The Company’s quarterly income tax provision is based upon an estimated annual income tax rate. The Company’s quarterly provision for income taxes also includes the tax impact of discrete items, if any, including changes in judgment about valuation allowances and effects of changes in tax laws or rates, in the interim period in which they occur.

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During thethree months ended* March 31, 2024and2023*, the Company recorded income tax expense of $2,490 and an income tax benefit of $10,873, respectively.

In assessing the realizability of deferred tax assets, management considers whether it is more likely thannot that some portion or all of the deferred income tax assets willnot be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred income tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based on consideration of these items, management has determined that enough uncertainty exists relative to the realization of the deferred income tax asset balances to warrant the application of a valuation allowance as of* March 31, 2024*. The valuation allowance at* March 31, 2024* was $10,966,564. The net change in the valuation allowance during thethree months ended* March 31, 2024* was an increase of $209,158.

14. Segment Information

The Company operates in the following segments: (i) PDN Network, (ii) NAPW Network, and (iii) RemoteMore. The financial results of China Operations have been reclassified from the Company’s reportable segments to discontinued operations forthree months ended* March 31, 2023*. There wasno reportable activity related to discontinued operation in the same period in fiscal2024.

The following tables present key financial information related of the Company’s reportable segments related to financial position as of* March 31, 2024* and* December 31, 2023* and results of operations for thethree months ended* March 31, 2024and2023*:

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15. Subsequent Events

The Company has evaluated subsequent events through the filing of this Quarterly Report on Form10-Q and determined that there have beenno events that have occurred, other than those listed below, that would require adjustments to our disclosures in the consolidated financial statements.

In* April 2024,*the Company issued 46,442 shares of its common stock to Tumim Stone Capital, in connection with its committed equity line program, at a price of approximately $1.56 per share for aggregate gross proceeds of $70,168.

In* May 2024,*the Company issued 138,226 shares of its common stock to Tumim Stone Capital, in connection with its committed equity line program, at a price of approximately $1.27 per share for aggregate gross proceeds of $169,717.

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