Professional Diversity Network, Inc.

In addition to the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024, we are subject to the following new and updated material risks. You should carefully consider these risks, in addition to the other information in this report and our other filings with the SEC.

Risks Related to Our Financial Condition and Ability to Continue as a Going Concern

We have a history of operating losses and negative cash flows, and our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern.

We have a history of incurring net losses and have not demonstrated sustained profitability. For the fiscal year ended December 31, 2024, we recorded a net loss from continuing operations of approximately $2.4 million, following a net loss of $4.5 million for the year ended December 31, 2023. Our revenues have also declined, decreasing from $7.7 million in 2023 to $6.7 million in 2024. Furthermore, our operations consumed approximately $2.5 million in cash during the year ended December 31, 2024.

As a direct result of our recurring losses and negative cash flows, our independent registered public accounting firm included an explanatory paragraph in its audit report for the fiscal year ended December 31, 2024, expressing substantial doubt about our ability to continue as a going concern. A “going concern” qualification can negatively impact our credibility with investors, customers, and suppliers. It may significantly hinder our ability to obtain new financing on favorable terms, or at all, and could lead to difficulties in securing trade credit, which would further constrain our operations and our ability to execute our business plan.

We have entered into a significant capital commitment for the acquisition of musical copyrights, which creates a severe and near-term liquidity risk that could jeopardize our operations.

On September 3, 2025, we entered into a Copyright Transfer Agreement to acquire a portfolio of 40 musical copyrights for a total purchase price of $10.0 million. This agreement imposes substantial and non-cancellable payment obligations over a very compressed timeframe in late 2025.

Given our limited cash reserves and history of negative cash flow, meeting these payment obligations presents an extreme and immediate challenge to our liquidity. A failure to make any of these payments on time would constitute a breach of the agreement, potentially resulting in financial penalties (as stipulated in the agreement), termination of the contract, and the loss of any funds already paid. Our ability to make these payments is entirely dependent on our ability to raise a significant amount of capital in the very near future. If we are unable to secure the necessary funds to meet these obligations, we will face a severe liquidity crisis that could force us to default on the agreement and could materially and adversely affect our financial condition and ability to operate.

Our ability to fund our operations and strategic initiatives is dependent on raising additional capital, and we may not achieve or sustain profitability in the future.

Our recurring losses, negative cash flow, and the substantial near-term liabilities from the copyright acquisition agreement necessitate that we secure additional financing to continue operations and fund our new strategic direction. Our future financial viability depends on our ability to raise capital through equity or debt financings, enter into a strategic merger or acquisition, or generate sufficient revenue to achieve positive cash flow.

There is no assurance that we will be successful in obtaining the required financing on acceptable terms, or at all. The capital markets may be unwilling to provide funding to a company with our financial history and the "going concern" qualification from our auditors. If we are unable to raise sufficient capital, we may be forced to significantly delay, scale back, or even cease our operations, including our new strategic pivot into music copyrights. Even if we do secure financing, it may be on terms that are highly dilutive to our existing stockholders. Ultimately, despite our best efforts, we may never achieve or sustain profitability or positive cash flow, which could result in you losing all or part of your investment.

Risks Related to Our New Business Strategy

We are pursuing a new business strategy by investing in music copyrights and Web 3.0 technologies, areas in which we have limited or no prior operating history. This strategy is unproven and may not be successful.

We are undertaking a significant strategic pivot by pursuing growth through investments in music copyrights and Web 3.0 technologies. This is a fundamental shift from our historical business of operating online professional diversity networks. We have limited or no operating history, management experience, or industry knowledge in these new sectors. This unproven strategy carries a high degree of uncertainty and risk of failure. Entering markets in which we are not familiar may lead to:

If this new business strategy is not successful, we could suffer significant investment losses, which would further harm our financial condition and could damage investor confidence in our management and future prospects.

The valuation and future monetization of intangible assets like musical copyrights and Web 3.0 technologies are speculative and subject to significant uncertainty.

The core of our new strategy involves investing in intangible assets whose intrinsic worth is difficult to determine and whose future value and ability to generate revenue are highly speculative.

The value of musical copyrights is dependent on numerous unpredictable factors, including shifting public tastes, the royalty rates paid by streaming platforms, the risk of digital piracy, and the long-term popularity of artists. Valuation methodologies for copyrights are complex and subjective, and we may overpay for these assets. Furthermore, successfully monetizing these copyrights through licensing, synchronization, or other means requires specialized industry knowledge and networks that we do not currently possess.

The Web 3.0 sector, including blockchain, decentralized applications, and related technologies, is still in its early stages of development. The industry is characterized by rapid technological change, unproven business models, and an uncertain regulatory framework. Investments in Web 3.0 projects are subject to numerous risks, including technological failure, lack of market adoption, security vulnerabilities such as hacking, and the potential for future restrictive regulations. The value of these assets is extremely volatile, and there is no assurance that we will realize any return on these investments; we could lose our entire investment.