Professional Diversity Network, Inc.

Previous wording

While maintaining our legacy operations, we are aggressively expanding into new, unrelated business areas, including the acquisition and monetization of entertainment assets (specifically, musical copyrights) and the exploration of Web 3.0 technologies, such as the tokenization of Real World Assets (“RWA”). This strategic redirection is a material event driven by management’s assessment that our traditional recruitment business faces significant headwinds and that diversification is essential for long-term value creation. However, this strategy carries substantial execution risk, involves entering markets where we have limited operational history, and has fundamentally altered our capital requirements and liquidity profile. The success of this pivot is a primary known uncertainty that is reasonably likely to cause our future operating results and financial condition to differ materially from reported historical information.

Current wording

While maintaining our legacy operations, we are aggressively expanding into new, unrelated business areas, including the acquisition and monetization of entertainment assets (specifically, musical copyrights) and the exploration of Web 3.0 technologies, such as the tokenization of Real World Assets (“RWA”). This strategic redirection is a material event driven by management’s assessment that our traditional recruitment business faces significant headwinds and that diversification is essential for long-term value creation. However, this strategy carries substantial execution risk, involves entering markets where we have limited operational history, and has fundamentally altered our capital requirements and liquidity profile. The success of this pivot is a primary known uncertainty that is reasonably likely to cause our future operating results and financial condition to differ materially from reported historical information. To support these exploratory efforts, in 2025, we established a wholly owned subsidiary, Colorful Japan, in Tokyo, Japan. Colorful Japan is not currently a material contributor to our revenues, and its operations remain in development.

Previous wording

We generate revenue from ((i) recruitment services, (ii) contracted software development, (iii) paid membership subscriptions and related services, and (iv) consumer advertising and consumer marketing solutions. The following table sets forth our revenues from each 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.

Current wording

We generate revenue from (i) recruitment services, (ii) contracted software development, (iii) paid membership subscriptions and related services, (iv) consumer advertising and consumer marketing solutions, and (v) licensing service. The following table sets forth our revenues from each 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.

Previous wording

Total revenues for the three months ended September 30, 2025, increased approximately $38,000, or 2.2%, to approximately $1,732,000 from approximately $1,694,000 during the same period in the prior year. The increase was predominantly attributable to a approximate $378,000 increase in contracted software development revenue. This increase was partially offset by an approximate $314,000 decrease in recruitment services which was primarily driven by a slowdown in corporate spending on diversity, equity, and inclusion (“DEI”) initiatives. We believe this trend is influenced by a shifting political and legal landscape, including the Supreme Court's 2023 decision on affirmative action and various executive orders and state-level legislation targeting DEI programs, which has caused some companies in both the public and private sectors to pause or re-evaluate their diversity-focused recruitment budgets. Revenue from membership and related services also declined by approximately $20,000.

Current wording

Total revenues for the three months ended March 31, 2026, increased approximately $43,000, or 2.9%, to approximately $1,548,000 from approximately $1,505,000 during the same period in the prior year. The increase was predominantly attributable to an approximate $348,000 increase in contracted software development revenue. The increase was primarily driven by higher demand for remote software development services and outsourced technical solutions, reflecting broader industry trends toward distributed workforces and increased adoption of AI-related technologies. This increase was partially offset by an approximate $284,000 decrease in recruitment services which was primarily driven by a slowdown in corporate spending on diversity, equity, and inclusion (“DEI”) initiatives. We believe this trend is influenced by a shifting political and legal landscape, including the Supreme Court’s 2023 decision on affirmative action and various executive orders and state-level legislation targeting DEI programs, which has caused some companies in both the public and private sectors to pause or re-evaluate their diversity-focused recruitment budgets. Revenue from membership and related services also declined by approximately $21,000 due to lower membership activity.

Previous wording

Cost of revenues: Cost of revenues during the three months ended September 30, 2025 was approximately $969,000, an increase of approximately $272,000, or 39.0%, from approximately $697,000 during the same period of the prior year. The increase was predominantly due to an approximate $322,000 increase in RemoteMore's contract costs, which are the fees paid to external developers and are directly correlated with the segment's significant revenue growth. Partially offsetting the increases is a decrease of approximately $36,000 in payroll related costs, and approximately $14,000 in event related costs.

Current wording

Cost of revenues: Cost of revenues during the three months ended March 31, 2026 was approximately $1,013,000, an increase of approximately $294,000, or 40.9%, from approximately $719,000 during the same period of the prior year. The increase was predominantly due to an approximate $345,000 increase in RemoteMore’s contract costs, which are the fees paid to external developers and are directly correlated with the segment’s significant revenue growth. Partially offsetting the increases is a decrease of approximately $39,000 in payroll-related costs and approximately $12,000 in event-related and other costs due to labor restructuring and system automation.

Previous wording

Sales and marketing expense: Sales and marketing expense during the three months ended September 30, 2025 was approximately $434,000, a decrease of approximately $200,000, or 31.5%, from $634,000 during the same period in the prior year. The decrease was predominantly attributed to approximately $150,000 of reduced payroll and commission related costs and $29,000 reduction in marketing and $21,000 related to consulting and software costs.

Current wording

Sales and marketing expense: Sales and marketing expense during the three months ended March 31, 2026 was approximately $421,000, a decrease of approximately $150,000, or 26.3%, from $571,000 during the same period in the prior year. The decrease was predominantly attributed to approximately $52,000 of reduced payroll and commission related costs and $49,000 reduction in marketing and $49,000 related to consulting and software costs. The overall reduction in sales and marketing expenses was driven by lower revenue levels and improved operational efficiency, which collectively resulted in decreased spending across payroll, marketing, consulting, and other related services.

Previous wording

General and administrative expense: General and administrative expenses increased by approximately $1,658,000, or 65.1%, to approximately $4,203,000 during the nine months ended September 30, 2025, as compared to approximately $2,545,000 during the same period in the prior year. The increase in expenses was predominantly due to approximately $1,650,000 consulting fee related to the RWA service and $8,000 in other general and administrative expenses.

Current wording

General and administrative expense: General and administrative expenses decreased by approximately $107,000, or 12.2%, to approximately $772,000 during the three months ended March 31, 2026, as compared to approximately $879,000 during the same period in the prior year. The decrease in expenses was predominantly due to reductions of approximately $54,000 in salaries and related benefit charges due to workforce reductions, and $53,000 in legal expenses due to lower litigation activity.

Previous wording

Depreciation and amortization expense: Depreciation and amortization expense during the three months ended September 30, 2025 was approximately $39,000, a decrease of approximately $17,000 or 30.4%, compared to approximately $56,000 during the same period in the prior year. The decrease was primarily attributable to the amortization of trade name and other intangible assets.

Current wording

Depreciation and amortization expense: Depreciation and amortization expense during the three months ended March 31, 2026 was approximately $1,196,000, an increase of approximately $1,155,000 or 2817.1%, compared to approximately $41,000 during the same period in the prior year. The increase was primarily attributable to the amortization of musical works copyrights acquired by the Company, which are being amortized over an estimated 18-month useful life based on the expected peak streaming period.

Previous wording

For the three months ended September 30, 2025, costs and expenses related to our TalentAlly Network segment decreased by approximately $222,000, or 20.0%, as compared to the same period in the prior year. The decrease is primarily a result of reductions of approximately $189,000 in payroll related costs, approximately $26,000 in sales and marketing costs, approximately $47,000 in revenue sharing costs, and approximately $25,000 in third party software related to sales. Partially offsetting the decreases is an increase of approximately $57,000 in bad debt expenses, and approximately $8,000 in general and administrative costs.

Current wording

For the three months ended March 31, 2026, costs and expenses related to our TalentAlly Network segment decreased by approximately $147,000, or 15.0%, as compared to the same period in the prior year. The decrease is primarily a result of reductions of approximately $140,000 in payroll related costs, approximately $45,000 in sales and marketing costs, approximately $13,000 in revenue-sharing costs, approximately $34,000 in third-party software related to sales, and approximately $4,000 in bad debt expenses. These decreases were mainly attributable to workforce reductions and operational efficiencies implemented in response to decreased revenue. Partially offsetting the decreases is an increase of approximately $89,000 in franchise tax expenses, primarily due to an increase in outstanding shares.

Previous wording

During the three months ended September 30, 2025 and 2024, we recorded an income tax expense of approximately $0 and an income tax expense of approximately $0, respectively.

Current wording

During the three months ended March 31, 2026 and 2025, we recorded an income tax expense of approximately $0 and $0, respectively.

Previous wording

Consolidated Net Loss from Continuing Operations, Net of Tax. As the result of the factors discussed above, during the three months ended September 30, 2025, we incurred a net loss from continuing operations of approximately $2,375,000, a increase in the net loss of approximately $1,953,000, compared to a net loss of approximately $422,000 during the three months ended September 30, 2024. As the result of the factors discussed above, during the nine months ended September 30, 2025, we incurred a net loss from continuing operations of approximately $3,608,000, a increase in the net loss of approximately $1,793,000, compared to a net loss of approximately $1,815,000 during the nine months ended September 30, 2024.

Current wording

Consolidated Net Loss from Continuing Operations, Net of Tax. As the result of the factors discussed above, during the three months ended March 31, 2026, we incurred a net loss from continuing operations of approximately $1,856,000, an increase in the net loss of approximately $1,115,000, compared to a net loss of approximately $741,000 during the three months ended March 31, 2025.

Previous wording

Our principal sources of liquidity are our cash and cash equivalents, including cash from operations and net proceeds from the issuances of common stock, if any. As of September 30, 2025, we had cash and cash equivalents of approximately $265,000 compared to cash and cash equivalents of approximately $1,731,000 at December 31, 2024. Our working capital has shifted from $271,000 at December 31, 2024 to a working capital deficit of approximately $2,128,000 at September 30, 2025. We had an accumulated deficit of approximately $105,970,000 at September 30, 2025.

Current wording

Our principal sources of liquidity are our cash and cash equivalents, including cash from operations and net proceeds from the issuances of Common Stock, if any. As of March 31, 2026, we had cash and cash equivalents of approximately $35,000 compared to cash and cash equivalents of approximately $217,000 at December 31, 2025. Our working capital deficit has decreased from approximately $4,043,000 as of December 31, 2025 to approximately $788,000 as of March 31, 2026. We had an accumulated deficit of approximately $110,720,000 at March 31, 2026.

Previous wording

The significant decrease in our cash and cash equivalents and working capital during the first nine months of 2025 was primarily due to cash used in operating activities of $3,496,000 and a strategic investment of approximately $1.3 million in AI Geometric Ltd. These factors, combined with our history of recurring losses from operations, 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, raise capital, and generate revenues. The consolidated financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.

Current wording

The significant decrease in our cash and cash equivalents and working capital deficit during the first three months of 2026 was primarily due to cash used in operating activities of approximately $362,000 and the issuance of 1,358,000 shares of common stock in January 2026 to satisfy other current liabilities related to the purchase of DTT Tokens, which were valued at $2,593,780 in December 2025. These factors, combined with our history of recurring losses from operations, 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, raise capital, and generate revenues. The consolidated financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.

Previous wording

Our cash and cash equivalents at September 30, 2025 and cash flow from operations may not be sufficient to meet our working capital requirements for the fiscal year ending December 31, 2025, without the need to increase revenues, or raise capital by the issuance of common stock, including through our line of equity or private placements. There can be no assurances that our business plans and actions will be successful, that we will generate anticipated revenues, or that unforeseen circumstances will not require additional funding sources in the future or require an acceleration of 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. This requirement is significantly amplified by our commitment to complete the acquisition of musical compositions from High Wave Corp for a total consideration of $10,000,000, with payments due by November 30, 2025, as described in Note 16. Our ability to fulfill this and other obligations is entirely dependent on our success in raising substantial additional capital through the financing activities described herein or other alternatives. There is no assurance that such financing will be available on acceptable terms, or at all.

Current wording

Our cash and cash equivalents at March 31, 2026 and cash flow from operations may not be sufficient to meet our working capital requirements for the fiscal year ending December 31, 2026. To address our liquidity needs, during the first quarter of 2026, the Company issued 1,388,902 shares of its Common Stock to Streeterville Capital, LLC at a price range of $0.79 to $1.06 per share, resulting in aggregate gross proceeds of $1,205,000, which is recorded as restricted cash. Management has implemented cost-reduction measures, including personnel reductions and vendor renegotiations, and is actively exploring additional financing opportunities. There can be no assurance that our business plans and actions will be successful, that we will generate anticipated revenues, or that unforeseen circumstances will not require additional funding sources in the future or accelerate plans to conserve liquidity. Future efforts to raise additional funds may not be successful or may not be available on acceptable terms, if at all.

Previous wording

We are closely monitoring operating costs and capital requirements. Our Management continues to contain and reduce costs, through personnel reductions, replacing and negotiating with certain vendors, and implementing technology to reduce manual time spent on routine operations. If we are still not successful in sufficiently reducing our costs further, we may then need to dispose of our other assets or discontinue business lines.

Current wording

We are closely monitoring operating costs and capital requirements. Management continues to reduce and control costs through personnel reductions, replacement and renegotiation of certain vendor arrangements, and the implementation of technology to reduce manual effort in routine operations. If we are unable to further reduce costs sufficiently, we may be required to dispose of certain assets or discontinue certain business lines.

Previous wording

Our TalentAlly Network sells recruitment services to employers, generally on a 30-to-90-day period or a one-year contract basis. This revenue is also deferred and recognized over the period of the contract. Our payment terms for TalentAlly Network customers range from 30 to 90 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. We also offer monthly membership for NAPW for which we collect a fee on a monthly basis. RemoteMore generates revenue by providing contracted programmers to assist customers with their software solutions through customized software development. Customers are charged for the period the work is performed and payment terms are typically net 10 days.

Current wording

Our TalentAlly Network sells recruitment services to employers, generally on a 30-to-90-day period or a one-year contract basis. This revenue is also deferred and recognized over the period of the contract. Our payment terms for TalentAlly Network customers range from 30 to 90 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. We also offer monthly membership for NAPW for which we collect a fee on a monthly basis. RemoteMore generates revenue by providing contracted programmers to assist customers with their software solutions through customized software development. Customers are billed for services during the period in which the work is performed, and payment terms are typically net 10 days.

Previous wording

Net cash used in operating activities from continuing operations during the nine months ended September 30, 2024, was approximately $1,324,000. We had a net loss from continuing operations of approximately $1,815,000 during the nine months ended September 30, 2024, which included stock-based compensation expense of approximately $138,000, depreciation and amortization expense of approximately $163,000, provision for doubtful accounts of approximately $4,000, and noncash lease expense of $69,000. Changes in operating assets and liabilities provided approximately $115,000 of cash during the nine months ended September 30, 2024.

Current wording

Net cash used in operating activities from continuing operations during the three months ended March 31, 2026, was approximately $362,000. We had a net loss from continuing operations of approximately $1,856,000 during the three months ended March 31, 2026, which included stock-based compensation expense of approximately $31,000, depreciation and amortization expense of approximately $1,196,000, reversal of provision for doubtful accounts of approximately $15,000, loss on disposal of property, plant and equipment of approximately $19,000, and noncash lease expense of $23,000. Changes in operating assets and liabilities provided approximately $241,000 of cash during the three months ended March 31, 2026.

Previous wording

Net cash used in operating activities from continuing operations during the nine months ended September 30, 2025, was approximately $3,496,000. We had a net loss from continuing operations of approximately $3,608,000 during the nine months ended September 30, 2025, which included stock-based compensation expense of approximately $40,000, depreciation and amortization expense of approximately $121,000, provision for doubtful accounts of approximately $95,000, unrealized loss on investment of approximately $44,000, and noncash lease expense of $69,000. Changes in operating assets and liabilities used approximately $256,000 of cash during the nine months ended September 30, 2025.

Current wording

Net cash used in operating activities from continuing operations during the three months ended March 31, 2025, was approximately $284,000. We had a net loss from continuing operations of approximately $741,000 during the three months ended March 31, 2025, which included stock-based compensation expense of approximately $37,000, depreciation and amortization expense of approximately $41,000, provision for doubtful accounts of approximately $10,000, unrealized loss on investment of $44,000 and noncash lease expense of $23,000. Changes in operating assets and liabilities provided approximately $303,000 of cash during the three months ended March 31, 2025.

Previous wording

Net cash used in investing activities during the nine months ended September 30, 2025, was approximately $4,204,000 which is primary related to the investment in 13% of AI Geometric Ltd's outstanding shares and the purchase of intangible assets.

Current wording

Net cash used in investing activities from continuing operations during the three months ended March 31, 2025, was $1,300,000, which is related to the investment in 13% of AI Geometric Ltd’s outstanding shares.

Previous wording

Net cash provided in financing activities during the nine months ended September 30, 2025, was approximately $6,234,000 representing the proceeds from the sale of common stock and proceeds from short-term debt.

Current wording

Net cash provided by financing activities during the three months ended March 31, 2026, was approximately $1,385,000, consisting of $1,205,000 in proceeds from the sale of Common Stock and $180,000 in short-term debt, which is non-interest bearing and immaterial in amount.

Previous wording

Net cash provided in financing activities during the nine months ended September 30, 2024 was approximately $1,032,000 representing the proceeds from the sale of common stock and proceeds from minority partners.

Current wording

Net cash provided by financing activities during the three months ended March 31, 2025 was approximately $349,000 representing the proceeds from the sale of Common Stock.

Previous wording

Our material cash requirements for the next 12 months consist of funding our operating losses, servicing any debt, and, most critically, fulfilling the remaining payment obligations under the High Wave Corp agreement. The certainty of our cash flows from outside sources is low, as future financing is not guaranteed and may not be available on terms acceptable to us, if at all. Failure to secure sufficient additional capital in a timely manner will have a material adverse effect on our business and would likely force us to default on our obligations and scale back or cease operations.

Current wording

Our material cash requirements for the next 12 months consist of funding our operating losses, and servicing any debt. The certainty of our cash flows from outside sources is low, as future financing is not guaranteed and may not be available on terms acceptable to us, if at all. Failure to secure sufficient additional capital in a timely manner will have a material adverse effect on our business and would likely force us to default on our obligations and scale back or cease operations.

Previous wording

The following table provides a reconciliation of net loss from continuing operations to Adjusted EBITDA, the most directly comparable GAAP measure reported in our consolidated financial statements, for the three and nine months ended September 30, 2025 and 2024:

Current wording

The following table provides a reconciliation of net loss from continuing operations to Adjusted EBITDA, the most directly comparable GAAP measure reported in our consolidated financial statements, for the three months ended March 31, 2026 and 2025:

Previous wording

In November 2024, the Financial Accounting Standards Board (“FASB”) issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures. The ASU requires a public business entity to provide disaggregated disclosures of certain categories of expenses on an annual and interim basis including purchases of inventory, employee compensation, depreciation, and intangible asset amortization for each income statement line item that contains those expenses. This ASU is effective for annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating this ASU to determine its impact on the Company’s disclosures.

Current wording

ASU2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic220-40). InNovember 2024, the Financial Accounting Standards Board (“FASB”) issued ASU2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures. The ASU requires a public business entity to provide disaggregated disclosures of certain categories of expenses on an annual and interim basis including purchases of inventory, employee compensation, depreciation, and intangible asset amortization for each income statement line item that contains those expenses. This ASU is effective for annual reporting periods beginning afterDecember 15, 2026, and interim periods within annual reporting periods beginning afterDecember 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of this guidance on its consolidated financial statements and related disclosures.