SEC Company Response from Professional Diversity Network, Inc. (IPDN) (CIK 0001546296) (IPDN) — Jun 11, 2012
Professional Diversity Network, Inc. (IPDN) (CIK 0001546296)
Date: June 11, 2012 · CIK: 0001546296 · Accession: 0001193125-12-267150
AI Filing Summary & Sentiment
Referenced dates: May 14, 2012
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CORRESP 1 filename1.htm CORRESP June 11, 2012 Barbara C. Jacobs Assistant Director United States Securities and Exchange Commission 100 F Street, N.E. Washington, DC 20549 Re: Professional Diversity Network, LLC Registration Statement on Form S-1 Submitted April 16, 2012, Filed on May 23, 2012 CIK No. 0001546296 Dear Ms. Jacobs: By letter dated May 14, 2012 (the “SEC Letter”), the staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”) provided comments on the Confidential Draft Registration Statement on Form S-1 (the “Amendment”) submitted by Professional Diversity Network, LLC (the “Company”). In order to facilitate your review, this letter responds to each of the comments set forth in the SEC Letter on a point-by-point basis. The numbered paragraphs set forth below respond to the Staff’s comments and correspond to the numbered paragraphs in the SEC Letter. General 1. Since you appear to qualify as an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act, please disclose on your prospectus cover page that you are an emerging growth company and revise your prospectus to: • Describe how and when a company may lose emerging growth company status; • Briefly describe the various exemptions that are available to you, such as exemptions from Section 404(b) of the Sarbanes-Oxley Act of 2002 and Section 14A(a) and (b) of the Securities Exchange Act of 1934; and • State your election under Section 107(b) of the JOBS Act: • If you have elected to opt out of the extended transition period for complying with new or revised accounting standards pursuant to Section 107(b), include a statement that the election is irrevocable; or • If you have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1), provide a risk factor explaining that this election allows you to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. Please state in your risk factor that, as a result of this election, your financial statements may not be comparable to companies that comply with public company effective dates. Include a similar statement in your critical accounting policy disclosures. • In addition, consider describing the extent to which any of these exemptions are available to you as a Smaller Reporting Company. Response We have added the requested disclosure to the prospectus cover page as well as to pages 11, 26-27 and 39 of the amendment. June 11, 2012 Page 2 2. Please update your financial statements and related disclosures pursuant to Rule 8-08 of Regulation S-X. Response We have updated our financial statements and related disclosures in the prospectus pursuant to Rule 8-08 of Regulation S-X. 3. Please supplementally provide us with copies of any graphical materials or artwork you intend to use in your prospectus. Upon review of these materials, we may have further comments. Please refer to Question 101.02 of our Compliance and Disclosure Interpretations relating to Securities Act Forms available on our website. Response We will provide the Staff with graphical materials or artwork once we have finalized the graphical materials we intend to use in the prospectus. Prospectus Summary 4. We note your inclusion of defined terms in the front of your prospectus, which is subject to the plain English principles of Rule 421(d) of Regulation C. Rule 421(d) provides that information in the front of the prospectus must highlight information that is important for investors, and must also be easy to read. See SEC Release No. 33-7497. The defined terms should be moved to a section of the prospectus that is not subject to Rule 421(d). To conform to the requirements of Rule 421(b), replace specialized definitions with short descriptive phrases that you use throughout the text. Response We have revised the front of the prospectus to remove the defined terms, and have where practicable, replaced defined terms with short descriptive phrases. 5. It appears that you do not define your key metrics (i.e., unique visitors, number of visits, members) until the Business section of the prospectus, although these terms are used throughout the registration statement. Please include these definitions in the forepart of the prospectus. Response We have included the definitions of our key metrics in the forepart of the prospectus where the metrics are used and discussed. Please see page 6 of the revised prospectus. 6. Please provide supplemental support for the following assertions regarding your market position. • You believe that “iHispano.com is the largest United States online professional network catering to Hispanic-American professionals based on the number of members, visits and unique visitors to the website.” • You believe that AMightyRiver.com “is a leading online professional network focused on African-Americans based on the number of visits and unique visitors to the website.” • You believe that “iHispano.com has more members and received more visits and unique visitors than any other online diversity recruitment network focused on Hispanic-Americans” and that you believe “AMightyRiver.com has more members and received more visits and unique visitors than any other online diversity recruitment network focused on African-Americans.” June 11, 2012 Page 3 Response The beliefs cited by the Staff are based upon our experience in the industry. In light of the Staff’s comment, we have removed the above statements from the prospectus. 7. Please provide a balanced discussion of the reported number of members on your websites throughout the prospectus. We note your disclosure on page 24 that the reported number of members in your networks is higher than the number of actual individual members. This appears to be material information that should be presented in the prospectus summary and business section alongside your statistics regarding the number of members on each of your websites. Response We have presented the referenced disclosure in the prospectus summary business section alongside our statistics regarding the number of members on each of your websites. Please see pages 6 and 53 of the revised prospectus. 8. Please consider highlighting your relationship with Apollo and Monster.com in the forepart of your prospectus summary as it appears to be a material source of your revenues. Response We have added a new section in our prospectus summary to highlight our relationship with Apollo Group and Monster Worldwide. Please see pages 2-3 of the revised prospectus. 9. With respect to all third-party statements in your prospectus — such as market data by the U.S. Equal Employment Opportunity Commission, Bureau of Labor Statistics, the Kenan-Flagler Business School, Evercore Partners, and eMarketer, Inc., among others — please provide us with the relevant portion of the industry research reports you cite. To expedite our review, please clearly mark each source to highlight the applicable portion of the section containing the statistic, and cross-reference it to the appropriate location in your prospectus. Tell us whether any of the reports, other than those prepared by the government, were prepared for you or in connection with the offering. Also, ensure that the dates of the reports are disclosed in the prospectus. Response We are providing the Staff with copies of third party sources cited in our prospectus. The supplemental annexes being provided are highlighted to show the relevant portion we have cited and are cross-referenced to the page number(s) in the prospectus. None of the third party information we cited in the prospectus was prepared for us or in connection with the offering. In addition, as requested by the Staff, we have disclosed the dates of the reports cited in the prospectus. Risks Associated with Our Business 10. Please provide quantitative information regarding your material risks in the prospectus summary to provide investors with additional context regarding the risk. For example, disclose the percentages of revenue that you have generated from your two customers. As a further example, disclose the amount and percentage of shares held by your directors, executive officers, and significant stockholders after the offering. Response We revised the prospectus to include quantitative information regarding our material risks in the prospectus summary to provide additional context regarding risk. Among other additional information, we have disclosed (i) the percentages of revenue that we have generated from our two major customers, (ii) that our management board and significant stockholder currently hold all of our outstanding equity interests, and (iii) added language June 11, 2012 Page 4 that will provide for disclosure of the amount and percentage of shares held by our directors, executive officers and significant stockholders after the offering. Please see page 8 of the revised prospectus. Company Information, page 11 11. Please tell us in more detail the timing of your plans to restructure Professional Diversity Network, LLC into a Delaware corporation. Explain when you plan to convert the company into a Delaware corporation and when each holder of an outstanding membership interest will contribute to the company all of the right, title, and interest in and to the holder’s entire ownership interest in the company. With a view toward disclosure, please tell us the number of parties that hold membership interest in the company. Response As soon as practicable after our registration is effective and the underwriting agreement is signed, and prior to the closing of the offering, we will reorganize as a Delaware corporation. Specifically, the members of Professional Diversity Network, LLC (the “LLC”) who have made loans to the LLC will contribute their loans to capital and all of the members will contribute 100% of the membership interests of the LLC to the newly-formed corporation following which the LLC will merge into the corporation. At present, three persons, the Ladurini Trust, James Kirsch and Rudy Martinez, hold all of the membership interests in the LLC. Risk Factors 12. We note that some of your risk factors discuss several distinct risks to the company or an investment in the company’s securities under one heading. Consider revising the risk factors, particularly those listed in bullet point format on pages 21-22 and 28-29, to provide separately captioned paragraphs that address specifically how the conditions and uncertainties present material risks to potential investors. Response At the Staff’s request, we have revised our risk factor section, including revising the risk factors on prior pages 21-22 and 28-29, to provide separately captioned risk factors, remove duplicative risk factors, avoid generic disclosure and make other revisions to specify how conditions and uncertainties present material risks to potential investors. Nasdaq may delist our common stock from quotation on its exchange..., page 34 13. We note your disclosure that you will not offer your common stock unless you are approved for listing on a national securities exchange. Please tell us, with a view towards disclosure, the conditions under which you will not offer the securities. Response In the forepart of our prospectus, we have highlighted the condition that we will not offer our common stock unless we are approved for listing on a national securities exchange. Other than obtaining an acceptable price for the sale of our securities, we do not have any other conditions under which we will not offer the securities. We are obligated to develop and maintain proper and effective internal controls over financial reporting..., page 36 14. Please clarify your disclosure in this risk factor regarding Section 404 of the Sarbanes Oxley Act to indicate the circumstances under which you would be first required to provide the attestation report of an auditor with respect to management’s report on its internal control over financial reporting. Response We have revised the risk factor referenced by the Staff to indicate the circumstances under which we would be first required to provide the attestation report of an auditor with respect to management’s report on its internal control over financial reporting. Please see page 26 of the revised prospectus. June 11, 2012 Page 5 15. We note that you are in the process of evaluating and correcting a material weakness in your internal control over financial reporting related to the segregation of duties. While we note that you have not yet remediated this weakness, please describe the steps you are currently taking to correct this problem; disclose how long you estimate it will take to remediate this weakness and disclose any material costs associated with your remediation plan that you have incurred (or that you expect to incur). To the extent that you have not made any efforts to correct this weakness and you do not intend to do so in the near future, please revise to indicate as such. Response We have revised the risk factor referenced by the Staff to disclosure the steps we have taken to address the material weakness, when we expect to remediate disclosed the material weakness and the costs associated with our remediation plan. Please see page 26 of the revised prospectus. Special Note Regarding Forward-Looking Statements, page 37 16. We note your statement that some of the information in the prospectus is based on industry publications and reports generated by third parties and that you have not independently verified the third-party data. You are responsible for the entire content of the registration statement and should not include language that can be interpreted as a disclaimer of information you have chosen to include. Please revise. Response We have revised the Special Note Regarding Forward-Looking Statements and removed language that can be interpreted as a disclaimer of information from industry publications and reporting generated by third parties. Use of Proceeds, page 39 17. To the extent known, please provide more detail regarding the purposes for which the net proceeds in this offering are intended to be used. In this regard, consider disclosing the amount of proceeds that you plan to use to hire sales and marketing personnel and additional product development personnel. This section does not require disclosure of definitive plans and it is acceptable to discuss preliminary plans. See Item 504 of Regulation S-K. Response We have revised the Use of Proceeds section to provide additional detail regarding the purposes for which the net proceeds of the offering are intended to be used. Please see pages 10 and 29 of the revised prospectus. Capitalization, page 40 18. At the top of page 40 you state the pro forma basis reflects the conversion of promissory notes into shares of common stock. Describe further the conversion terms for these notes and tell us how you determined this adjustment meets the factually supportable criteria of Rule 11-02(b)(6) of Regulation S-X such that it should be included in your pro forma disclosures. Response The conversion terms of the promissory notes have not been determined or consummated at the time of this response as we did not contemplate their conversion upon their issuance in November, 2004. The promissory notes are currently not convertible. However in connection with the offering, we have an understanding with our noteholders that the outstanding notes will be exchanged into shares of our common stock at a price per share equal to the offering price. Prior to the effectiveness of the registration statement, we anticipate that we will enter into a debt conv