11. Commitments and Contingencies

Lease Obligations - The Company leases office space, a corporate apartment, office furniture and equipment under various operating lease agreements.

The Company leases an office for its headquarters in Illinois, as well as office spaces for its events business, sales and administrative offices under non-cancelable lease arrangements that provide for payments on a graduated basis with various expiration dates from February 2016 through February 2019.

During 2015, the Company closed NAPW's Los Angeles, California and Jericho, New York offices. As a result this decision, the Company recorded an expense for the write off of the remaining net book value of its furniture and fixtures and leasehold improvements in the amount of $191,946 and recorded the present value of the remaining lease obligations expected to be incurred for the remainder of the respective lease terms in the amount of $658,551. The expected lease obligations have been offset by expected sublease income. The lease obligation expense is recorded in general and administrative expenses in the accompanying consolidated statements of comprehensive loss. The corresponding current portion of the liability in the amount of $232,284 and the long-term portion of the liability in the amount of $426,267 are recorded in accrued expenses and other liabilities, respectively, in the accompanying consolidated balance sheets at December 31, 2015.

Rent expense, amounting to $1,436,902 and $618,551 for the years ended December 31, 2015 and 2014, respectively, is included in general and administrative expense in the consolidated statements of comprehensive loss. Included in rent expense is sublease income of $345,000 and $0 for the years ended December 31, 2015 and 2014, respectively.  The sublease runs through July 2018 and calls for escalating payments during its term.

Future annual minimum payments net of sublease income due under the leases are summarized as follows:

Legal Proceedings

 
Noble Voice LLC, a wholly-owned subsidiary of the Company, is party to litigation captioned as Expand, Inc. v. Noble Voice LLC et al., Case No.: 2014-CA-9366 A (Orange County, FL Circuit Court) pursuant to which Expand, Inc., d/b/a SoftRock, Inc. (“SoftRock”) filed a complaint against Noble Voice LLC and certain other defendants (the “Noble Voice Defendants”) in September of 2014 alleging the existence of a purported conspiracy by Noble Voice and the other defendants to breach the individual Noble Voice Defendants' Non-Compete Agreements and separate Confidentiality Agreements, misappropriation of trade secrets by some but not all Noble Voice Defendants, tortious interference and seeking injunctive relief. In February of 2016 the parties agreed to a settlement in principle, for a nominal amount that will be subject to a confidentiality agreement once approved by the Court.

The Company and its wholly-owned subsidiary, Noble Voice, LLC, are parties to litigation captioned as Coleman v. Noble Voice, LLC, et al., Case No. 15-CV-6791 (N.D. Ill.), a putative class action, pursuant to which a consumer alleged that Noble Voice violated the Telephone Consumer Protection Act (“TCPA”) by contacting him in relation to a job for which he applied online. The action complaint seeks unspecified damages and injunctive relief. The lawsuit was filed in August of 2015 and the Company timely filed its answer. While the case is in preliminary discovery stages, the Company is confident in its TCPA compliance practices. While the outcome of this lawsuit is uncertain, the Company believes that the claims asserted are without merit and intends to aggressively defend against the claims.

The Company is party to litigation captioned as Norma Vazquez v. Professional Diversity Network, Inc., Case No. 16-CV-13-WCO (N.D.Ga.), a putative class action, pursuant to which a consumer alleged that the Company violated the TCPA by sending her a text message inviting her to attend a career fair. The complaint seeks unspecified damages and injunctive relief. The lawsuit was filed in January of 2016 and the Company has not yet answered but is within its time to do so. While the outcome of this lawsuit is uncertain, the Company believes that the claims asserted are without merit and intends to aggressively defend against these claims.

The Company and its wholly-owned subsidiary, NAPW, Inc., are parties to litigation captioned Gauri Ramnath, et al. v. Professional Diversity Network, Inc., et al., No. BC604153 (Los Angeles Superior Ct.), a putative class action alleging violations of various California Labor Code (wage & hour) sections. The plaintiffs seek unspecified damages. The complaint was filed in December of 2016 and the Company has answered. The parties have not yet begun to conduct discovery, but have engaged in discussions to create a universal settlement. While the outcome of this lawsuit and its prospective settlement are uncertain, the Company believes that its resolution will not have a material negative impact on the Company's financial performance.

The Company and its wholly-owned subsidiary, NAPW, Inc., are parties to litigation captioned as Crystal Martin, et al. v. NAPW, Inc., et al., No. BC606543 (Los Angeles Sup. Ct.), alleging violations of various California Labor Code (wage & hour) sections. The plaintiffs seek unspecified damages and civil penalties pursuant to the California Labor Code. The complaint was served in January of 2016. The parties have agreed to a settlement in principle for a nominal amount.

The Company and its wholly-owned subsidiary, NAPW, Inc., are parties to litigation captioned Ilana Youngheim v. NAPW, Inc., et al., No. BC605928 (Los Angeles Sup. Ct.), a case alleging discrimination in violation of California Fair Employment and Housing Act (disability discrimination). The plaintiff seeks unspecified damages, back pay, front pay, lost employment benefits and other compensation. The complaint was served in February of 2016 and the Company has not yet answered but is within its time to do so. While the outcome of this lawsuit is uncertain, the Company believes that the claims asserted are without merit and intends to aggressively defend against these claims.
 
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 currently not material, there can be no assurance that matters arising in the ordinary course of business for which the Company is, or could be, involved in litigation, will not have a material adverse effect on its business, financial condition or results of operations.

Separation Agreement

On July 16, 2015, the Company and Mr. Proman entered into a Separation Agreement whereby Mr. Proman resigned from his position as the Company's Executive Vice President and Chief Operating Officer and resigned from the Company's Board of Directors. Under the terms of the Separation Agreement, the Company paid Mr. Proman severance in an amount equal to the value of nine months of his annual salary, or $206,250, which is recorded in general and administrative expenses in the accompanying consolidated statements of comprehensive loss. The Company will also reimburse Mr. Proman for the amount of any premiums for individual medical insurance during the nine-month period following the date of the Separation Agreement. Mr. Proman released and discharged the Company and its officers, directors, employees and agents from any and all claims, whether then known or unknown, which Mr. Proman then had based upon or arising out of any matter occurring or existing at any time up to and including the date of the Separation Agreement. The Company likewise released and discharged Mr. Proman from any and all claims, whether then known or unknown, which the Company then had based upon or arising out of any matter occurring or existing at any time up to and including the date of the Separation Agreement.

Mr. Proman also agreed to provisions in the Separation Agreement prohibiting him from, for a period of one year following the date of the Separation Agreement, (i) disparaging the Company or any of its subsidiaries, or any of its or their products and services, directors, officers, employees or other agents, (ii) competing against the Company or any of its subsidiaries, (iii) soliciting the termination of any employee of the Company or any of its subsidiaries and (iv) interfering with the relationship between the Company and its subsidiaries, on the one hand, and their customers, on the other hand. The Separation Agreement provides that in the event that Mr. Proman breaches his obligations under the foregoing provisions, then as liquidated damages he will forfeit any amounts otherwise owed to him under the Promissory Note. As of the date of the Separation Agreement, $445,000 of unpaid principal remained owing under the Promissory Note. As additional liquidated damages, Mr. Proman would also forfeit all of his rights to acquire shares of the Company's common stock upon the exercise of any warrants or options held by him as of the date of the Separation Agreement. As of such date, Mr. Proman was the holder of a warrant to purchase 50,000 shares of the Company's common stock for $4.00 per share, of a warrant to purchase 131,250 shares of the Company's common stock for $10.00 per share and of options to purchase 183,000 shares of the Company's common stock at $3.45 per share. Pursuant to the terms of Mr. Proman's Option Award Agreement he had 60 days from the date of this separation to exercise the 183,000 options at a price of $3.45 per share. Mr. Proman chose not to exercise the options within the 60 day window and as a result, the 183,000 options were forfeited.