Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For Quarterly Period Ended December 31, 2011
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the Transition period from _______________ to ______________
COMMISSION FILE NUMBER: 000-30999
30DC, INC.
---------------------------------------------------------------
(Exact name of registrant as specified in its charter)
MARYLAND 16-1675285
--------------------------------- ------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
80 BROAD STREET, 5TH FLOOR, NEW YORK, NY 10004
---------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(212) 962-4400
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Registrant's telephone number, including area code
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes[_X_] No[__]
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files).
Yes[_X_] No[__]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check One).
Large accelerated filer [___] Accelerated filer [___]
Non-accelerated filer [___] Smaller reporting company [_X_]
(Do not check if a smaller reporting company)
Indicate by check mark whether the Registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes[__] No[_X_]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
As of April 20, 2012 the number of shares outstanding of the registrant's class
of common stock was 74,520,248.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
PAGE
------
Item 1. Financial Statements 2
Condensed Consolidated Balance Sheets as of December 31, 2011
(Unaudited) and June 30, 2011 3
Condensed Consolidated Statements of Operations (Unaudited) for
the Three and Six Months Ended December 31, 2011 and 2010 4
Condensed Consolidated Statements of Cash Flows (Unaudited) for
the Six Months Ended December 31, 2011 and 2010 5
Notes to Condensed Consolidated Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 15
Item 3. Quantitative and Qualitative Disclosures About Market Risk 21
Item 4. Controls and Procedures 21
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 22
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 22
Item 3. Defaults upon Senior Securities 22
Item 4. Mine Safety Disclosures 22
Item 5. Other Information 23
Item 6. Exhibits 23
Signatures 24
-1-
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
----------------------------
-2-
30DC, INC. AND SUBSIDIARY
Condensed Consolidated Balance Sheets
December June
31, 2011 30, 2011
--------------- --------------------
Unaudited
Assets
Current Assets
Cash and Cash Equivalents $ 32,166 $ 33,790
Accrued Commissions Receivable 19,419 41,199
Prepaid Expenses 58,872 -
Assets of Discontinued Operations 103,125 99,375
--------------- --------------------
Total Current Assets 213,582 174,364
Property and Equipment, Net 53,688 84,041
Goodwill 1,503,860 1,503,860
--------------- --------------------
Total Assets $ 1,771,130 $ 1,762,265
=============== ====================
Liabilities and Stockholders' Deficiency
Current Liabilities
Accounts Payable $ 580,707 $ 565,534
Accrued Expenses and Refunds 333,123 335,288
Deferred Revenue 310,867 273,641
Due to Related Parties 477,160 262,761
Liabilities of Discontinued Operations 384,681 381,399
--------------- --------------------
Total Current Liabilities 2,086,538 1,818,623
--------------- --------------------
Total Liabilities 2,086,538 1,818,623
--------------- --------------------
Preferred Stock, Par Value $0.001, 10,000,000 Authorized, -0- Issued - -
Common Stock, Par Value $0.001, 100,000,000 authorized,
74,520,248 issued and outstanding 74,520 74,520
Paid in Capital 2,758,001 2,758,001
Accumulated Deficit (3,050,627) (2,767,957)
Accumulated Other Comprehensive Loss (97,302) (120,922)
--------------- --------------------
Total Stockholders' Deficiency (315,408) (56,358)
--------------- --------------------
Total Liabilities and Stockholders' Deficiency $ 1,771,130 $ 1,762,265
=============== ====================
The accompanying notes are an integral part of the condensed consolidated
financial statements.
-3-
30DC, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Operations and Comprehensive Loss
Unaudited
For the Three Months Ended For the Six Months Ended
December 31, December 31,
2011 2010 2011 2010
--------------- --------------- ----------------- --------------------
Revenue
Commissions $ 41,349 $ 153,438 $ 143,849 $ 250,673
Subscription Revenue 143,179 164,772 338,068 325,433
Products and Services 148,811 69,889 162,884 73,521
Seminars and Mentoring 174,534 180,256 278,330 320,930
--------------- --------------- ----------------- --------------------
Total Revenue 507,873 568,355 923,131 970,557
Operating Expenses 545,853 706,879 1,187,210 2,045,150
--------------- --------------- ----------------- --------------------
Operating Loss (37,980) (138,524) (264,079) (1,074,593)
Other Expense
Foreign Currency Loss (6,021) (6,460) (12,422) (13,512)
--------------- --------------- ----------------- --------------------
Total Other Expense (6,021) (6,460) (12,422) (13,512)
--------------- --------------- ----------------- --------------------
Loss From Continuing Operations (44,001) (144,984) (276,501) (1,088,105)
Income (Loss) From Discontinued Operations (3,613) (1,785) (6,169) 15
--------------- --------------- ----------------- --------------------
Net Loss (47,614) (146,769) (282,670) (1,088,090)
Foreign Currency Translation Gain (Loss) (34,495) (25,064) 23,620 (99,416)
--------------- --------------- ----------------- --------------------
Comprehensive Loss $ (82,109) $ (171,833) $ (259,050) $ (1,187,506)
=============== =============== ================= ====================
Weighted Average Common Shares Outstanding
Basic 74,520,248 73,068,388 74,520,248 67,911,180
Diluted 74,520,248 73,068,388 74,520,248 67,911,180
Loss Per Common Share (Basic and Diluted)
Continuing Operations $ (0.00) $ (0.00) $ (0.00) $ (0.02)
Discontinued Operations (0.00) (0.00) (0.00) 0.00
--------------- --------------- ----------------- --------------------
Net Loss Per Common Share $ (0.00) $ (0.00) $ (0.00) $ (0.02)
=============== =============== ================= ====================
The accompanying notes are an integral part of the condensed
consolidated financial statements.
-4-
30DC, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Cash Flows
Six Months Ended December 31
Unaudited
2011 2010
---------------- --------------
Cash Flows from Operating Activities:
Net Loss $ (282,670) $ (1,088,090)
Loss (Gain) From Discontinued Operations 6,169 (15)
Adjustments to Reconcile Loss from Continuing Operations
to Net Cash Provided By (Used In) Operations
Depreciation and Amortization 31,957 34,650
Equity Based Payments To Non-Employees - 455,988
Write-off of Deferred Financing Costs - 7,500
Changes in Operating Assets and Liabilities
Accrued Commissions Receivable 19,804 37,228
Prepaid Expenses (58,872) -
Accounts Payable 25,496 37,850
Accrued Expenses and Refunds 4,881 130,782
Deferred Revenue 48,945 (118,335)
Due to Related Parties 214,399 279,078
---------------- --------------
Net Cash Provided by (Used in) Operating Activities 10,109 (223,364)
---------------- --------------
Cash Flows from Investing Activities
Purchases of Property and Equipment (5,311) (5,008)
Cash - Acquired In Acquisition of Infinity - 3,350
---------------- --------------
Net Cash Used in Investing Activitities (5,311) (1,658)
---------------- --------------
Cash Flows from Financing Activities
Sale of common stock, net - 261,950
---------------- --------------
Net Cash Provided by Financing Activities - 261,950
---------------- --------------
Cash Flows from Discontinued Operations
Cash Flows From Operating Activities (6,637) (20,531)
---------------- --------------
Net Cash Used in Discontinued Operations (6,637) (20,531)
---------------- --------------
Effect of Foreign Exchange Rate Changes on Cash 215 3,148
---------------- --------------
Net (Decrease) Increase in Cash and Cash Equivalents (1,624) 19,545
Cash and Cash Equivalents - Beginning of Period 33,790 28,405
---------------- --------------
Cash and Cash Equivalents - End of Period $ 32,166 $ 47,950
================ ==============
Supplemental Disclosures of Non Cash Financing Activity
Private Placement Subscriptions Received Reclassified to Equity $ - $ 501,590
Common Stock Issued to Settle Liabilities $ - $ 279,125
The accompanying notes are an integral part of the condensed
consolidated financial statements.
-5-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2011
(UNAUDITED)
NOTE 1. DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION AND LIQUIDITY
--------------------------------------------------------------------
30DC, Inc., Delaware, ("30DC DE") was incorporated on October 17, 2008 in the
state of Delaware, as a holding company, for the purpose of building, acquiring
and managing international web-based sales and marketing companies. On July 15,
2009, 30DC DE completed the acquisitions of the business and assets of 30 Day
Challenge ("30 Day") and Immediate Edge ("Immediate"). 30 Day was acquired from
the Marillion Partnership and Edward Wells Dale, both of Victoria, Australia, in
consideration for the issuance of 2,820,000 shares of Common Stock of 30DC DE.
Immediate was acquired from Dan Raine of Cheshire, United Kingdom, in
consideration for the issuance of 600,000 shares of Common Stock of 30DC DE. The
acquired businesses were sold subject to specific liabilities which included
accounts payable, accrued expenses and deferred revenue. The acquisitions were
pursuant to an agreement dated November 14, 2008. Mr. Dale and Mr. Raine were
part of the founding group of shareholders of 30DC DE and in conjunction with
the acquisitions, Mr. Dale was named the Chief Executive Officer of 30DC DE. In
accordance with the provisions of Accounting Standards Codification ("ASC") 805,
"Business Combinations", the acquisitions of 30 Day and Immediate were accounted
for as transactions between entities under common control, whereby the acquired
assets and liabilities of 30 Day and Immediate were recognized in the financial
statements at their carrying amounts.
On September 10, 2010, shareholders of 30DC DE exchanged 100% of their 30DC DE
shares for 60,984,000 shares of Infinity Capital Group, Inc. ("Infinity"), a
publicly traded company which trades over the counter ("OTC") on the OTC Pink
market operated by OTC Market Group, Inc. 30DC DE became a wholly owned
subsidiary of Infinity Capital Group, Inc. which has subsequently changed its
name to 30DC, Inc. ("30DC" and together with its subsidiary "the Company").
After the share exchange, the former shareholders in 30DC DE held approximately
90% of the outstanding shares in Infinity and the officers of 30DC DE became the
officers of Infinity. 30DC DE was the accounting acquirer in the transaction and
its historical financial statements will be the historical financial statements
of 30DC. Infinity's operations were discontinued and subsequent to the share
exchange are accounted for as discontinued operations.
30DC offers internet marketing services and related training that help Internet
companies in operating their businesses. 30DC's core business units are 30 Day
and Immediate. 30 Day, with approximately 100,000 active online participants,
offers a free e-commerce training program year round along with an online
education subscription service and periodic premium live seminars that are
targeted to experienced internet business operators. Immediate is an online
educational program subscription service offering high-end Internet marketing
instruction and strategies for experienced online commerce practitioners. Other
revenue streams include sales of instructional courses and software tools
related to internet marketing and from commissions on third party products sold
via introduction to the 30DC customer base of active online participants and
subscribers which are referred to as affiliate marketing commissions. The
Company's recorded and unrecorded assets consist primarily of property and
equipment, goodwill and internally developed intangible property such as domain
names, websites, customer lists and copyrights.
On August 24, 2011, the Company entered into a Share Sale and Purchase Agreement
(the "Purchase") with RivusTV Ltd, ("Rivus") which was organized and exists in
Victoria, Australia. Rivus offers a solution to broadcast digital content across
the Internet on a revenue share basis. The purchase price for 100% of Rivus'
issued and outstanding shares is 45% of 30DC's adjusted issued and outstanding
shares immediately prior to closing which equates to 31% of the total
outstanding shares after closing without regards to the adjustment factor. The
adjustment factor to 30DC's outstanding shares accounts for 30DC's non-operating
liabilities and is expected to increase the shares deemed outstanding, as
defined, by approximately four million shares which would increase Rivus post
closing ownership by an additional 1%. The Purchase is subject to both 30DC and
Rivus completing satisfactory due diligence on each other and a minimum capital
raise of $5 million AUD (currently $5.15 million USD) by March 31, 2012 or such
other that date that the parties shall agree. The Purchase expired March 31,
2012 without completion.
-6-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2011
(UNAUDITED)
GOING CONCERN
The condensed consolidated financial statements have been prepared using
accounting principles generally accepted in the United States of America
applicable for a going concern which assumes that the Company will realize its
assets and discharge its liabilities in the ordinary course of business. As of
December 31, 2011, the Company has a working capital deficit of approximately
$1,873,000 and has accumulated losses of approximately $3,050,100 since its
inception. The Company's ability to continue as a going concern is dependent
upon its ability of the Company to obtain the necessary financing to meet its
obligations and pay its liabilities arising from normal business operations when
they come due and upon attaining profitable operations. The Company does not
have sufficient capital to meet its needs and continues to seek loans or equity
placements to cover such cash needs. No commitments to provide additional funds
have been made and there can be no assurance that any additional funds will be
available to cover expenses as they may be incurred. If the Company is unable to
raise additional capital or encounters unforeseen circumstances, it may be
required to take additional measures to conserve liquidity, which could include,
but not necessarily be limited to, issuance of additional shares of the
Company's stock to settle operating liabilities which would dilute existing
shareholders, curtailing its operations, suspending the pursuit of its business
plan and controlling overhead expenses. The Company cannot provide any assurance
that new financing will be available to it on commercially acceptable terms, if
at all. These conditions raise substantial doubt about the Company's ability to
continue as a going concern. These consolidated financial statements do not
include any adjustments to the amounts and classification of assets and
liabilities that may be necessary should the Company be unable to continue as a
going concern.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
--------------------------------------------------
BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with United States generally accepted accounting
principles ("GAAP") and with instructions to Form-10Q and Article 10 of
Regulation S-X. Accordingly, they do not include all the information required by
GAAP for a complete set of financial statements. In the opinion of management,
all adjustments, (including normal recurring accruals) considered necessary for
a fair presentation have been included in the financial statements. Operating
results for the interim period are not necessarily indicative of the results
that may be expected for the fiscal year ended June 30, 2012 or any other
period. In addition, the balance sheet data at June 30, 2011 was derived from
the audited financial statements but does not include all disclosures required
by GAAP. This Form 10-Q should be read in conjunction with the Audited Financial
Statements for the year ended June 30, 2011 included in the Company's annual
report on Form 10-K which was filed on December 13, 2011.
The unaudited condensed consolidated financial statements include the accounts
of 30DC, Inc., (f/k/a Infinity Capital Group, Inc.) and its subsidiary 30DC DE
for the period beginning September 10, 2010, the date of the share exchange with
Infinity, and ending December 31, 2011. For the period beginning July 1, 2010
and ending September 10, 2010 only the accounts of 30DC DE are included in the
financial statements.
NET LOSS PER SHARE
The Company computes net loss per share in accordance with ASC 260 "Earnings per
Share." Under ASC 260, basic net loss per share is computed by dividing net loss
per share available to common stockholders by the weighted average number of
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 loss per share
-7-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2011
(UNAUDITED)
excludes potentially dilutive securities consisting of 3,401,522 warrants and
600,000 options for the three and six months ended December 31, 2011 and
6,185,346 warrants and 600,000 options for the three and six months ended
December 31, 2010 because their inclusion would be anti-dilutive. In computing
net loss per share, warrants with an insignificant exercise price are deemed to
be outstanding common stock.
RECENT ACCOUNTING PRONOUNCEMENTS
Management does not believe that any recently issued, but not effective,
accounting standards, if currently adopted, would have a material effect on the
Company's financial statements.
NOTE 3. DISCONTINUED OPERATIONS
-------------------------------
On September 10, 2010, immediately prior to the share exchange with 30DC DE,
Infinity withdrew its election to operate as a Business Development Company
("BDC") under the Investment Company Act of 1940 ("1940 Act"). Infinity
historically operated as a non-diversified, closed-end management investment
company and prepared its financial statements as required by the 1940 Act. 30DC
is no longer actively operating the BDC and the assets, liabilities and results
of operations of Infinity's former business are shown as discontinued operations
in the Company's financial statements subsequent to the share exchange with
30DC.
Results of Discontinued Operations for the
Six Months Ended Six Months Ended
December 31, 2011 December 31, 2010
------------------ ------------------
Revenues $ - $ -
Operating expenses 9,919 7,235
Loss from operations (9,919) (7,235)
Unrealized gain on marketable securities 3,750 7,250
------------------ ------------------
Net (loss) income $ (6,169) $ 15
================== ==================
Three Months Ended Three Months Ended
December 31, 2011 December 31, 2010
------------------ ------------------
Revenues $ - $ -
Operating expenses 4,863 5,535
Loss from operations (4,863) (5.535)
Unrealized gain on marketable securities 1,250 3,750
------------------ ------------------
Net loss $ (3,613) $ (1,785}
================== ==================
-8-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2011
(UNAUDITED)
Assets and Liabilities of Discontinued Operations as of
December 31, 2011 June 30, 2011
----------------- -------------
ASSETS
Marketable securities $ 103,125 $ 99,375
----------------- -------------
Total assets of discontinued operations $ 103,125 $ 99,375
================= =============
LIABILITIES
Accounts payable $ 93,470 $ 94,139
Accrued expenses 52,875 46,233
Notes payable 129,520 135,020
Due to related parties 108,816 106,007
----------------- -------------
Total liabilities of discontinued operations $ 384,681 $ 381,399
================= =============
Notes Payable
Included in liabilities of discontinued operations at December 31, 2011 and June
30, 2011 are $187,867 and $193,367 respectively (including $58,347 at each date
of notes payable included in due to related parties) in notes payable plus
related accrued interest of which are all in default for lack of repayment by
their due date. For the six months ended December 31, 2011 and for the period
subsequent to the share exchange with 30DC DE through December 31, 2010 the
Company incurred interest expense on notes payable of $8,700 and $6,378
respectively which is included in the Statement of Operations under income
(loss) from discontinued operations.
NOTE 4. PRO FORMA FINANCIAL INFORMATION
---------------------------------------
The following unaudited consolidated pro forma information gives effect to the
share exchange with Infinity (discussed in Note 1) as if this transaction had
occurred as of July 1, 2010. The following unaudited pro forma information is
presented for illustration purposes only and is not necessarily indicative of
the results that would have been attained had the acquisition of this business
been completed at the beginning of each period presented, nor are they
indicative of results that may occur in any future periods.
Six Months Ended
December 31, 2010
(Unaudited)
-------------------
Revenues $ 970,557
Operating Expenses 2,097,198
-------------------
Loss from Continuing Operations (1,126,641)
Loss from Discontinued Operations (27,274)
-------------------
Net Loss (1,153,915)
Foreign Currency Translation Loss (99,416)
-------------------
Comprehensive Loss $ (1,253,331)
===================
Basic and Diluted Loss Per Share $ (.02)
Weighted Average Shares Outstanding - Basic and Diluted 70,437,619
-9-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2011
(UNAUDITED)
NOTE 5. RELATED PARTY TRANSACTIONS
-----------------------------------
The Company entered into three-year Contract For Services Agreements commencing
July 2009 with the Marillion Partnership ("Marillion") for services which
includes Mr. Edward Dale acting as the Company's Chief Executive Officer, with
23V Industries, Ltd. ("23V") for services which include Mr. Dan Raine acting as
the Company's Vice President of Business Development and with Jesselton, Ltd.
("Jesselton") for services which include Mr. Clinton Carey acting as the
Company's Chief Operating Officer. Effective April 1, 2010, Raine Ventures, LLC
replaced 23V Industries, Ltd in providing consulting services to the Company
which include Mr. Raine acting as the Company's Vice President of Business
Development. These agreements are non-cancelable by either party for the initial
two years and then with six months notice by either party for the duration of
the contract. Mr. Dale and Mr. Carey are directors of the Company, Mr. Dale and
Mr. Raine are both beneficial owners of greater than 10% of the Company's
outstanding common stock. Marillion Partnership is owned by affiliates of Mr.
Dale. 23V and Raine Ventures are owned 100% by Mr. Raine.
Cash remuneration under the Marillion, 23V and Raine Ventures agreements was
initially $250,000 per year and $200,000 under the Jesselton agreement. On
December 12, 2011 cash remuneration for the Marillion and Jesselton agreements
was amended for the year ended June 30, 2012 to the Australian Dollar equivalent
of the originally contracted amounts at the exchange rate on the contract start
date of July 15, 2009. The Marillion original contract amount of $250,000 has
been amended to $317,825 AUD Dollars and the Jesselton original contract amount
of $200,000 has been amended to $254,260 AUD. If in any year starting from the
commencement date, revenues of 30DC, Inc. doubles then a bonus equal to 50% of
cash remuneration will be due in shares of 30DC, Inc. as additional
compensation. The bonus was not earned in the fiscal year ending June 30, 2011
and nothing has been accrued in the December 31, 2011 financial statements,
since the proportionate amount to reach the bonus for the fiscal year ending
June 30, 2012 has not been earned.
30DC's Board of Directors approved a bonus to Marillion based upon the net cash
flow of the Company's 30 Day Challenge division and a bonus to 23V (succeeded by
Raine Ventures) based upon the net cash flow of the Company's Immediate Edge
division until such time as 30DC had completed a merger or public stock listing,
which occurred on September 10, 2010. For the six month period ended December
31, 2010 the bonus for Marillion was $79,643, all earned prior to September 10,
2010 and total compensation was $208,673 and the bonus for Raine Ventures was
$-0- and total compensation was $125,000. For the six month period ended
December 31, 2011 total compensation earned by Marillion was $158,913 AUD
($164,079 USD) and total compensation earned by Raine Ventures was $125,000. For
the three month period ended December 31, 2010 total compensation earned by
Marillion was $66,529 and total compensation earned by Raine Ventures was
$62,500. For the three month period ended December 31, 2011 total compensation
earned by Marillion was $79,456 AUD ($80,438 USD) and total compensation earned
by Raine Ventures was $62,500. Subsequent to the September 10, 2010 merger,
Marillion and Raine Ventures are being paid in accordance with their annual
contracted amounts and bonuses based upon net cash flow are no longer
applicable. The annual contracted amounts are not required to be paid
proportionately throughout the year and amounts may vary from period to period.
During the six months ended December 31, 2011 Marillion was paid $216,585 AUD
($222,951 USD) of which $58,872 is included in prepaid expenses in the current
assets section of the balance sheet.
Beginning July 1, 2010, the Company pays Marillion $2,500 AUD per month to cover
office related expenses which is included in operating expenses.
Due to related parties includes $232,190 due to Jesselton, which primarily
consists of $121,810 for contractor fees and $108,000 for fees related to the
share exchange between 30DC DE and Infinity, and $221,000 due to Theodore A.
Greenberg, 30DC's CFO for compensation.
Jesselton voluntarily withdrew from its contract with the Company effective
March 1, 2012.
-10-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2011
(UNAUDITED)
NOTE 6. PROPERTY AND EQUIPMENT
-------------------------------
Property and equipment consists of the following:
December 31, 2011 June 30, 2011
----------------- -------------
Computer and Audio Visual Equipment $ 434,301 $ 450,630
Office equipment and Improvements 68,625 71,870
----------------- -------------
502,926 522,500
Less accumulated depreciation and amortization (449,238) (438,459)
----------------- -------------
$ 53,688 $ 84,041
================= =============
Depreciation and amortization expense was $31,957 for the six months ended
December 31, 2011 and $34,650 for the six months ended December 31, 2010.
Depreciation and amortization expense was $14,580 for the three months ended
December 31, 2011 and $18,144 for the three months ended December 31, 2010.
Property and equipment, net are stated in the functional currency where located
and where applicable are translated to the reporting currency of the US Dollar
at each period end. Accordingly, property and equipment, net are subject to
change as a result of changes in foreign currency exchange rates.
NOTE 7. INCOME TAXES
---------------------
As of June 30, 2011, the Company had net operating loss carryovers for United
States income tax purposes of approximately $1,524,300, which begin to expire in
2031. The U.S. net operating loss carryovers may be subject to limitation under
Internal Revenue Code Section 382 should there be a greater than 50% change in
ownership as determined under the regulations. The Company has filed all federal
tax returns and is in the process of filing its state and local returns for
Infinity since 2005. The Company has not provided a tax benefit for the three
and six months ended December 31, 2011 and December 31, 2010 as it is not more
likely than not that such benefit will be realized. All unfiled income tax
returns are subject to income tax examination by tax authorities and the statute
of limitations for tax examinations does not begin to run until returns are
filed. Filed tax returns are subject to examination beginning with the period
ended December 31, 2008.
As a corporation formed in the United States, the Company is subject to the
United States corporation income tax on worldwide income. Since majority
ownership of the Company's shares are held by Australian residents, the Company
is deemed to be an Australian resident corporation and is subject to Australian
corporate income tax on worldwide net income which for Infinity was from the
time of the share exchange discussed in Note 1. Corporate income taxes paid to
Australia will generally be available as a credit against United States
corporation income tax. Prior to the share exchange with Infinity, the Company
did not have nexus to any individual state in the United States and accordingly
no deferred tax provision has been recognized for state taxes. Australia does
not have any state corporation income tax. Future changes in Company operations
might impact the geographic mix which could affect the Company's overall
effective tax rate.
The Company applies the provisions of ASC 740 "Income Taxes", which provides
clarification related to the process associated with accounting for uncertain
tax positions recognized in the interim financial statements. ASC 740 prescribes
a more likely than not threshold for financial statement recognition and
measurement of a tax position taken, or expected to be taken, in a tax return.
ASC 740 also provides guidance related to, amongst other things, classification,
accounting for interest and penalties associated with tax positions, and
disclosure requirements.
The Company classifies interest and penalties, if any, related to tax
uncertainties as income tax expense. There have not been any material changes in
our analysis of uncertain tax positions including interest and penalties, during
-11-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2011
(UNAUDITED)
the six months ended December 31, 2011. The Company does not currently
anticipate that the total amount of unrecognized tax benefits will significantly
increase or decrease within the next twelve months.
NOTE 8. STOCKHOLDERS' EQUITY
----------------------------
WARRANTS AND OPTIONS
The Company has 600,000 fully vested options outstanding as follows:
404,000 options exercisable at 80 cents per share expiring August 7, 2018
196,000 options exercisable at 50 cents per share expiring January 5, 2019
192,500 of these options are held by Pierce McNally a director of the Company
and the balance are held by a former employee and former directors of Infinity.
161,163 warrants (net of forfeitures) are due to Imperial Consulting Network
under an agreement signed in June 2010 at an exercise price of $0.0001 per
share. Such warrants are yet to be issued.
Pursuant to a private placement memorandum ("PPM") issued in August 2010 the
Company offered units consisting of one share of common stock, one warrant at 37
cents per share exercisable until March 15, 2011 ("37-Cent Warrant") and one
warrant at 50 cents per share exercisable five years from the date of issuance
("50-Cent Warrant") for a price of 26 cents per unit. A first closing was held
on September 22, 2010 under which 2,554,205 37-Cent Warrants were issued along
with 2,554,205 50-Cent Warrants expiring September 22, 2015. From November 2010
through March 2011, an additional 847,317 37-Cent Warrants were issued and
847,317 50-Cent Warrants were issued. All of the 37-Cent Warrants expired March
15, 2011 unexercised.
During the six months ended December 31, 2011, the Company did not issue any
common stock, options or warrants.
NOTE 9. SUPPLEMENTAL SCHEDULE OF OPERATING EXPENSES
---------------------------------------------------
Six Months Ended Six Months Ended
December 31, 2011 December 31, 2010
----------------- -----------------
Related Party Contractor Fees Base Compensation (1) $ 420,342 $ 354,029
Related party Contractor Fees Bonus Compensation (1)(2) - 79,643
Officer's Salary 100,000 100,000
Independent Contractors 211,322 310,555
Transaction Fees (3) - 670,138
Professional Fees 208,929 231,528
Travel Expenses 20,264 99,167
Other Operating Costs 226,353 200,090
----------------- -----------------
Total Operating Expenses $ 1,187,210 $ 2,045,150
================= =================
------------------------------------------------------
-12-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2011
(UNAUDITED)
(1) Related party contractors include Marillion which provides services to
the Company including for Edward Dale to act as Chief Executive
Officer of the Company, Raine Ventures which provides services to the
Company including for Dan Raine to act as Vice President for Business
Development and Jesselton, Ltd. which provides services to the Company
including Clinton Carey serving as Chief Operating Officer of the
Company. The annual contracted amounts are not required to be paid
proportionately throughout the year, however expense is recognized
proportionately throughout the year, and amounts may vary from period
to period due to fluctuations in foreign currency exchange rates.
(2) 30DC's Board of Directors approved a bonus to Marillion based upon the
net cash flow of the Company's 30 Day Challenge division (formerly 30
Day) and a bonus to Raine Ventures based upon the net cash flow of the
Company's Immediate Edge division (formerly Immediate) until such time
as 30DC had completed a merger or public stock listing which occurred
on September 10, 2010.
(3) Transaction fees were incurred upon completion of the 30DC/Infinity
share exchange for consulting services which resulted in completion of
the share exchange. $250,000 was due to Jesselton, Ltd., $250,000 AUD
($231,050) was due to Corholdings Pty, Ltd. and Prestige Financial
Center, Inc. was due 675,314 common shares which were valued at
$189,088.
Three Months Ended Three Months Ended
December 31, 2011 December 31, 2010
-------------------- --------------------
Related Party Contractor Fees (1) $ 207,290 $ 179,029
Officer's Salary 50,000 50,000
Independent Contractors 96,963 141,786
Professional Fees 72,153 174,166
Travel Expenses 10,828 44,648
Other Operating Costs 108,619 117,250
-------------------- --------------------
Total Operating Expenses $ 545,853 $ 706,879
==================== ====================
--------------------------------
(1) Related party contractors include Marillion which provides services to
the Company including for Edward Dale to act as Chief Executive
Officer of the Company, Raine Ventures which provides services to the
Company including for Dan Raine to act as Vice President for Business
Development and Jesselton, Ltd. which provides services to the Company
including Clinton Carey serving as Chief Operating Officer of the
Company. The annual contracted amounts are not required to be paid
proportionately throughout the year, however expense is recognized
proportionately throughout the year, and amounts may vary from period
to period due to fluctuations in foreign currency exchange rates.
-13-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2011
(UNAUDITED)
NOTE 10. SUBSEQUENT EVENTS
---------------------------
Jesselton voluntarily withdrew from its contract with the Company effective
March 1, 2012. Jesselton's contract for services included Clinton Carey serving
as the Company's Chief Operating Officer. Mr. Carey has continued as a director
of the Company but has no further management role.
The Share Sale and Purchase Agreement (the "Purchase") with RivusTV Ltd,
("Rivus") expired March 31, 2012 without completion.
Management has evaluated subsequent events to determine if events or
transactions occurring through the date on which the financial statements were
issued, require potential adjustment to or disclosure in the Company's financial
statements.
-14-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
--------------------------------------------------------------------------------
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH OUR UNAUDITED
FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED HEREIN. IN CONNECTION WITH, AND
BECAUSE WE DESIRE TO TAKE ADVANTAGE OF, THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995, WE CAUTION READERS REGARDING
CERTAIN FORWARD LOOKING STATEMENTS IN THE FOLLOWING DISCUSSION AND ELSEWHERE IN
THIS REPORT AND IN ANY OTHER STATEMENT MADE BY, OR ON OUR BEHALF, WHETHER OR NOT
IN FUTURE FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION. FORWARD-LOOKING
STATEMENTS ARE STATEMENTS NOT BASED ON HISTORICAL INFORMATION AND WHICH RELATE
TO FUTURE OPERATIONS, STRATEGIES, FINANCIAL RESULTS OR OTHER DEVELOPMENTS.
FORWARD LOOKING STATEMENTS ARE NECESSARILY BASED UPON ESTIMATES AND ASSUMPTIONS
THAT ARE INHERENTLY SUBJECT TO SIGNIFICANT BUSINESS, ECONOMIC AND COMPETITIVE
UNCERTAINTIES AND CONTINGENCIES, MANY OF WHICH ARE BEYOND OUR CONTROL AND MANY
OF WHICH, WITH RESPECT TO FUTURE BUSINESS DECISIONS, ARE SUBJECT TO CHANGE.
THESE UNCERTAINTIES AND CONTINGENCIES CAN AFFECT ACTUAL RESULTS AND COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED IN ANY FORWARD LOOKING
STATEMENTS MADE BY, OR ON OUR BEHALF. WE DISCLAIM ANY OBLIGATION TO UPDATE
FORWARD-LOOKING STATEMENTS.
OVERVIEW
30DC Inc. (Delaware) ("30DC DE") was incorporated on October 17, 2008 in the
state of Delaware and prior to July 15, 2009, 30DC DE had no active business
operations. On July 15, 2009, 30DC acquired the business of the "30 Day
Challenge" and "Immediate Edge" from two of 30DC's founding shareholders as part
of a plan to consolidate their business operations. 30DC DE was created to build
and manage international web-based sales and marketing companies. 30 Day
Challenge and Immediate Edge are 30DC DE's two business divisions. 30 Day
Challenge offers a free online ecommerce training program and an online
education subscription service. In addition, periodic premium live seminars are
produced which are intended to target experienced Internet business operators.
Immediate Edge is an online education program subscription service offering
high-end internet marketing instruction and strategies for experienced online
commerce practitioners.
On September 10, 2010, Infinity Capital Group, Inc., a Maryland Corporation,
("Infinity") entered into a Plan and Agreement of Reorganization (the
"Agreement") with 30DC DE, and the Shareholders of 30DC DE. ("30DC DE
Shareholders"). In exchange for 100% of the issued and outstanding shares of
30DC DE, Infinity issued 60,984,000 shares of its restricted common stock. The
shareholders of 30DC DE received 13.2 shares of common stock of Infinity for
every one share of 30DC DE. Upon closing Messrs. Edward Dale and Clinton Carey
were appointed to the Infinity Board of Directors and subsequently Infinity was
renamed 30DC, Inc. (Maryland) ("30DC"). Mr. Dale is the President, Chief
Executive Officer and a director of 30DC. In addition, he is the manager of the
former majority shareholder of 30DC DE, Marillion Partnership. Mr. Carey is the
Chief Operating Officer and a director of 30DC DE. Further, Mr. Dale was
appointed the Chief Executive Officer of Infinity and Mr. Carey was appointed
the Chief Operating Officer of Infinity. Effective March 1, 2012, Mr. Carey is
no longer Chief Operating Officer of the Company; he remains a director.
Infinity, as a result of the transaction, became the sole outstanding
shareholder of 100% of the outstanding common stock of 30DC DE. For purposes of
accounting, 30DC DE was considered the accounting acquirer. As of the date of
the transaction, Infinity discontinued its historical operations and the
business of 30DC DE is now the business of 30DC.
On August 24, 2011 the Company entered into a Share Sale and Purchase Agreement
(the "Purchase") with RivusTV Ltd, ("Rivus") which was organized and exists in
Victoria, Australia. Rivus offers a solution to broadcast digital content across
the Internet on a revenue share basis. The purchase price for 100% of Rivus'
-15-
issued and outstanding shares is 45% of 30DC's adjusted issued and outstanding
shares immediately prior to closing which equates to 31% of the total
outstanding shares after closing without regards to the adjustment factor. The
adjustment factor to 30DC's outstanding shares accounts for 30DC's non-operating
liabilities, as defined and is expected to increase the deemed outstanding by
approximately four million shares which would increase Rivus post closing
ownership by an additional 1%. The Purchase is subject to both 30DC and Rivus
completing satisfactory due diligence on each other and a minimum capital raise
of $5 million AUD (currently $5.15 million USD) by March 31, 2012 or such other
that date that the parties shall agree. The Purchase expired March 31, 2012
without completion.
The Company has been developing and selling more of its own products and has
been reducing operating costs. As part of the cost reduction efforts, effective
February 1, 2012 the Company consolidated its two subscription products; the
Immediate Edge and Challenge Plus. Resources and marketing efforts for
subscriptions are now exclusively for the Immediate Edge. The Company expects
future growth to come from new products which are developed internally or
through joint venture arrangements. There can be no assurance new products will
be developed and if developed there can be no assurance that new products will
produce significant revenue.
The Company has no plans at this time for purchases or sales of fixed assets
which would occur in the next twelve months.
The Company has no expectation or anticipation of significant changes in number
of employees in the next twelve months.
RESULTS OF OPERATIONS
FOR THE THREE MONTH PERIOD ENDED DECEMBER 31, 2011 COMPARED TO THE THREE MONTH
PERIOD ENDED DECEMBER 31, 2010.
During the three months ended December 31, 2011, 30DC, Inc. recognized revenues
of $507,873 from its operations compared to $568,355 during the three months
ended December 31, 2010. Revenues of the Company were from the following sources
during the three months ended December 31, 2011 compared to December 31, 2010.
Three Months Ended Three Months Ended Increase or
December 31, 2011 December 31, 2010 (Decrease)
------------------ ------------------- -------------
Revenue
Commissions $ 41,349 $ 153,438 $ (112,089)
Subscription Revenue 143,179 164,772 (21,593)
Products and Services 148,811 69,889 78,922
Seminars and Mentoring 174,534 180,256 (5,722)
------------------ ------------------- -------------
Total Revenues $ 507,873 $ 568,355 $ (60,482)
------------------ ------------------- -------------
The $112,089 decrease in commissions during the three months ended December 31,
2011 compared to the three months ending December 31, 2010 was the result of
fewer new participants in the Company's Challenge program in 2011 and a large
payer of affiliate commissions revising their policy to only pay commissions for
the first year of a subscription product rather than paying commissions over the
life of the subscription. Commissions earned from affiliate programs typically
generate the majority of commissions from new participants.
The $21,593 decrease in subscription revenue was due to net decreases in active
subscribers for the Immediate Edge and Challenge Plus subscription products. For
the three months ended December 31, 2011 the Immediate Edge active subscriber
base averaged 387 per month and for the three months ended December 31, 2010 the
Immediate Edge active subscriber base averaged 470 per month. For the three
-16-
months ended December 31, 2011 the Challenge Plus active subscriber base
averaged 294 per month and for the three months ended December 31, 2010 the
Challenge Plus active subscriber base averaged 567 per month. The Immediate Edge
subscriber base has historically increased when a promotion is offered and
gradually decreases after the promotion ends. Promotions are generally held two
to three times per year with timing dependent on whether the Company is offering
current promotions for its own or third-party products. The Company's Challenge
Plus subscription product was started in 2009 and marketed to the entire active
participant database resulting in a large initial subscriber base which has
leveled off over time resulting in fewer current active subscribers.
The $78,922 increase in products and services revenue was primarily due to an
increase in the number of the Company's own products being offered for sale
during the three months ended December 31, 2011. Previously the Company had been
offering more third party products for which affiliate commissions were earned.
When new products are introduced they are marketed to the Company's entire
active participant base and the vast majority of sales are in a relatively short
time period after product introduction.
During the three months ended December 31, 2011, the Company incurred $545,853
in operational expenses compared to $706,879 during the three months ended
December 31, 2010. Operational expenses during the three months ended December
31, 2011 and 2010, include the following categories:
THREE MONTHS ENDED THREE MONTHS ENDED INCREASE OR
DECEMBER 31, 2011 DECEMBER 31, 2010 DECREASE
----------------- ------------------ ------------
Accounting Fees $ 50,923 $ 153,311 $ (102,388)
Paypal Fees 11,618 11,197 421
Commissions 27,218 32,151 (4,933)
Independent Contractors 96,963 141,786 (44,823)
Depreciation 14,580 18,144 (3,564)
Internet Expenses 12,029 17,304 (5,275)
Legal Fees 21,230 20,855 375
Officer's Salaries 50,000 50,000 -
Payroll Taxes 9,215 8,390 825
Related Party Contractors 207,290 179,029 28,261
Telephone 21,600 6,882 14,718
Travel & Entertainment 11,058 44,648 (33,590)
Other Operating Expenses 12,129 23,182 (11,053)
-------------------- ------------------ ------------
Total Operating Expenses $ 545,853 $ 706,879 $ (161,026)
==================== ================== ============
The decrease of $102,388 in accounting fees was primarily related to a decrease
in auditing fees and accounting consultant fees which had increased related to
the Infinity/30DC transaction in September 2010.
The decrease of $44,823 in independent contractors is primarily due to the
$15,000 cost of investor relations consultants in the December 2010 quarter and
the reduction of two contractors in the IE division who were paid approximately
$12,000 per quarter each.
Related Party Contractor Fees consist of payments to Marillion Partnership,
Raine Ventures, LLC and Jesselton, Ltd. under contracts for services which
include Ed Dale acting as 30DC's Chief Executive Officer, Dan Raine acting as
30DC's Vice President of Business Development and Clinton Carey acting as 30DC's
Chief Operating Officer respectively. The $28,261 net increase results from a
change in cash remuneration under the Marillion and Jesselton contracts to the
Australian Dollar equivalent of the original contracted amounts based upon the
exchange rate at July 15, 2009 which was the effective date of the contracts
combined with the change in the exchange rate since that time which results in
higher cost in US dollars.
-17-
The increase in telephone expense of $14,718 is primarily due to a premium
high-volume internet package which costs approximately $4,000 per month which
was not in place during the three months ended December 31, 2010.
The decrease of $33,590 in travel and entertainment reflects fewer overseas
trips during the quarter ended December 31, 2011 than during the quarter ended
December 31, 2010.
The decrease of $11,053 in other expenses reflects a reduction of a number of
smaller expense categories during the quarter ended December 31, 2011 compared
to the quarter ended December 31, 2010 with the largest being an approximate
decrease of $4,700 in credit card and bank charges and an approximate decrease
of $2,800 in transfer agent and filing fees.
During the three months ended December 31, 2011, the Company recognized a net
loss from continuing operations of ($44,001) compared to a net loss of
($144,984) during the three months ended December 31, 2010. The decreased loss
of $100,983 was due to the decrease in operating expenses of $161,026 offset by
the decrease in revenues of $60,482.
FOR THE SIX MONTH PERIOD ENDED DECEMBER 31, 2011 COMPARED TO THE SIX MONTH
PERIOD ENDED DECEMBER 31, 2010.
During the six months ended December 31, 2011, 30DC, Inc. recognized revenues of
$923,131 from its operations compared to $970,557 during the six months ended
December 31, 2010. Revenues of the Company were from the following sources
during the six months ended December 31, 2011 compared to December 31, 2010.
Six Months Ended Six Months Ended Increase or
December 31, 2011 December 31, 2010 (Decrease)
----------------- ----------------- ------------------
Revenue
Commissions $ 143,849 $ 250,673 $ (106,824)
Subscription Revenue 338,068 325,433 12,635
Products and Services 162,884 73,521 89,363
Seminars and Mentoring 278,330 320,930 (42,600)
----------------- ----------------- ------------------
Total Revenues $ 923,131 $ 970,557 $ (47,426)
----------------- ----------------- ------------------
The $106,824 decrease in commissions during the six months ended December 31,
2011 compared to the six months ending December 31, 2010 was the result of fewer
new participants in the Company's Challenge program in 2011 and a large payer of
affiliate commissions revising their policy to only pay commissions for the
first year of a subscription product rather than paying commissions over the
life of the subscription. Commissions earned from affiliate programs typically
generate the majority of commissions from new participants.
The $89,363 increase in products and services revenue was primarily due to an
increase in the number of the Company's own products being offered for sale
during the six months ended December 31, 2011. Previously the Company had been
offering more third party products for which affiliate commissions were earned.
When new products are introduced they are marketed to the Company's entire
active participant base and the vast majority of sales are in a relatively short
time period after product introduction.
The $42,600 decrease in seminars and mentoring income resulted from a decrease
in the number of customers participating in the Company's mentoring program
which is priced from $5,000 to $10,000 per year and the revenue from which is
recognized ratably over the one year term. For the six months ended December 31,
2011 there was an average of 78 mentoring students per month and for the six
months ended December 31, 2010 there was an average of 108 mentoring students.
The decrease in revenue is less than proportionate due to an increase in the
cost of the mentoring program subsequent to December 31, 2010.
-18-
During the six months ended December 31, 2011, the Company incurred $1,187,210
in operational expenses compared to $2,045,150 during the six months ended
December 31, 2010. Operational expenses during the six months ended December 31,
2011 and 2010, include the following categories:
SIX MONTHS ENDED SIX MONTHS ENDED INCREASE OR
DECEMBER 31, 2011 DECEMBER 31, 2010 DECREASE
----------------- ----------------- -------------
Accounting Fees $ 166,311 $ 184,617 $ (18,306)
Paypal Fees 24,514 21,375 3,139
Commissions 41,141 37,618 3,523
Independent Contractors 211,322 310,555 (99,233)
Depreciation 31,957 34,650 (2,693)
Internet Expenses 28,487 32,218 (3,731)
Legal Fees 42,618 46,911 (4,293)
Officer's Salaries 100,000 100,000 -
Payroll Taxes 19,427 19,635 (208)
Related Party Contractors 420,342 433,672 (13,330)
Telephone 56,143 12,450 43,693
Transaction Fees - 670,138 (670,138)
Travel & Entertainment 20,763 99,167 (78,404)
Other Operating Expenses 24,185 42,144 (17,959)
------------------- ------------------ ------------
Total Operating Expenses $ 1,187,210 $ 2,045,150 $ (857,940)
=================== ================== ============
The decrease of $18,306 in accounting fees was due to a decrease in auditing
fees and accounting consultant fees which had increased related to the
Infinity/30DC transaction in September 2010 offset by an increase in auditing
fees due to multiple filings during the six months ended December 2011 covering
a number of prior periods.
The decrease of $99,233 in independent contractors is primarily due to the
approximately $56,000 cost of investor relations consultants during the six
months ended December 2010 and the reduction of two contractors in the IE
division during the six months ended December 31, 2011 reducing costs during the
period by approximately $30,000.
The increase in telephone expense of $43,693 is partly due to a premium
high-volume internet package which costs approximately $4,000 per month which
was not in place during the six months ended December 31, 2010.
The decrease of $670,138 in transaction fees was due to consultants advising on
the process which resulted in completion of the share exchange with Infinity
during the six months ended December 2010 including $250,000 to Jesselton, Ltd.,
$231,050 ($250,000 AUD) to Corholdings Pty Ltd and $189,088 to Prestige
Financial Center, Inc.
The decrease of $78,404 in travel and entertainment reflects fewer overseas
trips during the six months ended December 31, 2011 compared to the six months
ended December 31, 2010.
The decrease of $17,959 in other expenses reflects a reduction of a number of
smaller expense categories during the six months ended December 31, 2011
compared to the six months ended December 31, 2010 with the largest being an
approximate decrease of $11,300 in credit card and bank charges and an
approximate decrease of $2,800 in transfer agent and filing fees.
During the six months ended December 31, 2011, the Company recognized a net loss
from continuing operations of ($276,501) compared to a net loss of ($1,088,105)
during the six months ended December 31, 2010. The decreased loss of $811,604
was due to the decrease in operating expenses of $857,940 offset by the decrease
in revenues of $47,426.
-19-
LIQUIDITY AND CAPITAL RESOURCES
The Company had a cash balance of $32,166 at December 31, 2011 and the Company
had a working capital deficit of $1,872,956. To fund working capital for the
next twelve months, the Company expects to raise additional capital, to settle
liabilities using the Company's stock and to improve the results of operations
from increasing revenue and a reduction in operating costs. As further discussed
in Note 1 to the financial statements, the Company has signed an agreement with
RivusTV Ltd. pursuant to which the companies have initiated a joint capital
raising effort. There can be no assurance that the Company will raise additional
capital on commercially acceptable terms, if at all. The agreement with Rivus
expired March 31, 2012 without completion.
Included in liabilities of discontinued operations at December 31, 2011 is
$187,867 (including $58,347 included in due to related parties) in notes payable
plus related accrued interest that are in default for lack of repayment by their
due date.
During the six months ended December 31, 2011, operating activities provided the
Company with $10,109. During the six months ended December 31, 2010, the Company
used $223,364 in operating activities. The net increase in funds of $233,472 was
due to the decreased operating loss offset by expenses paid or settled with
shares of the Company's common stock, accrued but unpaid expenses during the six
months ended December 31, 2010 and timing of receipts related to mentoring
income which is initially recorded as deferred revenue. In the December 2011
period cash receipts for mentoring exceeded revenue recognized by $48,945 and
the December 2010 period revenue recognized as mentoring income exceeded cash
receipts by $118,335.
During the six month period ended December 31, 2011, financing activities
provided the Company with $-0-. During the six month period ended December 31,
2010, financing activities provided the Company with $261,950. Receipts from the
Company's private placement memorandum provided the bulk of these funds.
GOING CONCERN
The condensed consolidated financial statements have been prepared using
accounting principles generally accepted in the United States of America
applicable for a going concern which assumes that the Company will realize its
assets and discharge its liabilities in the ordinary course of business. As of
December 31, 2011, the Company has a working capital deficit of approximately
$1,873,000 and has accumulated losses of approximately $3,050,100 since its
inception. Its ability to continue as a going concern is dependent upon the
ability of the Company to obtain the necessary financing to meet its obligations
and pay its liabilities arising from normal business operations when they come
due and upon attaining profitable operations. The Company does not have
sufficient capital to meet its needs and continues to seek loans or equity
placements to cover such cash needs. No commitments to provide additional funds
have been made and there can be no assurance that any additional funds will be
available to cover expenses as they may be incurred. If the Company is unable to
raise additional capital or encounters unforeseen circumstances, it may be
required to take additional measures to conserve liquidity, which could include,
but not necessarily be limited to, issuance of additional shares of the
Company's stock to settle operating liabilities which would dilute existing
shareholders, curtailing its operations, suspending the pursuit of its business
plan and controlling overhead expenses. The Company cannot provide any assurance
that new financing will be available to it on commercially acceptable terms, if
at all. These conditions raise substantial doubt about the Company's ability to
continue as a going concern. The condensed consolidated financial statements do
not include any adjustments to the amounts and classification of assets and
liabilities that may be necessary should the Company be unable to continue as a
going concern.
-20-
GOODWILL
Goodwill was recorded as result of the 30DC/Infinity business combination. We
review our goodwill in accordance with ASU 2011-08 which redefined the steps
necessary in testing goodwill for impairment. The update permits an entity to
first assess qualitative factors to determine whether it is more likely than not
that the fair value of a reporting unit is less than its carrying amount as a
basis for determining whether it is necessary to perform the two-step goodwill
impairment test described in ASC Topic 350. The more-likely-than-not threshold
is defined as having a likelihood of more than 50 percent.
After assessing the totality of events and circumstances, the Company has
determined that it is not more likely than not that the fair value of the
reporting unit is less than its carrying amount at this time, and, therefore,
the two-step impairment test is unnecessary at December 31, 2011.
If the Company is unable to continue to improve operations through the execution
of its business plan then the Company may record an impairment charge related to
its goodwill in a future period. However, presently the Company believes that it
will improve operations through a combination of continued cost reduction
efforts, consolidation of operations and the development of new products.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
-------------------------------------------------------------------
The Company earns the majority of its revenue in United States dollars ("USD")
and pays a significant amount of its expense in Australian dollars ("AUD").
Material fluctuations in the exchange rate between USD and AUD may have material
impact on the Company's results of operations.
ITEM 4. CONTROLS AND PROCEDURES
--------------------------------
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Disclosure controls and procedures are controls and other procedures that are
designed to ensure that information required to be disclosed by our Company is
recorded, processed, summarized and reported, within the time periods specified
in the rules and forms of the SEC. Our Chief Executive Officer and Chief
Financial Officer are responsible for establishing and maintaining disclosure
controls and procedures for our Company.
Our management, with the participation of our Chief Executive Officer and Chief
Financial Officer, carried out an evaluation of the effectiveness of our
"disclosure controls and procedures" (as defined in the Securities Exchange Act
of 1934 (the "Exchange Act") Rules 13a-15(e) and 15d-15(e)) as of the end of the
period covered by this quarterly report on Form 10-Q (the "Evaluation Date").
Based upon that evaluation, our Chief Executive Officer and Chief Financial
Officer concluded that, as of the Evaluation Date, our disclosure controls and
procedures are not effective to ensure that information required to be disclosed
by us in the reports that we file or submit under the Exchange Act (i) is
recorded, processed, summarized and reported, within the time periods specified
in the SEC rules and forms and (ii) is accumulated and communicated to our
management, including our Chief Executive Officer and Chief Financial Officer,
as appropriate to allow timely decisions regarding required disclosure.
Specifically, management's evaluation was based on the following material
weaknesses, which existed as of December 31, 2011:
(1) Financial Reporting Systems: We did not maintain a fully integrated
financial consolidation and reporting system throughout the period and
as a result, extensive manual analysis, reconciliation and adjustments
were required in order to produce financial statements for external
reporting purposes.
(2) Segregation of Duties: We do not currently have a sufficient
complement of technical accounting and external reporting personal
commensurate to support standalone external financial reporting under
-21-
public company or SEC requirements. Specifically, the Company did not
effectively segregate certain accounting duties due to the small size
of its accounting staff, and maintain a sufficient number of
adequately trained personnel necessary to anticipate and identify
risks critical to financial reporting and the closing process. In
addition, there were inadequate reviews and approvals by the Company's
personnel of certain reconciliations and other processes in day-to-day
operations due to the lack of a full complement of accounting staff.
We believe that our internal control risks are mitigated by the fact that our
Chief Executive Officer reviews and approves substantially all of our major
transactions. We believe that our weaknesses in internal control over financial
reporting and our disclosure controls relate in part to the fact that we are an
emerging business with limited personnel. Management and the Board of Directors
believe that the Company must allocate additional human and financial resources
to address these matters. Throughout the year, the Company has been continuously
improving its monitoring of current reporting systems and its personnel. The
Company intends to continue to make improvements in its internal controls over
financial reporting and disclosure controls until its material weaknesses are
remediated.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
During the six months ended December 31, 2011, there was no change in our
internal control over financial reporting or in other factors that has
materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.
DISCLOSURE CONTROLS AND PROCEDURES
Our management, including our Chief Executive Officer and Chief Financial
Officer, does not expect that our disclosure controls and procedures or our
internal controls will prevent all errors and all fraud. A control system, no
matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are met. Further,
the design of a control system must reflect the fact that there are resource
constraints and the benefits of controls must be considered relative to their
costs. Because of the inherent limitations in all control systems, no evaluation
of controls can provide absolute assurance that all control issues and instances
of fraud, if any, within the Company have been detected, at this time.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
-------------------------
None.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
-------------------------------------------------------------------
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
---------------------------------------
Included in liabilities of discontinued operations at December 31, 2011 is
$187,867 (including $58,347 included in due to related parties) in notes payable
plus related accrued interest that are in default for lack of repayment by their
due date.
ITEM 4. MINE SAFETY DISCLOSURES
-------------------------------
None.
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ITEM 5. OTHER INFORMATION
-------------------------
The Company entered into three-year Contract For Services Agreements commencing
July 2009 with Jesselton, Ltd. ("Jesselton") for services which include Mr.
Clinton Carey acting as the Company's Chief Operating Officer. Jesselton
voluntarily withdrew from its contract with the Company effective March 1, 2012.
Jesselton's contract for services included Clinton Carey serving as the
Company's Chief Operating Officer. As a result Mr. Carey, will not continue
acting in the capacity of Chief Operating Officer of the Company, but has
remained as a director of the Company.
The Share Sale and Purchase Agreement (the "Purchase") with RivusTV Ltd,
("Rivus") expired March 31, 2012 without completion.
ITEM 6. EXHIBITS
----------------
The following is a complete list of exhibits filed as part of this Form 10-Q.
Exhibit numbers correspond to the numbers in the Exhibit Table of Item 601 of
Regulation S-K.
----------------- -- -----------------------------------------------------------
EXHIBIT NO. DESCRIPTION
----------------- -- -----------------------------------------------------------
31.1 Section 302 Certification - CEO
----------------- -- -----------------------------------------------------------
31.2 Section 302 Certification - CFO
----------------- -- -----------------------------------------------------------
32.1 Section 906 Certification - CEO
----------------- -- -----------------------------------------------------------
32.2 Section 906 Certification - CFO
----------------- -- -----------------------------------------------------------
101.INS XBRL Instance Document (1)
----------------- -- -----------------------------------------------------------
101.SCH XBRL Taxonomy Extension Schema Document (1)
----------------- -- -----------------------------------------------------------
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document (1)
----------------- -- -----------------------------------------------------------
101.DEF XBRL Taxonomy Extension Definition Linkbase Document (1)
----------------- -- -----------------------------------------------------------
101.LAB XBRL Taxonomy Extension Label Linkbase Document (1)
----------------- -- -----------------------------------------------------------
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document (1)
--------------------------------------------------------------------------------
(1) Pursuant to Rule 406T of Regulation S-T, this interactive data file is
deemed not filed or part of a registration statement or prospectus for purposes
of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for
purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is
not subject to liability under these sections.
--------------------------------------------------------------------------------
-23-
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
30DC, INC.
-------------------------
Registrant
Dated: April 20, 2012 By:/s/ Edward Dale
---------------------------------
Edward Dale
Principal Executive Officer
Chief Executive Officer
President
Dated: April 20, 2012 By:/s/ Theodore A. Greenberg
---------------------------------
Theodore A. Greenberg,
Principal Accounting Officer
Chief Financial Officer
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