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 September 30, 2013
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.
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(Exact name of registrant as specified in its charter)
MARYLAND 16-1675285
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(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
80 BROAD STREET, 5TH FLOOR, NEW YORK, NY 10004
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(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[___] No[_x_]
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 January 14, 2014, the number of shares outstanding of the registrant's
class of common stock was 87,413,464.
TABLE OF CONTENTS
PAGE
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements 2
Condensed Consolidated Balance Sheets as of September 30, 2013
(Unaudited) and June 30, 2013 3
Condensed Consolidated Statements of Operations (Unaudited) for
the Three Months Ended September 30, 2013 and 2012 4
Condensed Consolidated Statements of Cash Flows (Unaudited) for
the Three Months Ended September 30, 2013 and 2012 5
Notes to Condensed Consolidated Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
Item 3. Quantitative and Qualitative Disclosures About Market Risk 16
Item 4. Controls and Procedures 16
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 18
Item 3. Defaults upon Senior Securities 18
Item 4. Mine Safety Disclosures 18
Item 5. Other Information 18
Item 6. Exhibits 19
Signatures 20
-1-
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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-2-
30DC, INC. AND SUBSIDIARY
Condensed Consolidated Balance Sheets
September June
30, 2013 30, 2013
---------------- -------------------
Unaudited
Assets
Current Assets
Cash and Cash Equivalents $ 640,494 $ 116,650
Restricted Cash 211,456 47,984
Accrued Commissions Receivable 13,537 32,035
Accounts Receivable 729,167 26,114
Prepaid Expenses 7,309 3,648
Assets of Discontinued Operations 73,604 72,458
---------------- -------------------
Total Current Assets 1,675,567 298,889
Property and Equipment, Net 22,508 23,045
Intangible Assets, Net 269,500 286,000
Goodwill 2,252,849 2,252,849
---------------- -------------------
Total Assets $ 4,220,424 $ 2,860,783
================ ===================
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable $ 732,212 $ 514,294
Accrued Expenses and Refunds 888,886 374,219
Deferred Revenue 108,590 23,649
Due to Related Parties 685,376 924,057
Liabilities of Discontinued Operations 268,452 303,358
---------------- -------------------
Total Current Liabilities 2,683,516 2,139,577
---------------- -------------------
Total Liabilities 2,683,516 2,139,577
---------------- -------------------
Stockholders' Equity
Preferred Stock, Par Value $0.001, 10,000,000 Authorized, -0- Issued - -
Common Stock, Par Value $0.001, 100,000,000 authorized,
87,313,464 and 86,986,939 issued and outstanding respectively 87,313 86,987
Paid in Capital 3,959,007 3,880,469
Accumulated Deficit (2,406,554) (3,143,392)
Accumulated Other Comprehensive Loss (102,858) (102,858)
---------------- -------------------
Total Stockholders' Equity 1,536,908 721,206
---------------- -------------------
Total Liabilities and Stockholders' Equity $ 4,220,424 $ 2,860,783
================ ===================
The accompanying notes are an integral part of the unaudited condensed
consolidated financial statements.
-3-
30DC, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Operations
Three Months Ended September 30
Unaudited
2013 2012
--------------- ------------------
Revenue
Commissions $ 19,306 $ 103,817
Subscription Revenue 96,739 118,237
Products and Services 1,923,905 86,105
Seminars and Mentoring - 141,580
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Total Revenue 2,039,950 449,739
Operating Expenses 1,390,377 490,917
--------------- ------------------
Operating Income (Loss) 649,573 (41,178)
Other Income
Forgiveness of Debt 87,253 -
--------------- ------------------
Total Other Income 87,253 -
--------------- ------------------
Income (Loss) From Continuing Operations 736,826 (41,178)
Income (Loss) From Discontinued Operations 12 (5,017)
--------------- ------------------
Net Income (Loss) $ 736,838 $ (46,195)
=============== ==================
Weighted Average Common Shares Outstanding
Basic 87,069,922 73,352,334
Diluted 87,454,537 73,352,334
Earnings Per Common Share (Basic)
Continuing Operations $ 0.01 $ (0.00)
Discontinued Operations 0.00 (0.00)
Net Income (Loss) Per Common Share $ 0.01 $ (0.00)
Earnings Per Common Share (Diluted)
Continuing Operations $ 0.01 $ (0.00)
Discontinued Operations 0.00 (0.00)
Net Income (Loss) Per Common Share $ 0.01 $ (0.00)
The accompanying notes are an integral part of the unaudited condensed
consolidated financial statements.
-4-
30DC, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Cash Flows
Three Months Ended September 30
Unaudited
2013 2012
--------------- ----------------
Cash Flows from Operating Activities:
Net Income (Loss) $ 736,838 $ (46,195)
(Income) Loss From Discontinued Operations (12) 5,017
Adjustments to Reconcile Loss from Continuing Operations
to Net Cash Provided By (Used) In Operations
Depreciation and Amortization 20,335 9,182
Equity Based Payments To Non-Employees - 45,000
Equity Based Payments To Employees 24,764 -
Gain on Debt Forgiveness (87,253) -
Changes in Operating Assets and Liabilities
Restricted Cash (163,472) (244,281)
Accrued Commissions Receivable 18,498 (54,651)
Accounts Receivable (703,053) 152,516
Prepaid Expenses (3,661) (2,684)
Accounts Payable 353,171 343,418
Accrued Expenses and Refunds 514,667 (836,483)
Deferred Revenue 84,941 (130,158)
Due to Related Parties (238,681) 48,730
--------------- ----------------
Net Cash Provided By (Used in) Operating Activities 557,082 (710,589)
--------------- ----------------
Cash Flows from Investing Activities
Purchases of Property and Equipment (3,298) (4,466)
--------------- ----------------
Net Cash Used in Investing Activitities (3,298) (4,466)
--------------- ----------------
Cash Flows from Discontinued Operations
Cash Flows From Operating Activities (29,940) (12,705)
--------------- ----------------
Net Cash Used in Discontinued Operations (29,940) (12,705)
--------------- ----------------
Increase (Decrease) in Cash and Cash Equivalents 523,844 (727,760)
Cash and Cash Equivalents - Beginning of Period 116,650 1,031,167
--------------- ----------------
Cash and Cash Equivalents - End of Period $ 640,494 $ 303,407
=============== ================
Supplemental Disclosures of Non Cash Financing Activity Cash paid during the
period for:
Interest $ 25,211 $ 1,024
Income taxes - -
Common Stock Issued to Settle Liabilities $ 54,100 $ -
The accompanying notes are an integral part of the unaudited condensed
consolidated financial statements.
-5-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2013
(UNAUDITED)
NOTE 1. 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, 2014 or any other
period. In addition, the balance sheet data at June 30, 2013 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, 2013 included in the Company's annual
report on Form 10-K which was filed on December 23, 2013.
The unaudited condensed consolidated financial statements include the accounts
of 30DC, Inc., (f/k/a Infinity Capital Group, Inc.) and its subsidiary 30DC,
Inc., Delaware, ("30DC DE").
REVENUE RECOGNITION
The Company offers customers the option to purchase its digital products for a
single payment or for a higher price consisting of a down payment and additional
payments over a period of time which can be as long as one year. The Company
deems the sale to have occurred at the time of initial purchase and records the
full amount paid and/or due from a customer as revenue. Typically customers are
offered a period to review the product and request a refund and if a refund is
requested the company reverses the revenue which was recorded at the time of the
sale. The Company has recorded a liability for future refunds and reduced
revenue by that amount. If a customer defaults on an additional payment, the
customer loses access to the digital product. Based upon its past experience
with extended payment plans, the Company has estimated the number of future
defaulted payments and has reduced revenue and accounts receivable by that
amount.
NOTE 2. 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
September 30, 2013, the Company had a working capital deficit of approximately
$1,008,000 and had accumulated losses of approximately $2,407,000 since its
inception. The Company's ability to continue as a going concern is dependent
upon its ability to obtain the necessary financing or to earn profits from its
business operations to meet its obligations and pay its liabilities arising from
normal business operations when they come due. In May 2012, the Company launched
MagCast which the Company expects to be an integral part of its businesses on an
ongoing basis. MagCast is being sold through an affiliate network which expands
the Company's selling capability and has a broad target market beyond the
Company's traditional customer base. In August 2013, the Company relaunched
MagCast with a large-scale promotion for which approximately 75% of sales were
through affiliates. The Company does not expect to have a promotion of this
scale more than once per year. Until the Company achieves sustained
profitability it 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
-6-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2013
(UNAUDITED)
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 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.
NOTE 3. ACQUISITION AND PRO FORMA FINANCIAL INFORMATION
-------------------------------------------------------
In October 2012 the Company reached an agreement for the Company to purchase
Netbloo's 50% interest in the MagCast JV Agreement and Market Pro Max an online
marketing platform that allows anyone to create digital products and quickly
build a variety of eCommerce marketing websites for a purchase price of
13,487,363 shares of the Company's common stock. Netbloo received a three year
contractor agreement with annual compensation of $300,000 which is payable in
monthly installments of $25,000 and may be terminated after two years subject to
a six month termination payment. The contractor agreement was effective October
1, 2012 and final documents were signed on December 31, 2012.
The following unaudited consolidated pro forma information gives effect to the
Netbloo acquisition as if this transaction had occurred at the beginning of each
period presented. 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.
Three Months Ended September
30, 2012
(Unaudited)
-------------------------------
Revenues $ 465,497
Operating Expenses 554,969
-------------------------------
Loss from Continuing Operations (89,472)
Loss from Discontinued Operations (5,017)
-------------------------------
Net Loss $ (94,489)
===============================
Basic and Diluted Loss Per Share $ (0.00)
Weighted Average Shares Outstanding - Basic
& Diluted 86,839,697
NOTE 4. 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. Investment companies report assets at fair value and the Company has
continued to report investment assets in discontinued operations on this basis.
-7-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2013
(UNAUDITED)
Results of Discontinued Operations for the
Three Months Ended Three Months Ended
September 30, 2013 September 30, 2012
-------------------- --------------------
Revenues $ - $ -
Operating expenses 1,930 4,184
Loss from operations (1,930) (4,184)
Forgiveness of debt 796 -
Unrealized gain on marketable
securities 1,146 (833)
-------------------- --------------------
Net (loss) income $ 12 $ (5,017)
==================== ====================
Assets and Liabilities of Discontinued Operations as of
September 30, 2013 June 30, 2013
-------------------- --------------
ASSETS
Marketable securities $ 73,604 $ 72,458
-------------------- --------------
Total assets of discontinued operations $ 73,604 $ 72,458
==================== ==============
LIABILITIES
Accounts payable $ 78,872 $ 80,028
Accrued expenses 66,095 67,375
Notes payable 92,050 102,020
Due to related parties 31,435 53,935
-------------------- --------------
Total liabilities of discontinued operations $ 268,452 $ 303,358
==================== ==============
Notes Payable
Included in liabilities of discontinued operations at September 30, 2013 and
June 30, 2013 are $92,050 and $102,051 respectively (including $-0- and $31 in
due to related parties respectively) in notes payable plus related accrued
interest of which are all in default for lack of repayment by their due date.
For the three months ended September 30, 2013 and September 30, 2012 the Company
incurred interest expense on notes payable of $1,897 and $3,582 respectively
which is included in the Statement of Operations under income (loss) from
discontinued operations.
NOTE 5. RELATED PARTY TRANSACTIONS
-----------------------------------
At September 30, 2013, due to related parties totaled $685,376. This mainly
consisted of $5,955 due to Marillion Partnership under its contractor agreement
which includes the services of Edward Dale as the Company's CEO, $7,081 due to
Raine Ventures under its contractor agreement which includes the services of Dan
Raine serving as the Company's Vice President of Business Development, $70,915
due to Netbloo Media, Ltd. for earnings from the collaborative arrangement prior
to 30DC acquiring Netbloo's 50% interest in the MagCast JV (note 3), $25,500
accrued for directors' fees for services of non-executive directors and $571,000
due to Theodore A. Greenberg, CFO and director, for compensation.
-8-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2013
(UNAUDITED)
NOTE 6. INCOME TAXES
--------------------
As of June 30, 2013, the Company had net operating loss carryovers for United
States income tax purposes of approximately $1,277,400, which begin to expire in
2030. For income tax purposes, net income for the three month period ended
September 30, 2013 is completely offset by the net operating loss carryovers;
accordingly no income tax provision has been provided. For future periods, 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.
NOTE 7. STOCKHOLDERS' EQUITY
----------------------------
COMMON STOCK
During the three months ended September 30, 2013, the Company issued common
stock as follows:
300,000 shares of common stock to Michael A. Littman as payment for $78,000
included in accounts payable. The Company recorded $30,000 of forgiveness of
debt for this transaction which is included as other income in the Statement of
Operations. Mr. Littman is an attorney who has provided services to the Company
and who provided services to Infinity prior to the share exchange.
The Company also recorded $57,253 of forgiveness of debt for reduced cash
payment of $95,453 ($96,500 AUD) over a 10 month period to settle an outstanding
liability of $152,706 to an Australian law firm which originated prior to 30DC's
transaction with Infinity in 2010 and was previously included in accounts
payable.
26,525 shares of common stock to a creditor as full payment for a note payable
and accrued interest totaling $6,896. The Company recorded $796 of forgiveness
of debt for this transaction which is included in the Discontinued Operations
section of the Statement of Operations.
WARRANTS
Information relating to outstanding warrants is as follows:
Weighted
Weighted Average
Number Average Remaining
of Exercise Contract
Shares Price Life (years)
---------------------------------------------
Outstanding warrants at 06/30/13 3,401,522 $ 0.50 2.30
Granted - - -
Exercised - - -
Forfeited/expired - - -
Outstanding warrants at 9/30/13 3,401,522 0.50 2.05
Exercisable on 9/30/13 3,401,522 0.50 2.05
-9-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2013
(UNAUDITED)
NOTE 8. STOCK BASED COMPENSATION PLANS
---------------------------------------
The Company follows FASB Accounting Standards Codification No. 718 -
Compensation - Stock Compensation for share based payments to employees. The
Company follows FASB Accounting Standards Codification No. 505 for share based
payments to Non-Employees.
The Company recognized expense in the amount of $24,764 for the three months
ended September 30, 2013 for options granted in prior periods the cost of which
is being recorded on a straight-line basis over the vesting period. There was no
impact on the Company's cash flow.
Further information relating to stock options is as follows:
WEIGHTED
WEIGHTED AVERAGE
NUMBER AVERAGE REMAINING
OF EXERCISE CONTRACT
SHARES PRICE LIFE (YEARS)
---------------------------------------------
Outstanding options at 06/30/13 3,600,000 $ 0.18 8.61
Granted - - -
Exercised - - -
Forfeited/expired - - -
Outstanding options at 9/30/13 3,600,000 0.18 8.36
Exercisable on 9/30/13 1,600,000 0.31 7.52
The options have a contractual term of ten years. The aggregate intrinsic value
of shares outstanding and exercisable was $60,000 at September 30, 2013. Total
intrinsic value of options exercised was $0 for the three months ended September
30, 2013 as no options were exercised during this period.
At September 30, 2013, shares available for future stock option grants to
employees and directors under the 2012 Stock Option Plan were 4,500,000.
(REMAINDER OF PAGE LEFT BLANK INTENTIONALLY)
-10-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2013
(UNAUDITED)
NOTE 9. SUPPLEMENTAL SCHEDULE OF OPERATING EXPENSES
---------------------------------------------------
Three Months Ended Three Months Ended
September 30, 2013 September 30, 2012
------------------ ------------------
Related Party Contractor Fees (1) $ 222,009 $ 200,697
Officer's Salary 62,382 50,000
Directors' Fees 39,882 -
Independent Contractors 138,419 84,552
Commission Expense 719,348 27,546
Professional Fees 34,829 29,109
Credit Card Processing Fees 101,613 12,305
Telephone and Data Lines 11,614 27,557
Other Operating Costs 60,281 59,151
------------------ ------------------
Total Operating Expenses $ 1,390,377 $ 490,917
================== ==================
----------------------------------
(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, GHL Group,
Ltd., whose President, Gregory H. Laborde is a Director and Netbloo which
was the joint developer of the MagCast Publishing Platform
NOTE 10. SUBSEQUENT EVENTS
--------------------------
On November 4, 2013, the Company issued 100,000 shares to a creditor as full
payment for a note payable and accrued interest totaling $19,794.
Management has evaluated subsequent events to determine if events or
transactions occurring through the date on which the financial statements were
available to be issued, require potential adjustment to or disclosure in the
Company's financial statements.
-11-
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. 30 Day Challenge began in
2005 by offering a free online ecommerce training program. . Immediate Edge
began in 2007 offering 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 Edward Dale was appointed to the
Infinity Board of Directors and named Chief Executive Officer of Infinity which
was subsequently renamed 30DC, Inc. (Maryland) ("30DC"). 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.
In May of 2012 the Company signed a Joint Venture Agreement ("JV Agreement")
with Netbloo Media. Ltd.for the MagCast Publishing Platform ("MagCast") which
was jointly developed. MagCast provides customers access to a cloud-based
service to create an application ("App") to publish a digital magazine on Apple
Corporation's online marketplace Apple Newsstand and includes executive training
modules as well as a three-month trial subscription to the Company's Immediate
Edge subscription product and other bonus products. Under the terms of the JV
Agreement the Company was responsible for marketing, sales and administration
and Netbloo was responsible for product development. MagCast was launched in May
2012 and a majority of sales were the result of affiliate marketing
relationships which resulted in commissions of 50% of gross revenue for those
sales to the affiliate responsible for the sale. All MagCast sales revenue was
recorded gross by the Company and commission expense was recorded for the amount
due to Netbloo which was 50% of revenue reduced by affiliate commissions and
other allowable costs.
-12-
In October 2012 the Company reached an agreement to purchase Netbloo's 50%
interest in the MagCast JV Agreement and Market Pro Max, a product which helps
companies run online information businesses for a purchase price of 13,487,368
shares of the Company's common stock. Netbloo received a three year contractor
agreement with annual compensation of $300,000 which is payable in monthly
installments of $25,000 and may be terminated after two years subject to a six
month termination payment. The contractor agreement was effective October 1,
2012 and final documents were signed on December 31, 2012.
The Company has continued to update the MagCast platform and released version 4
in the summer of 2013 which enabled customer to offer a version of their
magazine tailored for the IPhone which significantly expanded the potential
number of magazine readers. The Company now offers ancillary services to assist
customers in creating their Apps and provides customers with training in
developing and marketing their digital publications.
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 SEPTEMBER 30, 2013 COMPARED TO THE THREE MONTH
PERIOD ENDED SEPTEMBER 30, 2012.
During the three months ended September 30, 2013, 30DC, Inc. recognized revenues
of $2,039,950 from its operations compared to $449,739 during the three months
ended September 30, 2012. Revenues of the Company were from the following
sources during the three months ended September 30, 2013 compared to September
30, 2012.
Three Months Ended Three Months Ended Increase or
September 30, 2013 September 30, 2012 (Decrease)
------------------ ------------------ -------------
Revenue
Commissions $ 19,306 $ 103,817 $ (84,511)
Subscription Revenue 96,739 118,237 (21,498)
Products and Services 1,923,905 86,105 1,837,800
Seminars and Mentoring - 141,580 (141,580)
------------------ ------------------ -------------
Total Revenues $ 2,039,950 $ 449,739 $ 1,590,211
------------------ ------------------ -------------
The Company earns commissions for products sold by third parties to customers
referred by the Company. The $84,511 decrease in commission revenue during the
three months ended September 30, 2013 compared to the three months ending
September 30, 2012 was the result of commissions earned from a successful third
party product in 2012 which did not repeat in 2013.
The $21,498 decrease in subscription revenue was due to a decrease in the
average number of monthly subscribers to the Immediate Edge. For the three
months ended September 30, 2013 the Immediate Edge active subscriber base
averaged 450 per month and for the three months ended September 30, 2012 the
Immediate Edge active subscriber base averaged 343 per month.
The $1,837,800 increase in products and services revenue was primarily due to
the approximately $1,875,000 in sales of the MagCast Publishing Platform during
the quarter ended September 30, 2013, compared to the approximately $65,000 in
MagCast sales in the quarter ended September 30, 2012. The large increase in
sales resulted from a relaunch promotion in August 2013 of which approximately
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75% of sales where though affiliates who earned affiliate commissions and
affiliate bonuses. The Company has no future relaunches planned during the
remainder of the fiscal year ending June 30, 2014.
The $141,580 decrease in seminars and mentoring income resulted from phase out
of the Company's historic mentoring program at the end of December 2012. The
Company discontinued its historical mentoring program as of December 31, 2012 to
redirect Company resources toward products and services sales growth which
management believes has more potential for long-term growth than mentoring which
is labor intensive and does have the ability to leverage and scale.
During the three months ended September 30, 2013, the Company incurred
$1,390,377 in operational expenses compared to $490,917 during the three months
ended September 30, 2012. Operational expenses during the three months ended
September 30, 2013 and 2012, include the following categories:
Three Months Ended Three Months Ended Increase or
September 30, 2013 September 30, 2012 Decrease
------------------ ------------------ ------------
Accounting Fees $ 22,207 $ 20,000 $ 2,207
Credit Card Processing Fees 101,613 12,305 89,308
Commissions 719,348 27,546 691,802
Independent Contractors 138,419 84,552 53,867
Depreciation and Amortization 20,335 9,182 11,153
Directors' Fees 39,882 - 39,882
Internet Expenses 20,410 20,642 (232)
Legal Fees 12,622 9,109 3,513
Officer's Salaries 62,382 50,000 12,382
Related Party Contractors 222,009 200,697 21,312
Telephone and Data Lines 11,614 27,557 (15,943)
Travel & Entertainment 632 12,297 (11,665)
Other Operating Expenses 18,904 17,030 1,874
------------------ ------------------ ------------
Total Operating Expenses $ 1,390,377 $ 490,917 $ 899,460
================== ================== ============
The increase of $89,308 in credit card processing fees resulted from the
increase in sales of products and services of $1,837,800 in the September 2013
quarter compared to the September 2012 quarter. Credit card fees on accounts
receivable have been accrued to match the period the expense is recognized with
the period the related income is recognized.
The increase of $691,802 in commissions resulted from the increase in sales of
products and services of $1,837,800 in the September 2013 quarter compared to
the September 2012 quarter. Commissions on accounts receivable have been accrued
to match the period the expense is recognized with the period the related income
is recognized. Approximately 75% of sales during the August 2013 MagCast
relaunch were subject to affiliate commissions and approximately $126,000 in
bonuses were earned by affiliates for referral and sales contests during the
relaunch.
The increase of $53,867 in independent contractors is primarily due to the
approximately $17,000 increased cost for contractors for maintenance and support
of the MagCast Publishing Platform, approximately $10,000 cost for an affiliate
manager who was contracted to help with the affiliate program related to the
MagCast promotional relaunch, approximately $8,000 for a contractor who helped
during the annual offering of the free Challenge program and $18,000 for Clinton
Carey, former Chief Operating Officer of the Company who is helping shape sales
strategy to extend marketing of MagCast outside the Company's traditional
customer base.
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The increase of $11,153 in depreciation and amortization is due to $16,500 in
amortization of intangible assets from the asset acquisition in October 2012
offset by a decrease in depreciation of approximately $5,400 due to the end of
depreciable life for some of the Company's fixed assets.
The increase of $39,882 in directors' fees includes $12,382 for the September
30, 2013 quarter portion of expense related to stock options previously issued
to Henry Pinskier, a director and chairman of the Company which is being
amortized on a straight-line basis over the vesting period. In September 2013
the Company's board approved directors' fees for non-executive directors in the
total amount of $110,000 per year of which $27,500 was an expense the September
2013 quarter.
The increase of $12,382 in officer's salaries is for the value of stock options
previously issued to Theodore A. Greenberg, chief financial officer and a
director of the Company a portion of which was expensed in the September 2013
quarter.
Related Party Contractor Fees consist of payments to Marillion Partnership and
Raine Ventures, LLC under contracts for services which include Ed Dale acting as
30DC's Chief Executive Officer and Dan Raine acting as 30DC's Vice President of
Business Development as well as the consulting contract with GHL Group, Ltd.
whose President, Gregory H. Laborde is a Director of the Company and a services
contract with Netbloo Media, Ltd. which was the joint developer of the MagCast
Publishing Platform. The $21,312 net increase results from $75,000 for Netboo
which started in October 2012 offset by, approximately $37,000 decrease in the
amount paid to GHL, Group, Ltd. which was due to $45,000 in stock issued to GHL
in the September 2012 quarter and approximately $15,000 less paid the Marillion
Partnership which resulted from a change in the AU/USD exchange rate.
The $15,943 decrease in telephone and date lines expense is primarily due to an
approximate $8,000 decrease in the contracted amount with Telstra AU and
approximately $4,000 because a telephone contract for $6,000 per quarter, paid
in advance, is now being recognized as prepaid expense for the amount prepaid
beyond the end of the September 2013 quarter.
Travel and Entertainment decreased by $11,655 due to limited travel in the
September 2013 quarter. In the September 2012 quarter, Edward Dale made a number
of trips to present and sell MagCast at conferences sponsored by affiliates.
During the three months ended September 30, 2013, the Company recognized net
income from continuing operations of $736,826 compared to a net loss of
($41,118) during the three months ended September 30, 2013. The increased net
income of $777,944 was primarily due to the increase in revenues of $1,590,211
offset by the increase in operating expenses of $899,460.
LIQUIDITY AND CAPITAL RESOURCES
The Company had a cash balance of $640,494 at September 30, 2013 and the Company
had a working capital deficit of $1,007,949. At November 30, 2013 the Company
had a working capital deficit of approximately $1,323,000.To fund working
capital in the year ending June 30, 2014, the Company expects to raise capital
and to improve the results of operations from increasing revenue as well as a
reduction in operating costs. Increased revenue is expected to come from further
sales of MagCast Publishing Platform, an increase in monthly license
subscriptions for Market Pro Max which has not been extensively marketed and
introduction of new products some of which will be extensions of existing
product lines.
Included in liabilities of discontinued operations at September 30, 2013 is
$92,050 in notes payable plus related accrued interest that are in default for
lack of repayment by their due date.
During the three month period ended September 30, 2013, operating activities
provided the Company with $557,082. During the three month period ended
September 30, 2012, Company used $710,589 in operations. The increase of
$1,267,661 provided by operating activities was a combination of the increase of
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in net income from continuing operations of approximately $796,000, and payment
of significant accrued commissions from the June 2012 MagCast launch in the
September 2012 quarter.
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
September 30, 2013, the Company has a working capital deficit of approximately
$1,008,000 and has accumulated losses of approximately $2,407,000 since its
inception. At November 30, 2013 the Company had a working capital deficit of
approximately $1,323,000. The Company's ability to continue as a going concern
is dependent upon the ability of the Company to obtain the necessary financing
or to earn profits from its business operations to meet its obligations and pay
its liabilities arising from normal business operations when they come due. In
May 2012 the Company launched MagCast which has become an integral part of its
businesses on an ongoing basis. MagCast is being sold through an affiliate
network which expands the Company's selling capability and has a broad target
market beyond the Company's traditional customer base. Until the Company
achieves sustained profitability it 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.
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
-------------------------------
DISCLOSURES CONTROLS AND PROCEDURES
We have adopted and maintain disclosure controls and procedures (as such term is
defined in Rules 13a 15(e) and 15d-15(e) under the Securities Exchange Act of
1934, as amended (the "Exchange Act")) that are designed to ensure that
information required to be disclosed in our reports under the Exchange Act, is
recorded, processed, summarized and reported within the time periods required
under the SEC's rules and forms and that the information is gathered and
communicated to our management, including our Chief Executive Officer (Principal
Executive Officer) and Principal Financial Officer, as appropriate, to allow for
timely decisions regarding required disclosure.
As required by SEC Rule 15d-15(b) for the quarter ended September 30, 2013, our
Chief Executive Officer and Chief Financial Officer, carried out an evaluation
under the supervision and with the participation of our management, of the
effectiveness of the design and operation of our disclosure controls and
procedures pursuant to Exchange Act Rule 15d-14 as of the end of the period
covered by this report. Based on the foregoing evaluation, they have concluded
that our disclosure controls and procedures are not effective in timely alerting
them to material information required to be included in our periodic SEC filings
and to ensure that information required to be disclosed in our periodic SEC
filings is accumulated and communicated to our management, including our Chief
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Executive Officer, to allow timely decisions regarding required disclosure as a
result of the deficiency in our internal control over financial reporting
discussed below.
MANAGEMENT'S QUARTERLY REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING.
With the participation of our Chief Executive Officer and Chief Accounting
Officer, we have evaluated the effectiveness of our disclosure controls and
procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended (the " Exchange Act ")), as of the
end of the period covered by this report. Based upon such evaluation, our Chief
Executive Officer and Chief Financial Officer have concluded that, as of the end
of such periods, our disclosure controls and procedures were not effective due
to the material weaknesses noted below, in ensuring that (i) information
required to be disclosed by us in the reports that we file or submit under the
Exchange Act is recorded, processed, summarized and reported, within the time
periods specified in the Securities and Exchange Commission's rules and forms
and (ii) information required to be disclosed by us in the reports that we file
or submit under the Exchange Act is accumulated and communicated to our
management, including our principal executive and principal financial officers,
or persons performing similar functions, as appropriate to allow timely
decisions regarding required disclosure.
(1) Due to the small size of its staff, the Company did not have
sufficient segregation of duties to support its internal control over
financial reporting.
(2) The Company has installed accounting software which is not
comprehensive and which does not prevent erroneous or unauthorized
changes to previous reporting periods and does not provide an adequate
audit trail or entries made in the accounting software.
REMEDIATION OF MATERIAL WEAKNESS
As our current financial condition allows, we are in the process of analyzing
and developing our processes for the establishment of formal policies and
procedures with necessary segregation of duties, which will establish mitigating
controls to compensate for the risk due to lack of segregation of duties.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
There was no change in our internal control over financial reporting that
occurred during the fiscal quarter ended September 30, 2013, that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
-------------------------
None.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
-------------------------------------------------------------------
During the period July 1, 2013 through September 30, 2013 the Company issued the
following equity securities;
On August 24, 2013, 26,525 shares of common stock were issued to a creditor as
full payment for a note payable and accrued interest totaling $6,896. The
Company recorded $796 of forgiveness of debt for this transaction which is
included in the Discontinued Operations section of the Statement of Operations.
On September 9, 2013, the Company issued 300,000 common shares to Michael A.
Littman as payment for $78,000 included in accounts payable. The Company
recorded $30,000 of forgiveness of debt for this transaction which is included
as other income in the Statement of Operations. Mr. Littman is an attorney who
has provided services to the Company and who provided services to Infinity prior
to the share exchange.
EXEMPTION FROM REGISTRATION CLAIMED
All of the above sales by the Company of its unregistered securities were made
by the Company in reliance upon Section 4(2) of the Securities Act of 1933, as
amended (the "1933 Act"). All of the individuals and/or entities that purchased
the unregistered securities were primarily existing shareholders, known to the
Company and its management, through pre-existing business relationships, as long
standing business associates. All purchasers were provided access to all
material information, which they requested, and all information necessary to
verify such information and were afforded access to management of the Company in
connection with their purchases. All purchasers of the unregistered securities
acquired such securities for investment and not with a view toward distribution,
acknowledging such intent to the Company. All certificates or agreements
representing such securities that were issued contained restrictive legends,
prohibiting further transfer of the certificates or agreements representing such
securities, without such securities either being first registered or otherwise
exempt from registration in any further resale or disposition.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
---------------------------------------
Included in liabilities of discontinued operations at September 30, 2013 is
$92,050 in notes payable plus related accrued interest that are in default for
lack of repayment by their due date.
ITEM 4. MINE SAFETY DISCLOSURES
-------------------------------
Not Applicable.
ITEM 5. OTHER INFORMATION
-------------------------
None.
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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.
--------------------------------------------------------------------------------
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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: January 14, 2014 By:/s/ Edward Dale
----------------------------------
Edward Dale
Principal Executive Officer
Chief Executive Officer
President
Dated: January 14, 2014 By:/s/ Theodore A. Greenberg
----------------------------------
Theodore A. Greenberg,
Principal Accounting Officer
Chief Financial Officer
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