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 March 31, 2015
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
--------------------------------- ------------------------------------
(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[_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 May 13, 2015, the number of shares outstanding of the registrant's class
of common stock was 76,853,464.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION PAGE
Item 1. Financial Statements 2
Condensed Consolidated Balance Sheets (Unaudited) as of March 31,
2015 and June 30, 2014 3
Condensed Consolidated Statements of Operations (Unaudited) for
the Three and Nine Months Ended March 31, 2015 and 2014 4
Condensed Consolidated Statements of Cash Flows (Unaudited) for
the Nine Months Ended March 31, 2015 and 2014 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 20
Item 4. Controls and Procedures 20
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 22
Item 6. Exhibits 22
Signatures 23
-1-
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
----------------------------
-2-
30DC, INC. AND SUBSIDIARY
Condensed Consolidated Balance Sheets
March June
31, 2015 30, 2014
---------------- -------------------
Unaudited
Assets
Current Assets
Cash and Cash Equivalents $ 44,148 $ 102,684
Restricted Cash 90,000 83,730
Accrued Commissions Receivable 11,036 12,706
Accounts Receivable 27,116 38,313
Prepaid Expenses 18,620 24,291
Assets of Discontinued Operations 86,750 116,313
---------------- -------------------
Total Current Assets 277,670 378,037
Property and Equipment, Net 18,536 19,066
Intangible Assets, Net 170,500 220,000
Goodwill 2,027,564 2,027,564
---------------- -------------------
Total Assets $ 2,494,270 $ 2,644,667
================ ===================
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable $ 247,698 $ 190,228
Accrued Expenses and Refunds 610,978 625,565
Deferred Revenue 116,033 90,716
Due to Related Parties 1,056,685 805,483
Liabilities of Discontinued Operations 211,200 216,548
---------------- -------------------
Total Current Liabilities 2,242,594 1,928,540
---------------- -------------------
Total Liabilities 2,242,594 1,928,540
---------------- -------------------
Stockholders' Equity
Preferred Stock, Par Value $0.001, 10,000,000 Authorized, -0- Issued - -
Common Stock, Par Value $0.001, 100,000,000 authorized,
76,853,464 issued and outstanding 76,853 76,853
Paid in Capital 3,844,315 3,826,606
Accumulated Deficit (3,566,634) (3,084,474)
Accumulated Other Comprehensive Loss (102,858) (102,858)
---------------- -------------------
Total Stockholders' Equity 251,676 716,127
---------------- -------------------
Total Liabilities and Stockholders' Equity $ 2,494,270 $ 2,644,667
================ ===================
The accompanying notes are an integral part of the unaudited condensed
consolidated financial statements.
-3-
30DC, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Operations
Unaudited
For the Three Months Ended For the Nine Months Ended
March 31, March 31,
2015 2014 2015 2014
---------------- ------------------ -------------- --------------
Revenue
Commissions $ 15,297 $ 26,912 $ 44,223 $ 58,642
Subscription Revenue 27,625 - 89,263 -
Products and Services 57,379 238,701 843,604 2,357,597
---------------- ------------------ -------------- --------------
Total Revenue 100,301 265,613 977,090 2,416,239
Operating Expenses 374,834 495,263 1,425,535 2,393,869
---------------- ------------------ -------------- --------------
Operating Income (Loss) (274,533) (229,650) (448,445) 22,370
Other Income
Forgiveness of Debt - - - 93,513
---------------- ------------------ -------------- --------------
Total Other Income - - - 93,513
---------------- ------------------ -------------- --------------
Income (Loss) From Continuing Operations (274,533) (229,650) (448,445) 115,883
Income (Loss) From Discontinued Operations (20,614) 11,380 (33,715) (3,607)
---------------- ------------------ -------------- --------------
Net Income (Loss) $ (295,147) $ (218,270) $ (482,160) $ 112,276
================ ================== ============== ==============
Weighted Average Common Shares Outstanding
Basic 76,853,464 83,658,797 76,853,464 86,052,421
Diluted 76,853,464 83,658,797 76,853,464 86,985,754
Earnings (Loss) Per Common Share (Basic)
Continuing Operations $ (0.00) $ (0.00) $ (0.01) $ 0.00
Discontinued Operations (0.00) 0.00 (0.00) (0.00)
Net Income (Loss) Per Common Share $ (0.00) $ (0.00) $ (0.01) $ 0.00
Earnings (Loss) Per Common Share (Diluted)
Continuing Operations $ (0.00) $ (0.00) $ (0.01) $ 0.00
Discontinued Operations (0.00) 0.00 (0.00) (0.00)
Net Income (Loss) Per Common Share $ (0.00) $ (0.00) $ (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
Nine Months Ended March 31
Unaudited
2015 2014
--------------- ----------------
Cash Flows from Operating Activities:
Net Income (Loss) $ (482,160) $ 112,276
Loss From Discontinued Operations 33,715 3,607
Adjustments to Reconcile Income from Continuing Operations
to Net Cash Provided By (Used In) Operations
Depreciation and Amortization 55,488 60,965
Equity Based Payments To Employees 17,709 58,383
Gain on Debt Forgiveness - (93,513)
Changes in Operating Assets and Liabilities
Restricted Cash (6,270) (69,250)
Accrued Commissions Receivable 1,670 30,035
Accounts Receivable 11,197 (35,365)
Prepaid Expenses 5,671 (3,616)
Accounts Payable 57,470 (170,626)
Accrued Expenses and Refunds (14,587) 257,637
Deferred Revenue 25,317 106,008
Due to Related Parties 251,202 (155,932)
--------------- ----------------
Net Cash Provided By (Used In) Operating Activities (43,578) 100,609
--------------- ----------------
Cash Flows from Investing Activities
Purchases of Property and Equipment (5,458) (7,438)
--------------- ----------------
Net Cash Used in Investing Activitities (5,458) (7,438)
--------------- ----------------
Cash Flows from Discontinued Operations
Cash Flows From Operating Activities (9,500) (106,559)
--------------- ----------------
Net Cash Used in Discontinued Operations (9,500) (106,559)
--------------- ----------------
Decrease in Cash and Cash Equivalents (58,536) (13,388)
Cash Transferred In Divestiture - (969)
Cash and Cash Equivalents - Beginning of Period 102,684 116,372
--------------- ----------------
Cash and Cash Equivalents - End of Period $ 44,148 $ 102,015
=============== ================
Cash paid during the period for:
Interest $ 4,827 $ 33,868
Income taxes 1,514 2,936
Supplemental Disclosures of Non Cash Financing Activity
Common Stock Issued to Settle Liabilities $ - $ 104,690
Common Stock Redeemed For Divestiture $ - $ 207,335
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
MARCH 31, 2015
(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, 2015 or any other
period. In addition, the balance sheet data at June 30, 2014 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, 2014 included in the Company's annual
report on Form 10-K which was filed on October 10, 2014.
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. Pursuant to ASC
605 the Company has determined that revenue is realizable and the earnings
process is complete and the four criteria for revenue recognition stated in SAB
Topic 13 are met at the time of the initial purchase. Accordingly, 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 records a liability for future refunds and reduces 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.
For an additional charge, the Company offers customers ancillary services which
are not required to be purchased with a product. These services include
additional technical support and/or specific product services. The Company
recognizes revenue when the service is completed; receipts for services which
have not been completed are included in deferred revenue.
NET INCOME OR LOSS PER SHARE
The Company computes net income or loss per share in accordance with ASC 260
"Earnings per Share." Under ASC 260, basic net income or 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,
includes 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. In computing diluted earnings per
share for the nine month period ended March 31, 2014, the Company has included
as outstanding 1,000,000 options which are exercisable and have an exercise
price below the average market price for the Company's shares during the period.
For all other periods presented, potentially dilutive securities would be
anti-dilutive have not been included in computing diluted earnings per share.
-6-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2015
(UNAUDITED)
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
March 31, 2015, the Company had a working capital deficit of approximately
$1,965,000 and had accumulated losses of approximately $3,567,000 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 the past few years, the
Company switched its focus to developing its own products. 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 directly to customers and
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
April of 2014, the Company began offering the Ultimate Product System which
incorporates 30DC's digital marketing platform Market Pro Max. 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. 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.
For the past few years, the Company offered MagCast through a once per year
large-scale promotion for which the majority of sales were through marketing
affiliates which are unrelated parties who earn commissions by referring
customers to the Company and a majority of the Company's annual sales were
during the promotion. The Company held a smaller promotion through marketing
affiliates in July 2014 than in prior years. The Company does not expect to have
a large-scale promotion during this fiscal year.
NOTE 3. DIVESTITURE
-------------------
Effective February 28, 2014, the Company divested assets and liabilities that
made up its Immediate Edge subscription business ("Edge") to Raine Ventures, LLC
("Raine") in exchange for the 10,560,000 common shares of the Company which
Raine had held. Included with the Edge business was cash of approximately $1,000
and intangible assets including goodwill of approximately $225,000. Raine
assumed liability for deferred revenue of approximately $19,000. The Company
recorded zero gain or loss on the divestiture. Operating results for the Edge
have been reclassified as discontinued operations for the nine months ended
March 31, 2014 (see note 4). Raine had been party to a contractor agreement with
the Company which had expired in 2012 and was extended on a month to month basis
and was terminated concurrent with the divestiture.
-7-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2015
(UNAUDITED)
NOTE 4. DISCONTINUED OPERATIONS
-------------------------------
The Company has included two businesses in discontinued operations; the
Immediate Edge business which was divested effective February 28, 2014 (see note
3) and the business of Infinity which was discontinued after the share exchange
with 30DC DE on September 10, 2010. Prior to the share exchange, 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.
RESULTS OF DISCONTINUED
OPERATIONS FOR THE
NINE MONTHS ENDED MARCH 31, 2015 NINE MONTHS ENDED MARCH 31, 2014
IMMEDIATE EDGE INFINITY TOTAL IMMEDIATE EDGE INFINITY TOTAL
----------------------------------------------- -------------------------------------------------
Revenues $ - $ - $ - $ 266,495 $ - $ 266,495
Operating expenses - 4,152 4,152 287,017 8,943 295,960
Income (Loss) from operations - (4,152) (4,152) (20,522) (8,943) (29,465)
Forgiveness of debt - - - - 796 796
Unrealized gain (loss) on
marketable securities - (29,563) $ (29,563) - 25,062 25,062
----------------------------------------------- -------------------------------------------------
Net Income (Loss) $ - $ (33,715) $ (33,715) $ (20,522) $ 16,915 $ (3,607)
=============================================== =================================================
THREE MONTHS ENDED MARCH 31, 2015 THREE MONTHS ENDED MARCH 31, 2014
IMMEDIATE EDGE INFINITY TOTAL IMMEDIATE EDGE INFINITY TOTAL
----------------------------------------------- -------------------------------------------------
Revenues $ - $ - $ - $ 72,360 $ - $ 72,360
Operating expenses - 1,301 1,301 65,921 2,746 68,667
Income (Loss) from operations - (1,301) (1,301) 6,439 (2,746) 3,693
Unrealized gain (loss) on
marketable securities - (19,313) (19,313) - 7,687 7,687
----------------------------------------------- -------------------------------------------------
Net Income (Loss) $ - $ (20,614) $ (20,614) $ 6,439 $ 4,941 $ 11,380
=============================================== =================================================
ASSETS AND LIABILITIES OF
DISCONTINUED OPERATIONS AS OF
MARCH 31, 2015 JUNE 30, 2014
IMMEDIATE EDGE INFINITY TOTAL IMMEDIATE EDGE INFINITY TOTAL
----------------------------------------------- -------------------------------------------------
Assets
Marketable securities $ - $ 86,750 $ 86,750 $ - $ 116,313 $ 116,313
----------------------------------------------- -------------------------------------------------
Total Assets of
Discontinued Operations $ - $ 86,750 $ 86,750 $ - $ 116,313 $ 116,313
=============================================== =================================================
LIABILITIES
Accounts payable $ - $ 72,201 $ 72,201 $ - $ 72,201 $ 72,201
Accrued expenses - 66,449 66,449 - 62,297 62,297
Notes payable - 51,550 51,550 - 61,050 61,050
Due to related parties - 21,000 21,000 - 21,000 21,000
----------------------------------------------- -------------------------------------------------
Total Liabilities of
Discontinued Operations $ - $ 211,200 $ 211,200 $ - $ 216,548 $ 216,548
=============================================== =================================================
-8-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2015
(UNAUDITED)
Notes Payable
Included in liabilities of discontinued operations at March 31, 2015 and June
30, 2014 are $51,550 and $61,050 respectively in notes payable plus related
accrued interest of which are all in default for lack of repayment by their due
date.
For the nine months ended March 31, 2015 and March 31, 2014 the Company incurred
interest expense on notes payable of $4,152 and $7,764 respectively which is
included in the Statement of Operations under income (loss) from discontinued
operations.
Marketable Securities
At March 31, 2015 the fair value of marketable securities held for sale was
$86,750 which included cumulative net unrealized gains of $20,340. June 30, 2014
the fair value of marketable securities held for sale was $116,313 which
included cumulative net unrealized gains of $49,873.
NOTE 5. RELATED PARTY TRANSACTIONS
-----------------------------------
At March 31, 2015, due to related parties totaled $1,056,685. This primarily
consisted of $17,500 due to GHL Group, Ltd., whose President, Gregory H. Laborde
is a Director, under their consulting services agreement, $176,500 accrued for
directors' fees for services of non-executive directors, $99,500 due to Netbloo
Media, Ltd. under its contractor agreement, 35,500 due to Marillion Partnership
under its contractor agreement and $727,500 due to Theodore A. Greenberg, CFO
and director, for compensation.
NOTE 6. INCOME TAXES
---------------------
As of June 30, 2014, the Company had net operating loss carryovers for United
States income tax purposes of approximately $925,300, which begin to expire in
2030. For income tax purposes, net income for the nine month period ended March
31, 2014 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 nine months ended March 31, 2015, the Company did not issue any
common stock.
WARRANTS
Information relating to outstanding warrants is as follows:
Weighted Average
Number of Weighted Average Remaining Contract
Shares Exercise Price Life (years)
-----------------------------------------------
Outstanding warrants at 06/30/14 3,401,522 $ 0.50 1.30
Granted - - -
Exercised - - -
Forfeited/expired - - -
Outstanding warrants at 3/31/15 3,401,522 0.50 0.55
Exercisable on 3/31/15 3,401,522 0.50 0.55
-9-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2015
(UNAUDITED)
The aggregate intrinsic value of warrants outstanding and exercisable was $0 at
March 31, 2015. Total intrinsic value of warrants exercised was $0 for the nine
months ended March 31, 2015 as no warrants were exercised during this period.
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 $17,709 and $58,383 for the nine
months ended March 31, 2015 and March 31, 2014 respectively and $-0- and $8,855
for the three months ended March 31, 2015 and March 31, 2014 respectively 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 06/30/14 3,600,000 $ 0.18 7.61
Granted - - -
Exercised - - -
Forfeited/expired - - -
Outstanding options at 3/31/15 3,600,000 0.18 6.86
Exercisable on 3/31/15 3,600,000 0.18 6.86
The options have a contractual term of ten years. The aggregate intrinsic value
of options outstanding and exercisable was $0 at March 31, 2015. Total intrinsic
value of options exercised was $0 for the nine months ended March 31, 2015 as no
options were exercised during this period.
At March 31, 2015, shares available for future stock option grants to employees
and directors under the 2012 Stock Option Plan were 4,500,000.
-10-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2015
(UNAUDITED)
NOTE 9. SUPPLEMENTAL SCHEDULE OF OPERATING EXPENSES
---------------------------------------------------
Nine Months Ended Nine Months Ended
March 31, 2015 March 31, 2014
-------------------- --------------------
Related Party Contractor Fees (1) $ 475,733 $ 488,813
Officer's Salary 107,855 179,191
Directors' Fees 91,355 111,691
Independent Contractors 242,877 365,244
Commission Expense 154,676 771,862
Professional Fees 109,604 135,500
Credit Card Processing Fees 32,917 115,629
Telephone and Data Lines 27,450 26,475
Other Operating Costs 183,068 199,464
-------------------- --------------------
Total Operating Expenses $ 1,425,535 $ 2,393,869
==================== ====================
-----------------------------------
(1) Related party contractors include Marillion an affiliate of the Company
that manages marketing and development for the Company and provides the
services of Edward Dale as Chief Executive Officer of the Company, GHL
Group, Ltd., whose President, Gregory H. Laborde is a Director and Netbloo
which was the joint developer of the MagCast Publishing Platform
Three Months Ended Three Months Ended
March 31, 2015 March 31, 2014
-------------------- --------------------
Related Party Contractor Fees (1) $ 153,759 $ 163,147
Officer's Salary 33,000 54,427
Directors' Fees 27,500 31,927
Independent Contractors 65,936 118,777
Commission Expense 4,766 16,945
Professional Fees 22,545 34,126
Credit Card Processing Fees 4,715 10,353
Telephone and Data Lines 8,311 9,656
Other Operating Costs 54,302 55,905
-------------------- --------------------
Total Operating Expenses $ 374,834 $ 495,263
==================== ====================
-----------------------------------
(1) Related party contractors include Marillion an affiliate of the Company
that manages marketing and development for the Company and provides the
services of Edward Dale as Chief Executive Officer of the Company, GHL
Group, Ltd., whose President, Gregory H. Laborde is a Director and Netbloo
which was the joint developer of the MagCast Publishing Platform
-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 offers digital media training and publishing solutions for individuals,
professionals and businesses using the Internet and mobile media in operating
their businesses and in particular in marketing digital creations. Our flagship
training course, The Challenge, is offered once annually for a thirty-day period
at no fee as an interactive on-line education program. The Challenge content is
made available for purchase throughout the year as the Digital Success Bootcamp
training course. The course content of The Challenge is geared to individuals
and professionals with an interest in marketing using digital media. The
participants might be motivated to begin a new on-line business or extend an
existing brick-and-mortar business to an on-line platform. Increasingly,
Challenge participants are involved in the migration of commerce to mobile media
comprised of tablet computers and smartphones.
30DC's digital publishing solutions include the MagCast Digital Publishing
Platform for the publication of magazines and other content to mobile devices
through a mobile application or "app" and Market Pro Max, a system for on-line
marketing of digital products. The MagCast platform and Market Pro Max system
are licensed as software-as-a-service applications and are sold independently or
in conjunction with related training courses. Digital Publishing Blue Print
instructs participants in content monetization methods and the use of
proprietary content in developing brand awareness and marketing products or
services. The Ultimate Product System is a video-based program to help novice
e-marketers identify and define a market niche and package their digital
products for greatest marketability.
In addition to our core digital media training and publishing products and
solutions, from time to time we offer a series of on-line training products
related to the use of digital media for commerce and priced at nominal
subscription rates around $50 per month. We also offer individual courses
covering a variety of digital marketing topics such as how to drive traffic to
websites using social media platforms like Facebook. The Company provides
particular training courses to licensees of our MagCast Digital Publishing
Platform related to developing and marketing their digital publications and we
provide ancillary services to assist licensees in creating mobile apps with the
MagCast platform.
CORPORATE HISTORY
On September 10, 2010, Infinity Capital Group, Inc., a Maryland Corporation,
("Infinity") entered into a Plan and Agreement of Reorganization (the
"Agreement") with 30DC, Inc., a Delaware corporation, ("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
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its restricted common stock. The 30DC DE Shareholders received 13.2 shares of
common stock of Infinity for every one share of 30DC DE. Infinity, as a result
of the transaction, became the owning entity of 100% of the outstanding shares
of common stock of 30DC DE. For purposes of accounting, 30DC DE was considered
the accounting acquirer. The business of 30DC DE became the primary business of
Infinity. Infinity was renamed 30DC, Inc. (Maryland) ("30DC" and together with
its subsidiary "the Company"). 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").
In May of 2012 the Company signed a joint venture agreement ("JV Agreement")
with Netbloo Media, Ltd. ("Netbloo") for the joint development of the MagCast
Digital Publishing Platform ("MagCast"). MagCast provides customers access to a
cloud-based service to create an application ("App") to publish a digital
magazine on the digital distribution platforms Apple Newsstand and Google Play
and includes executive training modules to develop and market a digital
magazine. MagCast was launched in May 2012 and a majority of sales were the
result of affiliate marketing relationships which result in commission of 50% of
gross revenue for those sales to the affiliate responsible for the sale. In
October 2012 the Company reached an agreement 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.
Effective February 28, 2014, the Company divested assets and liabilities that
made up to Raine Ventures, LLC ("Raine") in exchange for the 10,560,000 common
shares of the Company which Raine had held. Please see Note 3 for further
details on the divestiture.
PRODUCT OFFERINGS
Our principal digital media training products and publishing solutions include
the following:
o The Challenge
o Digital Success Bootcamp
o MagCast Digital Publishing Platform
o Digital Publishing Blue Print
o Market Pro Max System
o Ultimate Market System
30DC was founded in 2005 by offering a free Internet marketing educational
program that was originally known as The 30 Day Challenge and has evolved into
the Company's current Challenge program. The Challenge is a thirty-day
interactive educational program configured to give participants the framework
and guidance to design and develop an on-line business. The course content is
made available by subscription throughout the year as the Ignition Blue Print
training course.
The Challenge program includes modules on a range of topics, including
researching market opportunity and competition, identifying and sustaining niche
markets, utilizing social media to build your business, among many other
subjects pertinent to Internet marketing. There are no prerequisites to taking
the course and participants come from around the globe. The course content of
The Challenge is geared to individuals, professionals and business people with
an interest in Internet marketing. The participants might be motivated to begin
a new on-line business or extend existing `brick-and-mortar' business to an
on-line platform. Increasingly, Challenge participants are involved in the
migration of business to the mobile media comprised of tablet computers and
smartphones.
The Challenge has predominately grown through our viral marketing campaign
whereby participants are encouraged to publicize the program through email and
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social media, including Twitter, Facebook, FriendFeed and blogs focused on
Internet marketing. The growth in The Challenge community has resulted in a
targeted community, to which the Company markets other high-valued added digital
media training courses and solutions as well as third-party products related to
Internet marketing.
The Company's first digital media solution, The MagCast Digital Publishing
Platform ("MagCast") originated from the collaboration of 30DC with Netbloo
Media Ltd. ("Netbloo') in a joint venture. It was first introduced in fiscal
year 2012, as a software-as-a-service for publication of digital magazines and
other proprietary content to mobile devices through mobile applications or
`apps' based on the Applie iOS and Google Android architectures. The MagCast
platform is relevant to the Company's historical customer base of Internet
marketers as well as a broader audience of users interested in marketing to
their clients through the mobile medium. Publications created on the MagCast
platform can be distributed to readers through Apple Newsstand or Google Play,
the app distribution channels for the two principal mobile device operating
systems. We believe the MagCast platform is distinctive among digital publishing
applications by providing users with a built-in suite of marketing functions and
tools. We believe we are the first to introduce such a product and expect these
features to differentiate the MagCast platform from competitors.
The Company has continued to update the MagCast software application to improve
functionality and 30DC has engaged a dedicated team of software developers to
create new product features. Initially mobile apps created using the MagCast
platform were available only to readers with Apple iPad devices. In the summer
2013, the Company released MagCast version 4, which enabled our customers to
offer a version of their publication tailored for the iPhone thereby
significantly expanding the potential number of magazine readers. MagCast
version 6 released in July 2014 enabled distribution through Google Play where
their digital magazine is available to users of Android devices. This update
included a variety of new features and capabilities such as dynamic in-app
purchasing, a survey funnel, e-mail sharing, push notifications, and Facebook
event tracking, among other modern marketing techniques that could benefit
MagCast platform users. In September 2014, MagCast version 7 was released with
an in-app sales funnel and the user interface was improved to facilitate list
building and issuance of new products and service offers. Version 7 was
optimized for both Google's Android architecture and Apple's iOS 8 operating
system, which are the two most popular mobile device architectures.
Digital Publishing Blueprint is a comprehensive training program that provides
instruction in developing and marketing a digital publication. The course is
designed to instruct participants in content monetization and the use of
proprietary content to create brand awareness and build sales. The fee for
Digital Publishing Blueprint includes a license for the MagCast Digitial
Publishing Platform.
Market Pro Max is on-line marketing system acquired in 2012 from Netbloo Media,
Ltd. Market Pro Max is made available to users as a software-as-a-service. The
application provides plug-n-play functionality to create on-line marketing sites
with little or no programming experience. Market Pro Max is targeted at digital
businesses and information publishers seeking to monetize content on-line.
Starting in 2014, Market Pro Max has been sold in conjunction with an on-line
training course Ultimate Product System. This video-based course helps the
novice e-marketer identify and define a market niche and package products for
greatest marketability.
BUSINESS MODEL AND GROWTH OPPORTUNITIES
We generate revenue through subscriptions to on-line training programs, the sale
of video-based training courses, and the sale of licenses for the use of our
proprietary digital publishing solutions. We also earn commissions on the sale
of third-party Internet marketing products and services to the 30DC customer
base and in particular during and after the annual Challenge training program.
Such revenue is referred to as affiliate marketing commissions.
The Company's long-term growth strategy is to increase its portfolio of products
and services while expanding the audience to which it markets those products and
services. Our business has historically been driven by the attraction of
participants to a no-fee Internet marketing program, The Challenge, and the
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retention of those participants as potential customers for other high
valued-added training programs and digital publishing solutions. Nearly 200,000
individuals have participated in The Challenge since its inception.
To expand the Company's access to potential customers, during the fiscal year
ended June 30, 2012, 30DC began a more comprehensive program of selling through
affiliate marketing relationships. Affiliates promote 30DC's products to their
respective customer bases and receive a commission from 30DC as a percentage of
gross revenue typically in a range of 30% to 50%.
In fiscal year 2013, the Company initiated its MagCast Certified Professional
(MCP) program for the resale of the MagCast Digital Publishing Platform. The MCP
program is intended to drive penetration of corporate and other vertical markets
with an interest in reaching their audiences with digital content on mobile
devices.
30DC's marketing strategy includes paid-for traffic generation to its product
web sites as well as the purchase of sales leads for product promotion through
targeted e-mails. Additionally, during fiscal year 2014, the Company began test
marketing on-line and mobile advertising, which has become more sophisticated
and enables targeting of customers who are more likely to be interested in 30DC
products and services. The initial advertising test focused on the Market Pro
Max system and related training program Ultimate Product System.
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 MARCH 31, 2015 COMPARED TO THE THREE MONTH
PERIOD ENDED MARCH 31, 2014.
During the three months ended March 31, 2015, 30DC, Inc. recognized revenues of
$100,301 from continuing operations compared to $265,613 during the three months
ended March 31, 2014. Revenues from continuing operations were from the
following sources during the three months ended March 31, 2015 compared to March
31, 2014.
Three Months Three Months
Ended Ended Increase or
March 31, 2015 March 31, 2014 (Decrease)
------------------ ----------------- --------------
Revenue
Commissions $ 15,297 $ 26,912 $ (11,615)
Subscription Revenue 27,625 - 27,625
Products and Services 57,379 238,701 (181,322)
------------------ ----------------- --------------
Total Revenues $ 100,301 $ 265,613 $ (165,312)
The $11,615 decrease in commissions was due to commissions earned during the
three months ended March 31, 2014 from a product promotion which did not repeat
during the three months ended March 31, 2015.
The $27,625 increase in subscription revenue was due to a new online forum
subscription product which was launched in April 2014 and has a recurring
monthly charge.
The $181,322 decrease in products and services revenue was due to an $185,981
decrease in revenue from the MagCast Publishing Platform. During the three
months ended March 31, 2015 the company did offer any special promotions for
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MagCast. During the three months ended March 31, 2014, the Company released the
Android version of MagCast which had revenue of $106,855, offered a special
promotion for existing customers to purchase an additional MagCast license which
had revenue of $29,910, received $28,466 in revenue from customers for MagCast
payment plan purchases which had been deferred and therefore not previously
recorded in accounts receivable and earned an additional $17,754 in revenue from
MagCast Done For You services.
During the three months ended March 31, 2015, the Company incurred $374,834 in
operational expenses for continuing operations compared to $495,263 during the
three months ended March 31, 2014. Operational expenses during the three months
ended March 31, 2015 and 2014, include the following categories:
THREE MONTHS ENDED THREE MONTHS ENDED INCREASE OR
MARCH 31, 2015 MARCH 31, 2014 DECREASE
--------------------------------------------------
Accounting Fees $ 16,000 $ 22,805 $ (6,805)
Advertising 11,073 428 10,645
Credit Card Processing Fees 4,715 10,353 (5,638)
Commissions 4,766 16,945 (12,179)
Independent Contractors 65,936 118,777 (52,841)
Depreciation and Amortization 18,600 19,957 (1,357)
Directors' Fees 27,500 31,927 (4,427)
Internet Expenses 6,262 13,905 (7,643)
Legal Fees 6,545 11,321 (4,776)
Officer's Salaries 33,000 54,427 (21,427)
Related Party Contractors 153,759 163,147 (9,388)
Telephone and Data Lines 8,311 9,656 (1,345)
Travel & Entertainment 770 2,814 (2,044)
Other Operating Expenses 17,597 18,801 (1,204)
--------------------------------------------------
Total Operating Expenses $ 374,834 $ 495,263 $ (120,429)
==================================================
The increase of $10,645 in advertising is due to the Company advertising its
digital products on Facebook and the cost of a marketing consultant who helped
the Company develop the advertising campaign.
The decrease of $12,179 in commissions resulted from the $185,981 decrease in
revenue from the MagCast Publishing Platform, a portion of which were sales
through marketing affiliate relationships which resulted in commission expense.
The decrease of $52,841 in independent contractors is primarily due to the
Company terminating its relationship with two long-term contractors, one at the
end of July 2014, saving the Company approximately $9,000 per month, and one at
the end of August 2014, saving the Company approximately $6,000 per month and a
reduction of $6,000 in the amount 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. In addition the
March 2014 quarter included approximately $8,500 paid to a contractor hired to
help with the Company's annual free course and was retained to work on
additional development projects, $5,000 for a strategic consultant and $1,500
for a valuation analyst. These increases were offset by an increase of $6,000
per month to a contractor who has assumed additional responsibilities.
The decrease of $21,427 in officer's salaries was due to a reduction in a
reduction in base salary for Theodore A. Greenberg, the Company's CFO from
$200,000 to $132,000 per year and a reduction in the charge for amortization of
stock option expense over the vesting period, for stock options previously
issued to Mr. Greenberg which fully vested January 1, 2015.
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The decrease of $9,388 in Related Party Contractors was due to a change in the
exchange rate which reduced the US Dollar amount for Marillion Partners
contractor fees which are paid in Australian Dollars.
During the three months ended March 31, 2015, the Company recognized a net loss
from continuing operations of $274,533 compared to a net loss from continuing
operations of $229,650 during the three months ended March 31, 2014. The
increased net loss from continuing operations of $44,883 was due to the decrease
in revenue of $165,312 offset by the decrease in operating expenses of $120,429.
FOR THE NINE MONTH PERIOD ENDED MARCH 31, 2015 COMPARED TO THE NINE MONTH PERIOD
ENDED MARCH 31, 2014.
During the nine months ended March 31, 2015, 30DC, Inc. recognized revenues of
$977,090 from continuing operations compared to $2,416,239 during the nine
months ended March 31, 2014. Revenues from continuing operations were from the
following sources during the nine months ended March 31, 2015 compared to March
31, 2014.
Nine Months Nine Months
Ended Ended Increase or
March 31, 2015 March 31, 2014 (Decrease)
------------------ ------------------- ----------------
Revenue
Commissions $ 44,223 $ 58,642 $ (14,419)
Subscription Revenue 89,263 - 89,263
Products and Services 843,604 2,357,597 (1,513,993)
------------------ ------------------- ----------------
Total Revenues $ 977,090 $ 2,416,239 $ (1,439,149)
The $14,419 decrease in commissions was due to commissions earned during the
nine months ended March 31, 2014 from product promotions which did not repeat
during the nine months ended March 31, 2015.
The $89,263 increase in subscription revenue was due to a new online forum
subscription product which was launched in April 2014 and has a recurring
monthly charge.
The $1,513,993 decrease in products and services revenue was mainly due to a
decrease of $1,616,811 in revenue from the MagCast Publishing Platform which
resulted from a smaller launch promotion in July 2014 than August 2013 and the
release of the MagCast Android version in February 2014. This was partially
offset by a $27,998 increase in sales of Market Pro Max including the Ultimate
Product System which is a training program that includes a lifetime license for
one Market Pro Max marketing web site and an increase in sales of $71,506 in the
sale of other products the company has developed on topics such as increasing
traffic to web sites.
During the nine months ended March 31, 2015, the Company incurred $1,425,535 in
operational expenses for continuing operations compared to $2,393,869 during the
nine months ended March 31, 2014. Operational expenses during the nine months
ended March 31, 2015 and 2014, include the following categories:
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NINE MONTHS ENDED NINE MONTHS ENDED INCREASE OR
MARCH 31, 2015 MARCH 31, 2014 DECREASE
--------------------------------------------------
Accounting Fees $ 83,250 $ 96,612 $ (13,362)
Advertising 44,985 620 44,365
Credit Card Processing Fees 32,917 115,629 (82,712)
Commissions 154,676 771,862 (617,186)
Independent Contractors 242,877 365,244 (122,367)
Depreciation and Amortization 55,489 60,965 (5,476)
Directors Fees 91,355 111,691 (20,336)
Internet Expenses 22,961 30,386 (7,425)
Legal Fees 26,354 38,888 (12,534)
Officer's Salaries 107,855 179,191 (71,336)
Related Party Contractors 475,733 488,813 (13,080)
Telephone and Data Lines 27,450 26,475 975
Travel & Entertainment 2,903 47,982 (45,079)
Other Operating Expenses 56,730 59,511 (2,781)
--------------------------------------------------
Total Operating Expenses $ 1,425,535 $ 2,393,869 $ (968,334)
==================================================
The decrease of $13,362 in accounting fees is primarily due to an additional
$30,000 in fees to our auditors during the nine months ended March 31, 2014 for
the Company to file reports which had been in arrears, offset by $18,000 in fees
during the nine months ended March 31, 2015 to an e-commerce accounting firm to
automate a number of our accounting processes and to provide outsourced
bookkeeping services.
The increase of $44,365 in advertising is due to the Company advertising its
digital products on Facebook and the cost of a marketing consultant who helped
the Company develop the advertising campaign.
The decrease of $82,712 in credit card processing fees resulted from the
$1,439,149 decrease in revenue and a decrease of approximately 1.5% in the
effective credit card processing rate.
The decrease of $617,186 in commissions resulted from the $1,513,993 decrease in
products and services revenue, a significant portion of which are sales
marketing affiliate relationships which result in commission expense.
The decrease of $122,367 in independent contractors is primarily due to the
Company terminating its relationship with two long-term contractors, one at the
end of July 2014, saving the Company approximately $9,000 per month, and one at
the end of August 2014, saving the Company approximately $6,000 per month and a
reduction of $11,500 in the amount 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. In addition the nine
months ended March 2014 included approximately $20,500 paid to a contractor
hired to help with the Company's annual free course, the Challenge and was
retained to work on additional development projects, $6,500 paid to investor
relations consultants, $10,000 for a strategic consultant and $4,500 for a
valuation analyst. These increases were offset by an increase of $6,000 per
month to a contractor who has assumed additional responsibilities.
The decrease of $20,336 in directors' fees is from a reduction in the charge for
amortization of stock option expense over the vesting period, for stock options
previously issued to Henry Pinskier, the Company's board chair, in the nine
months ended March 2015 from the amount in the nine months ended March 2014,
these options fully vested January 1, 2015.
The decrease of $71,336 in officer's salaries was due to a reduction in base
salary for Theodore A. Greenberg, the Company's CFO from $200,000 to $132,000
per year and a reduction in the charge for amortization of stock option expense
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over the vesting period, for stock options previously issued to Mr. Greenberg in
the nine months ended March 2015 from the amount in the nine months ended March
2014, these options fully vested January 1, 2015.
The decrease of $13,080 in Related Party Contractors was due to a change in the
exchange rate which reduced the US Dollar amount for Marillion Partners
contractor fees which are paid in Australian Dollars.
Travel and Entertainment decreased by $45,079 due to a company-wide group
meeting and travel to an investor conference, both in November 2013 which did
not repeat during the nine months ended March 2015.
During the nine months ended March 31, 2015, the Company recognized a net loss
from continuing operations of $448,445 compared to net income from continuing
operations of $115,883 during the nine months ended March 31, 2014. The decrease
in net income from continuing operations of $564,328 was due to the decrease in
revenue $1,439,149 offset by the decrease in operating expenses $968,334 and
forgiveness of debt income of $93,513 in the nine months ended March 2014.
LIQUIDITY AND CAPITAL RESOURCES
The Company had a cash balance of $44,148 at March 31, 2015 and the Company had
a working capital deficit of $1,964,924. To fund working capital for the next 12
months, the Company expects to raise capital and to improve the results of
operations from increasing revenue as well as a reduction in operating costs.
The Company expects increased revenue from further sales of MagCast Publishing
Platform through its Digital Publishing Blueprint training course and by
marketing to customers outside its historical customer base with the goal of
recurring revenue through annual licenses. The Company also expects increased
revenue from further sales of Market Pro Max through its Ultimate Product System
training course and introduction of new products some of which will be
extensions of existing product lines. Additionally, the Company intends to
increase funds available by raising capital, though at this time the Company has
not commenced any offerings and cannot guarantee that they will be successful in
its capital raising efforts. If the results of operations and capital raised, if
any, are not sufficient to fund the Company's expenses as they come due, the
Company will defer amounts due to related parties and to the extent possible
utilize shares of the Company to satisfy its liabilities.
Included in liabilities of discontinued operations at March 31, 2015 is $51,550
in notes payable plus related accrued interest that are in default for lack of
repayment by their due date.
During the nine month period ended March 31, 2015, operating activities used
$43,578. During the nine month period ended March 31, 2014, operating activities
provided the Company with $100,609. The decrease of $144,187 in funds provided
by operating activities was a combination of the decrease in net income from
continuing operations of approximately $594,000, a decrease of approximately
$272,000 in the change in accrued expenses and refunds due to the change in
status of accrued contractor fees in the nine months ended March 31, 2014 from
due to related parties because Clinton Carey was no longer a member of the
Company's board and a decrease in deferred revenue of approximately $81,000.
This was offset by an increase of approximately $228,000 from the change in
accounts payable due to payment of payables at June 30, 2013 with proceeds from
the August 2013 MagCast relaunch, an increase from the change in due to related
parties of approximately $407,000 partly because Clinton Carey was no longer a
member of the Company's board resulting in a change in status during the nine
months ended March 31, 2014 and deferral of payments to the Company's Chief
Financial Officer, Directors and other related parties during the nine months
ended March 31, 2015, an approximate decrease of $63,000 to change in the amount
of restricted cash which is the amount held in reserve by the Company's credit
card processor which was higher at March 31, 2014 due to the MagCast relaunch in
August 2013 and a decrease of approximately $93,000 in forgiveness of debt
income which was including in net income from continuing operations in the nine
months ended March 2014 but did not generate cash.
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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
March 31, 2015, the Company has a working capital deficit of approximately
$1,965,000 and has accumulated losses of approximately $3,567,000 since its
inception. 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 the
past few years, the Company switched its focus to developing its own products.
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
directly to customers and 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 April of 2014, the Company began offering the
Ultimate Product System which incorporates 30DC's digital marketing platform
Market Pro Max. 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 March 31, 2015, 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
Executive Officer, to allow timely decisions regarding required disclosure as a
result of the deficiency in our internal control over financial reporting
discussed below.
-20-
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 "internal control over
financial reporting" (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 period, our "internal control over financial reporting" is
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) 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
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.
(2) 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.
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. In
July 2014, the Company contracted an e-commerce accounting firm to automate a
number of our accounting processes and to provide outsourced bookkeeping
services that provide for segregation of some of the duties which previously had
not been.
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 March 31, 2015, 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, 2014 through March 31, 2015 the Company did not issue
any equity securities.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
---------------------------------------
Included in liabilities of discontinued operations at March 31, 2015 is $51,550
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.
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.
-22-
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: May 13, 2015 By:/s/ Edward Dale
--------------------------------------
Edward Dale
Principal Executive Officer
Chief Executive Officer
President
Dated: May 13, 2015 By:/s/ Theodore A. Greenberg
--------------------------------------
Theodore A. Greenberg,
Principal Accounting Officer
Chief Financial Officer
-23