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, 2012
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 of (I.R.S. Employer Identification No.)
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
--------------
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 August 2, 2012 the number of shares outstanding of the registrant's class
of common stock was 72,928,421.
TABLE OF CONTENTS
PAGE
PART I - FINANCIAL INFORMATION ----
Item 1. Financial Statements 2
Condensed Consolidated Balance Sheets as of March 31, 2012
(Unaudited) and June 30, 2011 3
Condensed Consolidated Statements of Operations (Unaudited)
for the Three and Nine Months Ended March 31, 2012 and 2011 4
Condensed Consolidated Statements of Cash Flows (Unaudited)
for the Nine Months Ended March 31, 2012 and 2011 5
Notes to Condensed Consolidated Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 15
Item 3. Quantitative and Qualitative Disclosures About Market Risk 21
Item 4. Controls and Procedures 21
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 22
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 22
Item 3. Defaults upon Senior Securities 22
Item 4. Mine Safety Disclosures 22
Item 5. Other Information 23
Item 6. Exhibits 23
Signatures 24
-1-
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
----------------------------
-2-
30DC, INC. AND SUBSIDIARY
Condensed Consolidated Balance Sheets
March June
31, 2012 30, 2011
--------------- -------------
Unaudited
Assets
Current Assets
Cash and Cash Equivalents $ 28,291 $ 33,790
Accrued Commissions Receivable 14,483 41,199
Due From Related Party 127,440 -
Prepaid Expenses 2,125 -
Assets of Discontinued Operations 103,125 99,375
--------------- -------------
Total Current Assets 275,464 174,364
Property and Equipment, Net 44,717 84,041
Goodwill 1,503,860 1,503,860
--------------- -------------
Total Assets $ 1,824,041 $ 1,762,265
=============== =============
Liabilities and Stockholders' Deficiency
Current Liabilities
Accounts Payable $ 602,040 $ 565,534
Accrued Expenses and Refunds 359,756 335,288
Deferred Revenue 291,595 273,641
Due to Related Parties 580,334 262,761
Liabilities of Discontinued Operations 384,766 381,399
--------------- -------------
Total Current Liabilities 2,218,491 1,818,623
--------------- -------------
Total Liabilities 2,218,491 1,818,623
--------------- -------------
Preferred Stock, Par Value $0.001, 10,000,000 Authorized, -0- Issued - -
Common Stock, Par Value $0.001, 100,000,000 authorized,
74,520,248 issued and outstanding 74,520 74,520
Paid in Capital 2,758,001 2,758,001
Accumulated Deficit (3,122,121) (2,767,957)
Accumulated Other Comprehensive Loss (104,850) (120,922)
--------------- -------------
Total Stockholders' Deficiency (394,450) (56,358)
--------------- -------------
Total Liabilities and Stockholders' Deficiency $ 1,824,041 $ 1,762,265
=============== =============
The accompanying notes are an integral part of the
condensed consolidated financial statements.
-3-
30DC, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Operations and Comprehensive Loss
Unaudited
For the Three Months Ended For the Nine Months Ended
March 31, March 31,
2012 2011 2012 2011
--------------- --------------- ----------------- --------------------
Revenue
Commissions $ 27,055 $ 117,583 $ 170,904 $ 368,256
Subscription Revenue 136,354 170,453 474,422 495,887
Products and Services 38,324 43,128 201,208 116,649
Seminars and Mentoring 199,703 114,428 478,033 435,358
--------------- --------------- ----------------- --------------------
Total Revenue 401,436 445,592 1,324,567 1,416,150
Operating Expenses 465,114 600,535 1,652,324 2,645,685
--------------- --------------- ----------------- --------------------
Operating Loss (63,678) (154,943) (327,757) (1,229,535)
Other Expense
Foreign Currency Loss (3,179) (10,809) (15,600) (24,320)
--------------- --------------- ----------------- --------------------
Total Other Expense (3,179) (10,809) (15,600) (24,320)
--------------- --------------- ----------------- --------------------
Loss From Continuing Operations (66,857) (165,752) (343,357) (1,253,855)
Loss From Discontinued Operations (4,637) (100,331) (10,806) (100,316)
--------------- --------------- ----------------- --------------------
Net Loss (71,494) (266,083) (354,163) (1,354,171)
Foreign Currency Translation Gain (Loss) (7,549) (11,647) 16,071 (111,063)
--------------- --------------- ----------------- --------------------
Comprehensive Loss $ (79,043) $ (277,730) $ (338,092) $ (1,465,234)
=============== =============== ================= ====================
Weighted Average Common Shares Outstanding
Basic 74,520,248 74,072,447 74,520,248 69,934,953
Diluted 74,520,248 74,072,447 74,520,248 69,934,953
Loss Per Common Share (Basic and Diluted)
Continuing Operations $ (0.00) $ (0.00) $ (0.00) $ $ (0.02)
Discontinued Operations (0.00) (0.00) (0.00) (0.00)
--------------- --------------- ----------------- --------------------
Net Loss Per Common Share $ (0.00) $ (0.00) $ (0.00) $ (0.02)
=============== =============== ================= ====================
The accompanying notes are an integral part of the
condensed consolidated financial statements.
-4-
30DC, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Cash Flows
Nine Months Ended March 31,
Unaudited
2012 2011
---------------- --------------------
Cash Flows from Operating Activities:
Net Loss $ (354,163) $ (1,354,171)
Loss (Gain) From Discontinued Operations 10,806 100,316
Adjustments to Reconcile Loss from Continuing Operations
to Net Cash Provided By (Used In) Operations
Depreciation and Amortization 43,760 52,457
Equity Based Payments To Non-Employees - 475,988
Equity Based Payments To Employees - 100,000
Write-off of Deferred Financing Costs - 7,500
Changes in Operating Assets and Liabilities
Accrued Commissions Receivable 25,298 37,915
Due From Related Party (127,440) -
Prepaid Expenses (2,125) -
Accounts Payable 43,916 36,583
Accrued Expenses and Refunds 29,526 111,519
Deferred Revenue 26,367 (41,090)
Due to Related Parties 317,574 192,942
---------------- --------------------
Net Cash Provided by (Used in) Operating Activities 13,519 (280,041)
---------------- --------------------
Cash Flows from Investing Activities
Purchases of Property and Equipment (7,154) (14,152)
Cash - Acquired In Acquisition of Infinity - 3,350
---------------- --------------------
Net Cash Used in Investing Activitities (7,154) (10,802)
---------------- --------------------
Cash Flows from Financing Activities
Sale of common stock, net - 367,250
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Net Cash Provided by Financing Activities - 367,250
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Cash Flows from Discontinued Operations
Cash Flows From Operating Activities (11,189) (46,697)
---------------- --------------------
Net Cash Used in Discontinued Operations (11,189) (46,697)
---------------- --------------------
Effect of Foreign Exchange Rate Changes on Cash (675) (1,218)
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Net (Decrease) Increase in Cash and Cash Equivalents (5,499) 28,492
Cash and Cash Equivalents - Beginning of Period 33,790 28,405
---------------- --------------------
Cash and Cash Equivalents - End of Period $ 28,291 $ 56,897
================ ====================
Supplemental Disclosures of Non Cash Financing Activity
Private Placement Subscriptions Received Reclassified to Equity $ - $ 501,590
Common Stock Issued to Settle Liabilities $ - $ 279,125
The accompanying notes are an integral part of the condensed
consolidated financial statements.
-5-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2012
(UNAUDITED)
NOTE 1. DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION AND LIQUIDITY
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30DC, Inc., Delaware, ("30DC DE") was incorporated on October 17, 2008 in the
state of Delaware, as a holding company, for the purpose of building, acquiring
and managing international web-based sales and marketing companies. On July 15,
2009, 30DC DE completed the acquisitions of the business and assets of 30 Day
Challenge ("30 Day") and Immediate Edge ("Immediate"). 30 Day was acquired from
the Marillion Partnership and Edward Wells Dale, both of Victoria, Australia, in
consideration for the issuance of 2,820,000 shares of Common Stock of 30DC DE.
Immediate was acquired from Dan Raine of Cheshire, United Kingdom, in
consideration for the issuance of 600,000 shares of Common Stock of 30DC DE. The
acquired businesses were sold subject to specific liabilities which included
accounts payable, accrued expenses and deferred revenue. The acquisitions were
pursuant to an agreement dated November 14, 2008. Mr. Dale and Mr. Raine were
part of the founding group of shareholders of 30DC DE and in conjunction with
the acquisitions, Mr. Dale was named the Chief Executive Officer of 30DC DE. In
accordance with the provisions of Accounting Standards Codification ("ASC") 805,
"Business Combinations", the acquisitions of 30 Day and Immediate were accounted
for as transactions between entities under common control, whereby the acquired
assets and liabilities of 30 Day and Immediate were recognized in the financial
statements at their carrying amounts.
On September 10, 2010, shareholders of 30DC DE exchanged 100% of their 30DC DE
shares for 60,984,000 shares of Infinity Capital Group, Inc. ("Infinity"), a
publicly traded company which trades over the counter ("OTC") on the OTC Pink
market operated by OTC Market Group, Inc. 30DC DE became a wholly owned
subsidiary of Infinity Capital Group, Inc. which has subsequently changed its
name to 30DC, Inc. ("30DC" and together with its subsidiary "the Company").
After the share exchange, the former shareholders in 30DC DE held approximately
90% of the outstanding shares in Infinity and the officers of 30DC DE became the
officers of Infinity. 30DC DE was the accounting acquirer in the transaction and
its historical financial statements will be the historical financial statements
of 30DC. Infinity's operations were discontinued and subsequent to the share
exchange are accounted for as discontinued operations.
30DC offers internet marketing services and related training that help Internet
companies in operating their businesses. 30DC's core business units are 30 Day
and Immediate. 30 Day, with approximately 100,000 active online participants,
offers a free e-commerce training program year round along with an online
education subscription service and periodic premium live seminars that are
targeted to experienced internet business operators. Immediate is an online
educational program subscription service offering high-end Internet marketing
instruction and strategies for experienced online commerce practitioners. Other
revenue streams include sales of instructional courses and software tools
related to internet marketing and from commissions on third party products sold
via introduction to the 30DC customer base of active online participants and
subscribers which are referred to as affiliate marketing commissions. The
Company's recorded and unrecorded assets consist primarily of property and
equipment, goodwill and internally developed intangible property such as domain
names, websites, customer lists and copyrights.
On August 24, 2011, the Company entered into a Share Sale and Purchase Agreement
(the "Purchase") with RivusTV Ltd, ("Rivus") which was organized and exists in
Victoria, Australia. The Purchase expired March 31, 2012 before all the terms
and conditions could be met.
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, 2012, the Company has a working capital deficit of approximately
$1,943,000 and has accumulated losses of approximately $3,122,100 since its
inception. The Company's ability to continue as a going concern is dependent
-6-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2012
(UNAUDITED)
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. The Company has been developing
new products and in May 2012 launched the MagCasting Publishing Platform
("MagCast"), which provides customers the ability to create an application
("App") to publish a magazine on Apple Newsstand and includes executive training
modules as well as a three-month trial subscription to the Company's Immediate
Edge subscription product. 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. These consolidated financial statements do not include any adjustments
to the amounts and classification of assets and liabilities that may be
necessary should the Company be unable to continue as a going concern.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
--------------------------------------------------
BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with United States generally accepted accounting
principles ("GAAP") and with instructions to Form-10Q and Article 10 of
Regulation S-X. Accordingly, they do not include all the information required by
GAAP for a complete set of financial statements. In the opinion of management,
all adjustments, (including normal recurring accruals) considered necessary for
a fair presentation have been included in the financial statements. Operating
results for the interim period are not necessarily indicative of the results
that may be expected for the fiscal year ended June 30, 2012 or any other
period. In addition, the balance sheet data at June 30, 2011 was derived from
the audited financial statements but does not include all disclosures required
by GAAP. This Form 10-Q should be read in conjunction with the Audited Financial
Statements for the year ended June 30, 2011 included in the Company's annual
report on Form 10-K which was filed on December 13, 2011.
The unaudited condensed consolidated financial statements include the accounts
of 30DC, Inc., (f/k/a Infinity Capital Group, Inc.) and its subsidiary 30DC DE
for the period beginning September 10, 2010, the date of the share exchange with
Infinity, and ending March 31, 2012. For the period beginning July 1, 2010 and
ending September 10, 2010 only the accounts of 30DC DE are included in the
financial statements.
NET LOSS PER SHARE
The Company computes net loss per share in accordance with ASC 260 "Earnings per
Share." Under ASC 260, basic net loss per share is computed by dividing net loss
per share available to common stockholders by the weighted average number of
shares outstanding for the period and excludes the effects of any potentially
dilutive securities. Diluted earnings per share, if presented, would include the
dilution that would occur upon the exercise or conversion of all potentially
dilutive securities into common stock using the "treasury stock" and/or "if
converted" methods as applicable. The computation of basic loss per share
excludes potentially dilutive securities consisting of 3,401,522 warrants and
600,000 options for the three and nine months ended March 31, 2012 and 2011
because their inclusion would be anti-dilutive. In computing net loss per share,
-7-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2012
(UNAUDITED)
warrants with an insignificant exercise price are deemed to be outstanding
common stock.
RECENT ACCOUNTING PRONOUNCEMENTS
Management does not believe that any recently issued, but not effective,
accounting standards, if currently adopted, would have a material effect on the
Company's financial statements.
NOTE 3. DISCONTINUED OPERATIONS
-------------------------------
On September 10, 2010, immediately prior to the share exchange with 30DC DE,
Infinity withdrew its election to operate as a Business Development Company
("BDC") under the Investment Company Act of 1940 ("1940 Act"). Infinity
historically operated as a non-diversified, closed-end management investment
company and prepared its financial statements as required by the 1940 Act. 30DC
is no longer actively operating the BDC and the assets, liabilities and results
of operations of Infinity's former business are shown as discontinued operations
in the Company's financial statements subsequent to the share exchange with
30DC.
Results of Discontinued Operations for the
Nine Months Ended Nine Months Ended
March 31, 2012 March 31, 2011
------------------ ------------------
Revenues $ - $ -
Operating expenses 14,556 11,410
Loss from operations (14,556) (11,410)
Realized loss on marketable securities - (24,490)
Unrealized gain (loss) on marketable securities 3,750 (64,416)
------------------ ------------------
Net loss $ (10,806) $ (100,316)
================== ==================
Three Months Ended Three Months Ended
March 31, 2012 March 31, 2011
------------------ ------------------
Revenues $ - $ -
Operating expenses 4,637 4,175
Loss from operations (4,637) (4,175)
Realized loss on marketable securities - (24,490)
Unrealized loss on marketable securities - (71,666)
------------------ ------------------
Net loss $ (4,637) $ (100,331)
================== ==================
-8-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2012
(UNAUDITED)
Assets and Liabilities of Discontinued Operations as of
March 31, 2012 June 30, 2011
---------------- ------------------
ASSETS
Marketable securities $ 103,125 $ 99,375
---------------- ------------------
Total assets of discontinued operations $ 103,125 $ 99,375
================ ==================
LIABILITIES
Accounts payable $ 94,327 $ 94,139
Accrued expenses 55,900 46,233
Notes payable 127,520 135,020
Due to related parties 107,019 106,007
---------------- ------------------
Total liabilities of discontinued operations $ 384,766 $ 381,399
================ ==================
NOTES PAYABLE
Included in liabilities of discontinued operations at March 31, 2012 and June
30, 2011 are $183,067 and $193,367 respectively (including $55,547 and $58,347
respectively of notes payable included in due to related parties) in notes
payable plus related accrued interest of which are all in default for lack of
repayment by their due date. For the nine months ended March 31, 2012 and for
the period subsequent to the share exchange with 30DC DE through March 31, 2011
the Company incurred interest expense on notes payable of $12,729 and $9,911
respectively which is included in the Statement of Operations under income
(loss) from discontinued operations.
NOTE 4. PRO FORMA FINANCIAL INFORMATION
---------------------------------------
The following unaudited consolidated pro forma information gives effect to the
share exchange with Infinity (discussed in Note 1) as if this transaction had
occurred as of July 1, 2010. The following unaudited pro forma information is
presented for illustration purposes only and is not necessarily indicative of
the results that would have been attained had the acquisition of this business
been completed at the beginning of each period presented, nor are they
indicative of results that may occur in any future periods.
Nine Months Ended
March 31, 2011
(Unaudited)
-------------------
Revenues $ 1,416,151
Operating Expenses 2,708,541
-------------------
Loss from Continuing Operations (1,292,390)
Loss from Discontinued Operations (127,604)
-------------------
Net Loss (1,419,994)
Foreign Currency Translation Loss (111,063)
-------------------
Comprehensive Loss $ (1,531,057)
===================
Basic and Diluted Loss Per Share $ (.02)
Weighted Average Shares Outstanding - Basic and Diluted 71,631,540
-9-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2012
(UNAUDITED)
NOTE 5. RELATED PARTY TRANSACTIONS
-----------------------------------
The Company entered into three-year Contract For Services Agreements commencing
July 2009 with the Marillion Partnership ("Marillion") for services which
includes Mr. Edward Dale acting as the Company's Chief Executive Officer, with
23V Industries, Ltd. ("23V") for services which include Mr. Dan Raine acting as
the Company's Vice President of Business Development and with Jesselton, Ltd.
("Jesselton") for services which include Mr. Clinton Carey acting as the
Company's Chief Operating Officer. Effective April 1, 2010, Raine Ventures, LLC
replaced 23V Industries, Ltd in providing consulting services to the Company
which include Mr. Raine acting as the Company's Vice President of Business
Development. These agreements are non-cancelable by either party for the initial
two years and then with six months notice by either party for the duration of
the contract. Mr. Dale and Mr. Carey are directors of the Company, Mr. Dale and
Mr. Raine are both beneficial owners of greater than 10% of the Company's
outstanding common stock. Marillion Partnership is owned by affiliates of Mr.
Dale. 23V and Raine Ventures are owned 100% by Mr. Raine. Jesselton voluntarily
withdrew from its contract with the Company effective March 1, 2012 and Mr.
Carey has continued as a director of the Company.
Cash remuneration under the Marillion, 23V and Raine Ventures agreements was
initially $250,000 per year and $200,000 under the Jesselton agreement. On
December 12, 2011 cash remuneration for the Marillion and Jesselton agreements
was amended for the year ended June 30, 2012 to the Australian Dollar equivalent
of the originally contracted amounts at the exchange rate on the contract start
date of July 15, 2009. The Marillion original annual contract amount of $250,000
has been amended to $317,825 AUD Dollars and the Jesselton original annual
contract amount of $200,000 has been amended to $254,260 AUD which has been
accrued on a proportionate basis through February 29, 2012 due to Jesselton's
voluntary withdrawal from its contract effective March 1, 2012. During the nine
months ended March 31, 2012 Marillion was paid $361,463 AUD ($375,933 USD) which
exceeds Marillion's contracted amount by $123,095 AUD ($127,440 USD). The
$127,440 in excess payments is included in due from related parties in the
current assets section of the balance sheet at March 31, 2012 and as further
described in footnote 10 was subsequently repaid. If in any year starting from
the commencement date, revenues of 30DC, Inc. doubles then a bonus equal to 50%
of cash remuneration will be due in shares of 30DC, Inc. as additional
compensation. The bonus was not earned in the fiscal year ending June 30, 2011
and nothing has been accrued in the March 31, 2012 financial statements, since
the proportionate amount to reach the bonus for the fiscal year ending June 30,
2012 has not been earned.
30DC's Board of Directors approved a bonus to Marillion based upon the net cash
flow of the Company's 30 Day Challenge division and a bonus to 23V (succeeded by
Raine Ventures) based upon the net cash flow of the Company's Immediate Edge
division until such time as 30DC had completed a merger or public stock listing,
which occurred on September 10, 2010. For the nine month period ended March 31,
2011 the bonus for Marillion was $79,643, all earned prior to September 10, 2010
and total compensation was $277,064 and the bonus for Raine Ventures was $-0-
and total compensation was $187,500. For the nine month period ended March 31,
2012 total compensation earned by Marillion was $238,369 AUD ($247,911 USD) and
total compensation earned by Raine Ventures was $187,500. For the three month
period ended March 31, 2011 total compensation earned by Marillion was $68,391
and total compensation earned by Raine Ventures was $62,500. For the three month
period ended March 31, 2012 total compensation earned by Marillion was $79,456
AUD ($82,637 USD) and total compensation earned by Raine Ventures was $62,500.
Subsequent to the September 10, 2010 merger, Marillion and Raine Ventures are to
be paid in accordance with their annual contracted amounts and bonuses based
upon net cash flow are no longer applicable. However, during the nine months
ended March 31, 2012 Marillion was paid $361,463 AUD ($375,932 USD) of which
$123,095 AUD ($127,440 USD) exceeded Marillion's contracted amount and is
included in due from related parties in the current assets section of the
balance sheet; as further described in footnote 10 this amount has subsequently
been repaid.
Beginning July 1, 2011, the Company pays Marillion $2,500 AUD per month to cover
office related expenses which is included in operating expenses.
-10-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2012
(UNAUDITED)
Due to related parties includes $275,317 due to Jesselton, which consists of
$167,317 for contractor fees and $108,000 for fees related to the share exchange
between 30DC DE and Infinity, and $271,000 due to Theodore A. Greenberg, 30DC's
CFO for compensation.
NOTE 6. PROPERTY AND EQUIPMENT
-------------------------------
Property and equipment consists of the following:
March 31, 2012 June 30, 2011
--------------- -------------
Computer and Audio Visual Equipment $ 442,253 $ 450,630
Office equipment and Improvements 69,541 71,870
--------------- -------------
511,794 522,500
Less accumulated depreciation and amortization (467,077) (438,459)
--------------- -------------
$ 44,717 $ 84,041
=============== =============
Depreciation and amortization expense was $43,760 for the nine months ended
March 31, 2012 and $52,457 for the nine months ended March 31, 2011.
Depreciation and amortization expense was $11,803 for the three months ended
March 31, 2012 and $17,807 for the three months ended March 31, 2011.
Property and equipment, net are stated in the functional currency where located
and where applicable are translated to the reporting currency of the US Dollar
at each period end. Accordingly, property and equipment, net are subject to
change as a result of changes in foreign currency exchange rates.
NOTE 7. INCOME TAXES
---------------------
As of June 30, 2011, the Company had net operating loss carryovers for United
States income tax purposes of approximately $1,524,300, which begin to expire in
2031. The U.S. net operating loss carryovers may be subject to limitation under
Internal Revenue Code Section 382 should there be a greater than 50% change in
ownership as determined under the regulations. The Company has filed all federal
tax returns and is in the process of filing its state and local returns for
Infinity since 2005. The Company has not provided a tax benefit for the three
and nine months ended March 31, 2012 and March 31, 2011 as it is not more likely
than not that such benefit will be realized. All unfiled income tax returns are
subject to income tax examination by tax authorities and the statute of
limitations for tax examinations does not begin to run until returns are filed.
Filed tax returns are subject to examination beginning with the period ended
December 31, 2008.
As a corporation formed in the United States, the Company is subject to the
United States corporation income tax on worldwide income. Since majority
ownership of the Company's shares are held by Australian residents, the Company
is deemed to be an Australian resident corporation and is subject to Australian
corporate income tax on worldwide net income which for Infinity was from the
time of the share exchange discussed in Note 1. Corporate income taxes paid to
Australia will generally be available as a credit against United States
corporation income tax. Prior to the share exchange with Infinity, the Company
did not have nexus to any individual state in the United States and accordingly
no deferred tax provision has been recognized for state taxes. Australia does
not have any state corporation income tax. Future changes in Company operations
might impact the geographic mix which could affect the Company's overall
effective tax rate.
The Company applies the provisions of ASC 740 "Income Taxes", which provides
clarification related to the process associated with accounting for uncertain
tax positions recognized in the interim financial statements. ASC 740 prescribes
a more likely than not threshold for financial statement recognition and
measurement of a tax position taken, or expected to be taken, in a tax return.
-11-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2012
(UNAUDITED)
ASC 740 also provides guidance related to, amongst other things, classification,
accounting for interest and penalties associated with tax positions, and
disclosure requirements.
The Company classifies interest and penalties, if any, related to tax
uncertainties as income tax expense. There have not been any material changes in
our analysis of uncertain tax positions including interest and penalties, during
the nine months ended March 31, 2012. The Company does not currently anticipate
that the total amount of unrecognized tax benefits will significantly increase
or decrease within the next twelve months.
NOTE 8. STOCKHOLDERS' EQUITY
----------------------------
WARRANTS AND OPTIONS
The Company has 600,000 fully vested options outstanding as follows:
404,000 options exercisable at 80 cents per share expiring August 7, 2018
196,000 options exercisable at 50 cents per share expiring January 5, 2019
192,500 of these options are held by Pierce McNally a director of the
Company and the balance are held by a former employee and former directors
of Infinity.
161,163 warrants (net of forfeitures) are due to Imperial Consulting
Network under an agreement signed in June 2010 at an exercise price of
$0.0001 per share. Such warrants are yet to be issued.
Pursuant to a private placement memorandum ("PPM") issued in August 2010 the
Company offered units consisting of one share of common stock, one warrant at 37
cents per share exercisable until March 15, 2011 ("37-Cent Warrant") and one
warrant at 50 cents per share exercisable five years from the date of issuance
("50-Cent Warrant") for a price of 26 cents per unit. A first closing was held
on September 22, 2010 under which 2,554,205 37-Cent Warrants were issued along
with 2,554,205 50-Cent Warrants expiring September 22, 2015. From November 2010
through March 2011, an additional 847,317 37-Cent Warrants were issued and
847,317 50-Cent Warrants were issued. All of the 37-Cent Warrants expired March
15, 2011 unexercised.
During the nine months ended March 31, 2012, the Company did not issue any
common stock, options or warrants.
NOTE 9. SUPPLEMENTAL SCHEDULE OF OPERATING EXPENSES
---------------------------------------------------
Nine Months Ended Nine Months Ended
March 31, 2012 March 31, 2011
----------------- -----------------
Related Party Contractor Fees Base Compensation (1) $ 611,673 $ 537,374
Related party Contractor Fees Bonus Compensation (1)(2) - 79,643
Officer's Salary 150,000 150,000
Independent Contractors 300,597 430,050
Transaction Fees (3) - 670,138
Professional Fees 253,454 319,225
Travel Expenses 23,406 131,199
Other Operating Costs 313,194 328,056
----------------- -----------------
Total Operating Expenses $ 1,652,324 $ 2,645,685
================= =================
---------------------------------------------------------------------
-12-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2012
(UNAUDITED)
(1) Related party contractors include Marillion which provides services to the
Company including for Edward Dale to act as Chief Executive Officer of the
Company, Raine Ventures which provides services to the Company including
for Dan Raine to act as Vice President for Business Development and
Jesselton, Ltd. which provides services to the Company including Clinton
Carey serving as Chief Operating Officer of the Company. The annual
contracted amounts are not required to be paid proportionately throughout
the year, however expense is recognized proportionately throughout the
year, and amounts may vary from period to period due to fluctuations in
foreign currency exchange rates.
(2) 30DC's Board of Directors approved a bonus to Marillion based upon the net
cash flow of the Company's 30 Day Challenge division (formerly 30 Day) and
a bonus to Raine Ventures based upon the net cash flow of the Company's
Immediate Edge division (formerly Immediate) until such time as 30DC had
completed a merger or public stock listing which occurred on September 10,
2010.
(3) Transaction fees were incurred upon completion of the 30DC/Infinity share
exchange for consulting services which resulted in completion of the share
exchange. $250,000 was due to Jesselton, Ltd., $250,000 AUD ($231,050) was
due to Corholdings Pty, Ltd. and Prestige Financial Center, Inc. was due
675,314 common shares which were valued at $189,088.
Three Months Ended Three Months Ended
March 31, 2012 March 31, 2011
-------------------- --------------------
Related Party Contractor Fees (1) $ 191,331 $ $183,345
Officer's Salary 50,000 50,000
Independent Contractors 89,275 119,495
Professional Fees 44,524 87,698
Travel Expenses 3,142 32,032
Other Operating Costs 86,842 127,965
-------------------- --------------------
Total Operating Expenses $ 465,114 $ 600,535
==================== ====================
---------------------------------------------
(1) Related party contractors include Marillion which provides services to the
Company including for Edward Dale to act as Chief Executive Officer of the
Company, Raine Ventures which provides services to the Company including
for Dan Raine to act as Vice President for Business Development and
Jesselton, Ltd. which provides services to the Company including Clinton
Carey serving as Chief Operating Officer of the Company. The annual
contracted amounts are not required to be paid proportionately throughout
the year, however expense is recognized proportionately throughout the
year, and amounts may vary from period to period due to fluctuations in
foreign currency exchange rates.
-13-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2012
(UNAUDITED)
NOTE 10. SUBSEQUENT EVENTS
---------------------------
During the fiscal year ended June 30, 2012, Marillion was paid $158,139 AUD
($159,183 USD) in fees beyond their contracted amount. On June 28, 2012, this
excess amount was settled by Marillion surrendering 1,591,827 of the Company's
common shares, which it held and the Company has canceled these shares.
Management has evaluated subsequent events to determine if events or
transactions occurring through the date on which the financial statements were
issued, require potential adjustment to or disclosure in the Company's financial
statements.
-14-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
--------------------------------------------------------------------------------
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH OUR UNAUDITED
FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED HEREIN. IN CONNECTION WITH, AND
BECAUSE WE DESIRE TO TAKE ADVANTAGE OF, THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995, WE CAUTION READERS REGARDING
CERTAIN FORWARD LOOKING STATEMENTS IN THE FOLLOWING DISCUSSION AND ELSEWHERE IN
THIS REPORT AND IN ANY OTHER STATEMENT MADE BY, OR ON OUR BEHALF, WHETHER OR NOT
IN FUTURE FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION. FORWARD-LOOKING
STATEMENTS ARE STATEMENTS NOT BASED ON HISTORICAL INFORMATION AND WHICH RELATE
TO FUTURE OPERATIONS, STRATEGIES, FINANCIAL RESULTS OR OTHER DEVELOPMENTS.
FORWARD LOOKING STATEMENTS ARE NECESSARILY BASED UPON ESTIMATES AND ASSUMPTIONS
THAT ARE INHERENTLY SUBJECT TO SIGNIFICANT BUSINESS, ECONOMIC AND COMPETITIVE
UNCERTAINTIES AND CONTINGENCIES, MANY OF WHICH ARE BEYOND OUR CONTROL AND MANY
OF WHICH, WITH RESPECT TO FUTURE BUSINESS DECISIONS, ARE SUBJECT TO CHANGE.
THESE UNCERTAINTIES AND CONTINGENCIES CAN AFFECT ACTUAL RESULTS AND COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED IN ANY FORWARD LOOKING
STATEMENTS MADE BY, OR ON OUR BEHALF. WE DISCLAIM ANY OBLIGATION TO UPDATE
FORWARD-LOOKING STATEMENTS.
OVERVIEW
30DC Inc. (Delaware) ("30DC DE") was incorporated on October 17, 2008 in the
state of Delaware and prior to July 15, 2009, 30DC DE had no active business
operations. On July 15, 2009, 30DC acquired the business of the "30 Day
Challenge" and "Immediate Edge" from two of 30DC's founding shareholders as part
of a plan to consolidate their business operations. 30DC DE was created to build
and manage international web-based sales and marketing companies. 30 Day
Challenge and Immediate Edge are 30DC DE's two business divisions. 30 Day
Challenge offers a free online ecommerce training program and an online
education subscription service. In addition, periodic premium live seminars are
produced which are intended to target experienced Internet business operators.
Immediate Edge is an online education program subscription service offering
high-end internet marketing instruction and strategies for experienced online
commerce practitioners.
On September 10, 2010, Infinity Capital Group, Inc., a Maryland Corporation,
("Infinity") entered into a Plan and Agreement of Reorganization (the
"Agreement") with 30DC DE, and the Shareholders of 30DC DE. ("30DC DE
Shareholders"). In exchange for 100% of the issued and outstanding shares of
30DC DE, Infinity issued 60,984,000 shares of its restricted common stock. The
shareholders of 30DC DE received 13.2 shares of common stock of Infinity for
every one share of 30DC DE. Upon closing Messrs. Edward Dale and Clinton Carey
were appointed to the Infinity Board of Directors and subsequently Infinity was
renamed 30DC, Inc. (Maryland) ("30DC"). Mr. Dale is the President, Chief
Executive Officer and a director of 30DC. In addition, he is the manager of the
former majority shareholder of 30DC DE, Marillion Partnership. Mr. Carey is the
Chief Operating Officer and a director of 30DC DE. Further, Mr. Dale was
appointed the Chief Executive Officer of Infinity and Mr. Carey was appointed
the Chief Operating Officer of Infinity. Effective March 1, 2012, Mr. Carey is
no longer Chief Operating Officer of the Company; he remains a director.
Infinity, as a result of the transaction, became the sole outstanding
shareholder of 100% of the outstanding common stock of 30DC DE. For purposes of
accounting, 30DC DE was considered the accounting acquirer. As of the date of
the transaction, Infinity discontinued its historical operations and the
business of 30DC DE is now the business of 30DC.
On August 24, 2011 the Company entered into a Share Sale and Purchase Agreement
(the "Purchase") with RivusTV Ltd, ("Rivus") which was organized and exists in
Victoria, Australia. The Purchase expired March 31, 2012 before all the terms
and conditions could be met.
-15-
The Company has been developing and selling more of its own products and has
been reducing operating costs. As part of the cost reduction efforts, effective
February 1, 2012 the Company consolidated its two subscription products; the
Immediate Edge and Challenge Plus. Resources and marketing efforts for
subscriptions are now exclusively for the Immediate Edge. The Company expects
future growth to come from new products which are developed internally or
through joint venture arrangements. There can be no assurance new products will
be developed and if developed there can be no assurance that new products will
produce significant revenue.
The Company has no plans at this time for purchases or sales of fixed assets
which would occur in the next twelve months.
The Company has no expectation or anticipation of significant changes in number
of employees in the next twelve months.
RESULTS OF OPERATIONS
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2012 COMPARED TO THE THREE MONTH
PERIOD ENDED MARCH 31, 2011.
During the three months ended March 31, 2012, 30DC, Inc. recognized revenues of
$401,436 from its operations compared to $445,592 during the three months ended
March 31, 2011. Revenues of the Company were from the following sources during
the three months ended March 31, 2012 compared to March 31, 2011.
Three Months Ended Three Months Ended Increase or
March 31, 2012 March 31, 2011 (Decrease)
------------------ ------------------ -----------
Revenue
Commissions $ 27,055 $ 117,583 $ (90,528)
Subscription Revenue 136,354 170,453 (34,099)
Products and Services 38,324 43,128 (4,804)
Seminars and Mentoring 199,703 114,428 85,275
------------------ ------------------ -----------
Total Revenues $ 401,436 $ 445,592 $ (44,156)
------------------ ------------------ -----------
The $90,528 decrease in commissions during the three months ended March 31, 2012
compared to the three months ending March 31, 2011 was the result of fewer new
participants in the Company's Challenge program in 2011 and a large payer of
affiliate commissions revising their policy to only pay commissions for the
first year of a subscription product rather than paying commissions over the
life of the subscription. Commissions earned from affiliate programs typically
generate the majority of commissions from new participants.
The $34,099 decrease in subscription revenue was primarily due cessation of the
Company's Challenge Plus subscription program effective February 1, 2012.
Challenge Plus revenue was $9,405 for the three month period ending March 2012
down from $55,450 for Challenge Plus for the three month period ended March 31,
2011. Offsetting this loss of revenue was an increase of approximately $12,000
in Immediate Edge subscriptions. For the three months ended March 31, 2012 the
Immediate Edge active subscriber base averaged 473 per month and for the three
months ended March 31, 2011 the Immediate Edge active subscriber base averaged
425 per month. The Immediate Edge subscriber base has historically increased
when a promotion is offered and gradually decreases after the promotion ends.
Promotions are generally held two to three times per year with timing dependent
on whether the Company is offering current promotions for its own or third-party
products and therefore is very cyclical in nature.
-16-
The $85,275 increase in seminars and mentoring revenue was primarily due to a
price increase late in fiscal year 2011 and the start of the Company's platinum
mentoring program in the March 2012 quarter. The platinum mentoring program is a
higher priced more intense program offered to a limited number of students.
During the three months ended March 31, 2012, the Company incurred $465,114 in
operational expenses compared to $600,535 during the three months ended March
31, 2011. Operational expenses during the three months ended March 31, 2012 and
2011, include the following categories:
Three Months Ended Three Months Ended Increase or
March 31, 2012 March 31, 2011 Decrease
------------------ ------------------ ------------
Accounting Fees $ 31,045 $ 77,533 $ (46,488)
Paypal Fees 10,244 11,150 (906)
Commissions 8,563 25,540 (16,977)
Independent Contractors 89,275 119,495 (30,220)
Depreciation 11,802 17,807 (6,005)
Internet Expenses 16,345 15,476 869
Legal Fees 13,479 10,164 3,315
Officer's Salaries 50,000 50,000 -
Payroll Taxes 8,968 10,256 (1,288)
Related Party Contractors 191,331 183,345 7,986
Telephone 16,670 14,308 2,362
Travel & Entertainment 3,507 32,032 (28,525)
Other Operating Expenses 13,885 33,429 (19,544)
------------------- ------------------ ------------
Total Operating Expenses $ 465,114 $ 600,535 $ (135,421)
=================== ================== ============
The decrease of $46,488 in accounting fees was primarily related to a decrease
in accounting consultant fees in the United States and Australia which had
increased related to the accounting requirements of the Infinity/30DC
transaction in September 2010.
The decrease of $16,977 in commissions was due to the majority of products sold
in the March 2012 quarter not being subject to affiliate commissions.
The decrease of $30,220 in independent contractors was primarily due to the
reduction of two contractors in the IE division who were paid approximately
$12,000 per quarter each and the reduction of one contractor in conjunction with
the cessation of the Challenge Plus subscription product.
Related Party Contractor Fees consist of payments to Marillion Partnership,
Raine Ventures, LLC and Jesselton, Ltd. under contracts for services which
include Ed Dale acting as 30DC's Chief Executive Officer, Dan Raine acting as
30DC's Vice President of Business Development and Clinton Carey acting as 30DC's
Chief Operating Officer respectively. The $7,986 net increase results from a
change in cash remuneration under the Marillion and Jesselton contracts to the
Australian Dollar equivalent of the original contracted amounts based upon the
exchange rate at July 15, 2009 which was the effective date of the contracts
combined with the change in the exchange rate since that time which results in
higher cost in US dollars. Offsetting this amount is the reduced amount incurred
to Jesselton in the March 2012 quarter due to the cessation of Jesselton's
contract effective March 1, 2012.
The decrease of $28,525 in travel and entertainment reflects fewer overseas
trips during the quarter ended March 31, 2012 than during the quarter ended
March 31, 2011.
The decrease of $19,544 in other expenses reflects a reduction of a number of
smaller expense categories during the quarter ended March 31, 2012 compared to
-17-
the quarter ended March 31, 2011 with the largest being an approximate decrease
of $8,000 in credit card and bank charges and an approximate decrease of $3,000
in publications costs.
During the three months ended March 31, 2012, the Company recognized a net loss
from continuing operations of ($66,857) compared to a net loss of ($165,752)
during the three months ended March 31, 2011. The decreased loss of $98,895 was
due to the decrease in operating expenses of $135,421 offset by the decrease in
revenues of $44,156.
FOR THE NINE MONTH PERIOD ENDED MARCH 31, 2012 COMPARED TO THE NINE MONTH PERIOD
ENDED MARCH 31, 2011.
During the nine months ended March 31, 2012, 30DC, Inc. recognized revenues of
$1,324,567 from its operations compared to $1,416,150 during the nine months
ended March 31, 2011. Revenues of the Company were from the following sources
during the nine months ended March 31, 2012 compared to March 31, 2011.
Nine Months Ended Nine Months Ended Increase or
March 31, 2012 March 31, 2011 (Decrease)
------------------ ------------------ ------------
Revenue
Commissions $ 170,904 $ 368,256 $ (197,352)
Subscription Revenue 474,422 495,887 (21,465)
Products and Services 201,208 116,649 84,559
Seminars and Mentoring 478,033 435,358 42,675
------------------ ------------------ ------------
Total Revenues $ 1,324,567 $ 1,416,150 $ (91,583)
------------------ ------------------ ------------
The $197,352 decrease in commissions during the nine months ended March 31, 2012
compared to the nine months ending March 31, 2011 was the result of fewer new
participants in the Company's Challenge program in 2012 and a large payer of
affiliate commissions revising their policy to only pay commissions for the
first year of a subscription product rather than paying commissions over the
life of the subscription. Commissions earned from affiliate programs typically
generate the majority of commissions from new participants.
The $21,465 decrease in subscription revenue during the nine months ended March
31, 2012 compared to the nine months ending March 31, 2011 was the result of
cessation of the Company's Challenge Plus subscription product effective
February 1, 2012.
The $84,559 increase in products and services revenue was primarily due to an
increase in the number of the Company's own products being offered for sale
during the nine months ended March 31, 2012. Previously the Company had been
offering more third party products for which affiliate commissions were earned.
When new products are introduced they are marketed to the Company's entire
active participant base and the vast majority of sales are in a relatively short
time period after product introduction.
The $42,675 increase in seminars and mentoring revenue was primarily due to a
price increase late in fiscal year 2011 and the start of the Company's platinum
mentoring program in the March 2012 quarter. The platinum mentoring program is a
higher priced more intense program offered to a limited number of students.
During the nine months ended March 31, 2012, the Company incurred $1,652,324 in
operational expenses compared to $2,645,685 during the nine months ended March
31, 2011. Operational expenses during the nine months ended March 31, 2012 and
2011, include the following categories:
-18-
Nine Months Ended Nine Months Ended Increase or
March 31, 2012 March 31, 2011 Decrease
------------------ ------------------ --------------
Accounting Fees $ 197,356 $ 262,151 $ (64,795)
Paypal Fees 34,757 32,526 2,231
Commissions 49,704 63,159 (13,455)
Independent Contractors 300,597 430,050 (129,453)
Depreciation 43,760 52,457 (8,697)
Internet Expenses 44,832 47,694 (2,862)
Legal Fees 56,098 57,074 (976)
Officer's Salaries 150,000 150,000 -
Payroll Taxes 28,395 29,890 (1,495)
Related Party Contractors 611,673 617,017 (5,344)
Telephone 72,813 26,758 46,055
Transaction Fees - 670,138 (670,138)
Travel & Entertainment 24,270 131,199 (106,929)
Other Operating Expenses 38,069 75,572 (37,503)
------------------ ------------------ --------------
Total Operating Expenses $ 1,652,324 $ 2,645,685 $ (993,361)
================== ================== ==============
The decrease of $64,795 in accounting fees was due to a decrease in accounting
consultant fees which had increased related to the Infinity/30DC transaction in
September 2010 offset by an increase in auditing fees due to multiple filings
during the nine months ended March 31, 2011 covering a number of prior periods.
The decrease of $13,455 in commissions was due to more of the products sold
during the nine months ended March 31, 2012 not being subject to affiliate
commissions as compared to the prior period.
The decrease of $129,453 in independent contractors is primarily due to the
approximately $56,000 cost of investor relations consultants during the nine
months ended March 31, 2011 and the reduction of two contractors in the IE
division during the nine months ended March 31, 2012 reducing costs during the
period by approximately $60,000.
The increase in telephone expense of $46,055 is partly due to a premium
high-volume internet package which costs approximately $4,000 per month which
was not in place for the entire nine month period ended March 31, 2011.
The decrease of $670,138 in transaction fees was due to consultants advising on
the process which resulted in completion of the share exchange with Infinity
during the nine months ended March 31, 2011 including $250,000 to Jesselton,
Ltd., $231,050 ($250,000 AUD) to Corholdings Pty Ltd and $189,088 to Prestige
Financial Center, Inc.
The decrease of $106,929 in travel and entertainment reflects fewer overseas
trips during the nine months ended March 31, 2012 compared to the nine months
ended March 31, 2011.
The decrease of $37,503 in other expenses reflects a reduction of a number of
smaller expense categories during the nine months ended March 31, 2012 compared
to the nine months ended March 31, 2011 with the largest being an approximate
decrease of $19,000 in credit card and bank charges, $4,000 in printing and
$4,000 in publications.
During the nine months ended March 31, 2012, the Company recognized a net loss
from continuing operations of ($343,357) compared to a net loss of ($1,253,855)
during the nine months ended March 31, 2011. The decreased loss of $910,498 was
due to the decrease in operating expenses of $993,361 offset by the decrease in
revenues of $91,583.
-19-
LIQUIDITY AND CAPITAL RESOURCES
The Company had a cash balance of $28,291 at March 31, 2012 and the Company had
a working capital deficit of $1,943,027. To fund working capital for the next
twelve months, the Company expects to raise additional capital, to settle
liabilities using the Company's stock and to improve the results of operations
from increasing revenue and a reduction in operating costs. As further discussed
in Note 1 to the financial statements, the Company, in August 2011 signed a
Share Purchase agreement with RivusTV Ltd. pursuant to which the companies
initiated a joint capital raising effort which was to have resulted in the
acquisition of RivusTV Ltd. by the Company. The agreement with Rivus expired
March 31, 2012 without completion due to a failure to complete the terms of the
agreement.
During the fiscal year ended June 30, 2012, Marillion, a related party, was paid
$158,139 AUD ($159,183 USD) in fees beyond their contracted amount. On June 28,
2012, this excess amount was settled by Marillion surrendering 1,591,827 of the
Company's common shares, which it held and the Company has canceled these.
Included in liabilities of discontinued operations at March 31, 2012 is $183,067
(including $55,547 included in due to related parties) in notes payable plus
related accrued interest that are in default for lack of repayment by their due
date.
During the nine months ended March 31, 2012, operating activities provided the
Company with $13,519. During the nine months ended March 31, 2011, the Company
used $280,041 in operating activities. The net increase in funds of $293,560 was
due to the decreased operating loss offset by expenses paid or settled with
shares of the Company's common stock, accrued but unpaid expenses during the
nine months ended March 31, 2011 and timing of receipts related to mentoring
income and subscription revenue which is initially recorded as deferred revenue.
In the March 2012 period cash receipts for mentoring and subscriptions exceeded
revenue recognized by $26,367 and in the March 2011 period revenue recognized as
mentoring and subscription income exceeded cash receipts by $41,090.
During the nine month period ended March 31, 2012, financing activities provided
the Company with $-0-. During the nine month period ended March 31, 2011,
financing activities provided the Company with $367,250. Receipts from the
Company's private placement memorandum provided the bulk of these funds.
GOING CONCERN
The condensed consolidated financial statements have been prepared using
accounting principles generally accepted in the United States of America
applicable for a going concern which assumes that the Company will realize its
assets and discharge its liabilities in the ordinary course of business. As of
March 31, 2012, the Company has a working capital deficit of approximately
$1,943,000 and has accumulated losses of approximately $3,122,100 since its
inception. Its ability to continue as a going concern is dependent upon the
ability of the Company to obtain the necessary financing 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. The Company has been
developing new products and in May 2012 launched the MagCasting Publishing
Platform ("MagCast"), which provides customers the ability to create an
application ("App") to publish a magazine on Apple Newsstand and includes
executive training modules as well as a three-month trial subscription to the
Company's Immediate Edge subscription product. 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
-20-
operating liabilities which would dilute existing shareholders, curtailing its
operations, suspending the pursuit of its business plan and controlling overhead
expenses. The Company cannot provide any assurance that new financing will be
available to it on commercially acceptable terms, if at all. These conditions
raise substantial doubt about the Company's ability to continue as a going
concern. The condensed consolidated financial statements do not include any
adjustments to the amounts and classification of assets and liabilities that may
be necessary should the Company be unable to continue as a going concern.
GOODWILL
Goodwill was recorded as result of the 30DC/Infinity business combination. We
review our goodwill in accordance with ASU 2011-08 which redefined the steps
necessary in testing goodwill for impairment. The update permits an entity to
first assess qualitative factors to determine whether it is more likely than not
that the fair value of a reporting unit is less than its carrying amount as a
basis for determining whether it is necessary to perform the two-step goodwill
impairment test described in ASC Topic 350. The more-likely-than-not threshold
is defined as having a likelihood of more than 50 percent.
After assessing the totality of events and circumstances, the Company has
determined that it is not more likely than not that the fair value of the
reporting unit is less than its carrying amount at this time, and, therefore,
the two-step impairment test is unnecessary at March 31, 2012.
If the Company is unable to continue to improve operations through the execution
of its business plan then the Company may record an impairment charge related to
its goodwill in a future period. However, presently the Company believes that it
will improve operations through a combination of continued cost reduction
efforts, consolidation of operations and the development of new products.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
-------------------------------------------------------------------
The Company earns the majority of its revenue in United States dollars ("USD")
and pays a significant amount of its expense in Australian dollars ("AUD").
Material fluctuations in the exchange rate between USD and AUD may have material
impact on the Company's results of operations.
ITEM 4. CONTROLS AND PROCEDURES
-------------------------------
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Disclosure controls and procedures are controls and other procedures that are
designed to ensure that information required to be disclosed by our Company is
recorded, processed, summarized and reported, within the time periods specified
in the rules and forms of the SEC. Our Chief Executive Officer and Chief
Financial Officer are responsible for establishing and maintaining disclosure
controls and procedures for our Company.
Our management, with the participation of our Chief Executive Officer and Chief
Financial Officer, carried out an evaluation of the effectiveness of our
"disclosure controls and procedures" (as defined in the Securities Exchange Act
of 1934 (the "Exchange Act") Rules 13a-15(e) and 15d-15(e)) as of the end of the
period covered by this quarterly report on Form 10-Q (the "Evaluation Date").
Based upon that evaluation, our Chief Executive Officer and Chief Financial
Officer concluded that, as of the Evaluation Date, our disclosure controls and
procedures are not effective to ensure that information required to be disclosed
by us in the reports that we file or submit under the Exchange Act (i) is
recorded, processed, summarized and reported, within the time periods specified
in the SEC rules and forms and (ii) is accumulated and communicated to our
management, including our Chief Executive Officer and Chief Financial Officer,
as appropriate to allow timely decisions regarding required disclosure.
Specifically, management's evaluation was based on the following material
weaknesses, which existed as of March 31, 2012:
-21-
(1) Financial Reporting Systems: We did not maintain a fully integrated
financial consolidation and reporting system throughout the period and as a
result, extensive manual analysis, reconciliation and adjustments were
required in order to produce financial statements for external reporting
purposes.
(2) Segregation of Duties: We do not currently have a sufficient complement of
technical accounting and external reporting personal commensurate to
support standalone external financial reporting under 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.
(3) Overpayment of Contractor Fees: The Company did not maintain proper
controls over revenue received , and disbursements for, a Paypal e-commerce
account and a related party bank account which had been used historically
by the business prior to the Infinity transaction, As a result, during the
fiscal year ended June 30, 2012, Marillion, which is a company affiliated
with our Chief Executive Officer, was paid contractor fees of $158,139 AUD
($159,183 USD) in excess of the amount of its annual contract. The Company
has taken steps to prevent future occurrences by notifying all repeat
paying customers that payments are to be remitted to specific company
accounts which have more appropriate financial controls. The Company's
Board has stipulated that the accounts in question are no longer to be used
for any ongoing or new business, any deposit errors are to be immediately
corrected by transfer of funds to appropriate accounts and that the
Company's Chief Financial Officer be informed of all receipts so funds can
be tracked on a timely basis.
We believe that our weaknesses in internal control over financial reporting and
our disclosure controls relate in part to the fact that we are an emerging
business with limited personnel. Management and the Board of Directors believe
that the Company must allocate additional human and financial resources to
address these matters. Throughout the year, the Company has been continuously
improving its monitoring of current reporting systems and its personnel. The
Company intends to continue to make improvements in its internal controls over
financial reporting and disclosure controls until its material weaknesses are
remediated.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
During the nine months ended March 31, 2012, there was no change in our internal
control over financial reporting or in other factors that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
DISCLOSURE CONTROLS AND PROCEDURES
Our management, including our Chief Executive Officer and Chief Financial
Officer, does not expect that our disclosure controls and procedures or our
internal controls will prevent all errors and all fraud. A control system, no
matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are met. Further,
the design of a control system must reflect the fact that there are resource
constraints and the benefits of controls must be considered relative to their
costs. Because of the inherent limitations in all control systems, no evaluation
of controls can provide absolute assurance that all control issues and instances
of fraud, if any, within the Company have been detected, at this time.
-22-
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
-------------------------
None.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
-------------------------------------------------------------------
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
---------------------------------------
Included in liabilities of discontinued operations at March 31, 2012 is $183,067
(including $55,547 included in due to related parties) in notes payable plus
related accrued interest that are in default for lack of repayment by their due
date.
ITEM 4. MINE SAFETY DISCLOSURES
-------------------------------
None.
ITEM 5. OTHER INFORMATION
-------------------------
The Company entered into three-year Contract For Services Agreements commencing
July 2009 with Jesselton, Ltd. ("Jesselton") for services which include Mr.
Clinton Carey acting as the Company's Chief Operating Officer. Jesselton
voluntarily withdrew from its contract with the Company effective March 1, 2012.
Jesselton's contract for services included Mr. Carey serving as the Company's
Chief Operating Officer. As a result Mr. Carey, will not continue acting in the
capacity of Chief Operating Officer of the Company, but has remained as a
director of the Company.
The Share Sale and Purchase Agreement (the "Purchase") with RivusTV Ltd,
("Rivus") expired March 31, 2012 without completion.
During the fiscal year ended June 30, 2012, Marillion was paid $158,139 AUD
($159,183 USD) in fees beyond their contracted amount. On June 28, 2012, this
excess amount was settled by Marillion surrendering 1,591,827 of the Company's
common shares, which it held and the Company has canceled these shares.
(REMAINDER OF PAGE LEFT BLANK INTENTIONALLY)
-23-
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.
--------------------------------------------------------------------------------
-24-
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: August 2, 2012 By:/s/ Edward Dale
---------------------------------
Edward Dale
Principal Executive Officer
Chief Executive Officer
President
Dated: August 2, 2012 By:/s/ Theodore A. Greenberg
---------------------------------
Theodore A. Greenberg,
Principal Accounting Officer
Chief Financial Officer
-25
