Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For Quarterly Period Ended September 30, 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
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(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
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Registrant's telephone number, including area code
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes[__] No[_x_]
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files).
Yes[_x_] No[__]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check One).
Large accelerated filer [___] Accelerated filer [___]
Non-accelerated filer [___] Smaller reporting company [_X_]
(Do not check if a smaller
reporting company)
Indicate by check mark whether the Registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes[__] No[_X_]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
As of July 16, 2013 the number of shares outstanding of the registrant's class
of common stock was 86,931,169.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
PAGE
----
Item 1. Financial Statements 2
Condensed Consolidated Balance Sheets as of September 30, 2012
(Unaudited) and June 30, 2012 3
Condensed Consolidated Statements of Operations (Unaudited)
for the Three Months Ended September 30, 2012 and 2011 4
Condensed Consolidated Statements of Cash Flows (Unaudited)
for the Three Months Ended September 30, 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 19
Item 4. Controls and Procedures 19
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 21
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 21
Item 3. Defaults upon Senior Securities 21
Item 4. Removed and Reserved 21
Item 5. Other Information 21
Item 6. Exhibits 21
Signatures 22
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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-2-
30DC, INC. AND SUBSIDIARY
Condensed Consolidated Balance Sheets
September 30, June 30,
2012 2012
---------------- -------------------
Unaudited
Assets
Current Assets
Cash and Cash Equivalents $ 547,688 $ 1,031,167
Accrued Commissions Receivable 70,456 15,805
Accounts Receivable 3,588 156,104
Prepaid Expenses 2,684 -
Assets of Discontinued Operations 94,792 95,625
---------------- -------------------
Total Current Assets 719,208 1,298,701
Property and Equipment, Net 29,384 34,100
Goodwill 1,503,860 1,503,860
---------------- -------------------
Total Assets $ 2,252,452 $ 2,836,661
================ ===================
Liabilities and Stockholders' Deficiency
Current Liabilities
Accounts Payable $ 925,193 $ 581,775
Accrued Expenses and Refunds 357,712 494,603
Accrued Commissions Expense - 699,592
Deferred Revenue 114,220 244,378
Due to Related Parties 655,557 606,827
Liabilities of Discontinued Operations 366,235 374,756
---------------- -------------------
Total Current Liabilities 2,418,917 3,001,931
---------------- -------------------
Total Liabilities 2,418,917 3,001,931
---------------- -------------------
Stockholders' Deficiency
Preferred Stock, Par Value $0.001, 10,000,000 Authorized, -0- Issued - -
Common Stock, Par Value $0.001, 100,000,000 authorized,
73,428,421 and 72,928,421 issued and outstanding respectively 73,428 72,928
Paid in Capital 2,644,910 2,600,410
Accumulated Deficit (2,781,945) (2,735,750)
Accumulated Other Comprehensive Loss (102,858) (102,858)
---------------- -------------------
Total Stockholders' Deficiency (166,465) (165,270)
---------------- -------------------
Total Liabilities and Stockholders' Deficiency $ 2,252,452 $ 2,836,661
================ ===================
The accompanying notes are an integral part of the unaudited condensed
consolidated financial statements.
-3-
30DC, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Operations and Comprehensive Loss
Three Months Ended September 30
Unaudited
2012 2011
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Revenue
Commissions $ 103,817 $ 102,500
Subscription Revenue 118,237 194,889
Products and Services 86,105 14,073
Seminars and Mentoring 141,580 103,796
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Total Revenue 449,739 415,258
Operating Expenses 490,887 641,357
--------------- ------------------
Operating Income (Loss) (41,148) (226,099)
Other Expense
Foreign Currency Loss (30) (6,402)
--------------- ------------------
Total Other Expense (30) (6,402)
--------------- ------------------
Loss From Continuing Operations (41,178) (232,501)
Loss From Discontinued Operations (5,017) (2,556)
--------------- ------------------
Net Loss (46,195) (235,057)
Foreign Currency Translation Loss - 58,116
--------------- ------------------
Comprehensive Loss $ (46,195) $ (176,941)
=============== ==================
Weighted Average Common Shares Outstanding
Basic 73,352,334 74,520,248
Diluted 73,352,334 74,520,248
Loss Per Common Share (Basic and Diluted)
Continuing Operations $ (0.00) $ (0.00)
Discontinued Operations (0.00) (0.00)
Net Loss Per Common Share $ (0.00) $ (0.00)
The accompanying notes are an integral part of the unaudited condensed
consolidated financial statements.
-4-
30DC, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Cash Flows
Three Months Ended September 30
Unaudited
2012 2011
--------------- ----------------
Cash Flows from Operating Activities:
Net Loss $ (46,195) $ (235,057)
Loss From Discontinued Operations 5,017 2,556
Adjustments to Reconcile Loss from Continuing Operations
to Net Cash Used In Operations
Depreciation and Amortization 9,182 17,378
Equity Based Payments To Non-Employees 45,000 -
Changes in Operating Assets and Liabilities
Accrued Commissions Receivable (54,651) 6,519
Accounts Receivable 152,516 -
Prepaid Expenses (2,684) (118,841)
Accounts Payable 343,418 39,955
Accrued Expenses and Refunds (136,891) (3,840)
Accrued Commissions Expense (699,592) -
Deferred Revenue (130,158) 187,603
Due to Related Parties 48,730 98,789
--------------- ----------------
Net Cash Used in Operating Activities (466,308) (4,938)
--------------- ----------------
Cash Flows from Investing Activities
Purchases of Property and Equipment (4,466) (5,379)
--------------- ----------------
Net Cash Used in Investing Activitities (4,466) (5,379)
--------------- ----------------
Cash Flows from Discontinued Operations
Cash Flows From Operating Activities (12,705) (2,589)
--------------- ----------------
Net Cash Used in Discontinued Operations (12,705) (2,589)
--------------- ----------------
Effect of Foreign Exchange Rate Changes on Cash - 9,475
--------------- ----------------
Decrease in Cash and Cash Equivalents (483,479) (3,431)
Cash and Cash Equivalents - Beginning of Period 1,031,167 33,790
--------------- ----------------
Cash and Cash Equivalents - End of Period $ 547,688 $ 30,359
=============== ================
The accompanying notes are an integral part of the unaudited condensed
consolidated financial statements.
-5-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2012
(UNAUDITED)
NOTE 1. DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION AND LIQUIDITY
--------------------------------------------------------------------
30DC, Inc., Delaware, ("30DC DE") was incorporated on October 17, 2008 in the
state of Delaware, as a holding company, for the purpose of building, acquiring
and managing international web-based sales and marketing companies. On July 15,
2009, 30DC DE completed the acquisitions of the business and assets of 30 Day
Challenge ("30 Day") and Immediate Edge ("Immediate"). 30 Day was acquired from
the Marillion Partnership and Edward Wells Dale, both of Victoria, Australia, in
consideration for the issuance of 2,820,000 shares of Common Stock of 30DC DE.
Immediate was acquired from Dan Raine of Cheshire, United Kingdom, in
consideration for the issuance of 600,000 shares of Common Stock of 30DC DE. The
acquired businesses were sold subject to specific liabilities which included
accounts payable, accrued expenses and deferred revenue. The acquisitions were
pursuant to an agreement dated November 14, 2008. Mr. Dale and Mr. Raine were
part of the founding group of shareholders of 30DC DE and in conjunction with
the acquisitions, Mr. Dale was named the Chief Executive Officer of 30DC DE. In
accordance with the provisions of Accounting Standards Codification ("ASC") 805,
"Business Combinations", the acquisitions of 30 Day and Immediate were accounted
for as transactions between entities under common control, whereby the acquired
assets and liabilities of 30 Day and Immediate were recognized in the financial
statements at their carrying amounts.
On September 10, 2010, shareholders of 30DC DE exchanged 100% of their 30DC DE
shares for 60,984,000 shares of Infinity Capital Group, Inc. ("Infinity"), a
publicly traded company which trades over the counter ("OTC") on the OTC Pink
market operated by OTC Market Group, Inc. 30DC DE became a wholly owned
subsidiary of Infinity Capital Group, Inc. which has subsequently changed its
name to 30DC, Inc. ("30DC" and together with its subsidiary "the Company").
After the share exchange, the former shareholders in 30DC DE held approximately
90% of the outstanding shares in Infinity and the officers of 30DC DE became the
officers of Infinity. 30DC DE was the accounting acquirer in the transaction and
its historical financial statements will be the historical financial statements
of 30DC. Infinity's operations were discontinued and subsequent to the share
exchange are accounted for as discontinued operations.
30DC offers internet marketing services and related training that help Internet
companies in operating their businesses. 30DC's core business units are 30 Day
and Immediate. 30 Day, with approximately 100,000 active online participants,
offers a free e-commerce training program year round along with an online
education subscription service and periodic premium live seminars that are
targeted to experienced internet business operators. Immediate is an online
educational program subscription service offering high-end Internet marketing
instruction and strategies for experienced online commerce practitioners. Other
revenue streams include sales of instructional courses and software tools
related to internet marketing and from commissions on third party products sold
via introduction to the 30DC customer base of active online participants and
subscribers which are referred to as affiliate marketing commissions. The
Company's recorded and unrecorded assets consist primarily of property and
equipment, goodwill and internally developed intangible property such as domain
names, websites, customer lists and copyrights.
In May of 2012 the Company signed a joint venture agreement ("JV Agreement")
with Netbloo Media, Ltd. ("Netbloo") for the MagCast Publishing Platform
("MagCast") which was jointly developed. MagCast provides customers access to a
cloud-based service to create an application ("App") to publish a digital
magazine on Apple Corporation's online marketplace Apple Newsstand and includes
executive training modules as well as a three-month trial subscription to the
Company's Immediate Edge subscription product and other bonus products. Under
the terms of the JV Agreement the Company is responsible for marketing, sales
and administration and Netbloo is responsible for product development. 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. Pursuant to ASC 808-10
the joint operating activity with Netbloo is considered a collaborative
arrangement. The Company has been deemed the principal participant and has
recorded all revenue under the JV Agreement on a gross basis with the 50% of
-6-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2012
(UNAUDITED)
revenue due Netbloo, net of affiliate commissions and other allowable costs,
recorded as commission expense.
On December 31, 2012 the Company and Netbloo entered into an asset purchase
agreement for the Company to purchase Netbloo's 50% interest in the MagCast JV
Agreement and Market Pro Max an online marketing platform that allows anyone to
create digital products and quickly build a variety of eCommerce marketing
websites for a purchase price of 13,487,363 shares of the Company's common
stock. Netbloo received a three year contractor agreement with annual
compensation of $300,000 which is payable in monthly installments of $25,000 and
may be terminated after two years subject to a six month termination payment.
The contractor agreement was effective October 1, 2012.
GOING CONCERN
The condensed consolidated financial statements have been prepared using
accounting principles generally accepted in the United States of America
applicable for a going concern which assumes that the Company will realize its
assets and discharge its liabilities in the ordinary course of business. As of
September 30, 2012, the Company has a working capital deficit of approximately
$1,700,000 and has accumulated losses of approximately $2,782,000 since its
inception. At June 30, 2013 the Company had a working capital deficit of
approximately $1,840,000. Subsequent to September 30, 2012 the Company received
$105,000 in cash from the sale of 300,000 shares of Strategic Environmental and
Energy Resources, Inc. which were included in Assets of Discontinued Operations.
The Company's ability to continue as a going concern is dependent upon its
ability to obtain the necessary financing or to earn profits from its business
operations to meet its obligations and pay its liabilities arising from normal
business operations when they come due. In May 2012, the Company launched
MagCast which the Company expects to be an integral part of its businesses on an
ongoing basis. MagCast is being sold through an affiliate network which expands
the Company's selling capability and has a broad target market beyond the
Company's traditional customer base. 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.
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, 2013 or any other
period. In addition, the balance sheet data at June 30, 2012 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
-7-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2012
(UNAUDITED)
Statements for the year ended June 30, 2012 included in the Company's annual
report on Form 10-K which was filed on June 3, 2013.
The unaudited condensed consolidated financial statements include the accounts
of 30DC, Inc., (f/k/a Infinity Capital Group, Inc.) and its subsidiary 30DC DE.
FOREIGN CURRENCY TRANSLATION AND REMEASUREMENT
The functional currency of the Company's 30 Day Challenge division switched to
the United States dollar from the Australian dollar on July 1, 2012. All other
Company operations have and continue to use the United States dollar as their
functional currency. For all accounting periods prior to July 1, 2012, the
Company followed ASC 830 "Foreign Currency Matters", under which functional
currency assets and liabilities are translated into the reporting currency, US
Dollars, using period end rates of exchange and the related translation
adjustments are recorded as a separate component of accumulated other
comprehensive income. Functional statements of operations amounts expressed in
functional currencies are translated using average exchange rates for the
respective periods. Re-measurement adjustments and gains or losses resulting
from foreign currency transactions are recorded as foreign exchange gains or
losses in the Statement of Operations. The historical foreign currency
translation loss remains on the Balance Sheet at $(102,858) which was the
balance at June 30, 2012.
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 because their inclusion would be anti-dilutive. In computing net
loss per share, warrants with an insignificant exercise price are deemed to be
outstanding common stock.
RECENT ACCOUNTING PRONOUNCEMENTS
Management does not believe that any recently issued, but not effective,
accounting standards, if currently adopted, would have a material effect on the
Company's financial statements.
NOTE 3. COLLABORATIVE ARRANGEMENT
---------------------------------
In May of 2012 the Company signed a joint venture agreement ("JV Agreement")
with Netbloo Media, Ltd. ("Netbloo") for the MagCast Publishing Platform
("MagCast") which was jointly developed. MagCast provides customers access to a
cloud-based service to create an application ("App") to publish a digital
magazine on Apple Corporation's online marketplace Apple Newsstand and includes
executive training modules as well as a three-month trial subscription to the
Company's Immediate Edge subscription product and other bonus products. Under
the terms of the JV Agreement the Company is responsible for marketing, sales
and administration and Netbloo is responsible for product development. 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. Pursuant to ASC 808-10
the joint operating activity with Netbloo is considered a collaborative
arrangement. The Company has been deemed the principal participant and has
recorded all transactions under the JV Agreement on a gross basis with the 50%
amount net of affiliate commissions and other allowable costs due Netbloo
recorded as commission expense.
-8-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2012
(UNAUDITED)
The following revenue and expense amounts from transactions under the JV
Agreement are included in the Statement of Operations for the three months ended
September 30, 2012;
Sales of MagCast Publishing Platform $ 76,457
Affiliate Commission Expense 4,291
Transaction Fees 5,956
Independent Contractors 5,449
Internet Expenses 2,895
Netbloo Commissions 28,933
-----------
Net Profit $ 28,933
===========
NOTE 4. DISCONTINUED OPERATIONS
-------------------------------
On September 10, 2010, immediately prior to the share exchange with 30DC DE,
Infinity withdrew its election to operate as a Business Development Company
("BDC") under the Investment Company Act of 1940 ("1940 Act"). Infinity
historically operated as a non-diversified, closed-end management investment
company and prepared its financial statements as required by the 1940 Act. 30DC
is no longer actively operating the BDC and the assets, liabilities and results
of operations of Infinity's former business are shown as discontinued operations
in the Company's financial statements subsequent to the share exchange with
30DC.
Results of Discontinued Operations for the
Three Months Ended Three Months Ended
September 30, 2012 September 30, 2011
------------------ ------------------
Revenues $ - $ -
Operating expenses 4,184 5,056
Loss from operations (4,184) (5,056)
Unrealized gain (loss) on marketable securities (833) 2,500
------------------ ------------------
Net (loss) income $ (5,017) $ (2,556)
================== ==================
Assets and Liabilities of Discontinued Operations as of
September 30, 2012 June 30, 2012
------------------ -------------------
ASSETS
Marketable securities $ 94,792 $ 95,625
------------------ -------------------
Total assets of discontinued operations $ 94,792 $ 95,625
================== ===================
LIABILITIES
Accounts payable $ 93,324 $ 94,428
Accrued expenses 60,787 58,138
Notes payable 124,020 124,770
Due to related parties 88,104 97,420
------------------ -------------------
Total liabilities of discontinued operations $ 366,235 $ 374,756
================== ===================
-9-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2012
(UNAUDITED)
Notes Payable
Included in liabilities of discontinued operations at September 30, 2012 and
June 30, 2012 are $159,051 and $169,801 respectively (including $35,031 and
$45,031 in due to related parties respectively) in notes payable plus related
accrued interest of which are all in default for lack of repayment by their due
date. For the three months ended September 30, 2012 and September 30, 2011 the
Company incurred interest expense on notes payable of $3,582 and $4,439
respectively which is included in the Statement of Operations under income
(loss) from discontinued operations.
NOTE 5. RELATED PARTY TRANSACTIONS
-----------------------------------
The Company entered into three-year Contract For Services Agreements commencing
July 2009 ("Commencement Date") 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 were 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. The Marillion and
Raine Ventures contracts expired June 30, 2012 and have continued on a month to
month basis under the same terms.
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
was amended to $317,825 AUD Dollars and the Jesselton original annual contract
amount of $200,000 was amended to $254,260 AUD. If in any year starting from the
Commencement Date, revenues of 30DC, Inc. doubles then a bonus equal to 50% of
cash remuneration will be due in shares of 30DC, Inc. as additional
compensation. The bonus was not earned in the fiscal year ending June 30, 2012
and nothing has been accrued in the September 30, 2012 financial statements,
since the proportionate amount to reach the bonus for the fiscal year ending
June 30, 2013 has not been earned.
During the term of the agreements, Marillion, Jesselton and Raine Ventures were
prohibited from engaging in any other business activity that competes with 30DC,
Inc. without written consent of the 30DC, Inc. Board of Directors.
In July, 2009 when 30DC acquired 30 Day and Immediate, Messrs. Dale and Carey
signed executive services agreements with the Company and Mr. Raine signed a
consulting services agreement with the Company. Pursuant to the agreements with
Marillion, Jesselton and 23V (effective April 1, 2010 Raine Ventures replaced
23V), the contract for services agreements memorialized the preexisting
contractual relationship and formally set the terms and conditions between the
parties from July 1, 2009 and all prior understandings and agreements - oral or
written were merged therein, including the respective executive services and
consulting services agreements. All compensation under the contract for services
agreements is identical with the respective executive services and consulting
agreements. Where applicable under local law, all payroll and other taxes are
the responsibility of Marillion, Jesselton, 23V and Raine Ventures and they have
provided the Company with indemnification of such taxes which under the prior
-10-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2012
(UNAUDITED)
contracts may have been a liability of the Company. The parties acknowledged
that the effective date of the agreements relates back to the contractual
relationship between the parties.
Beginning July 1, 2011, the Company paid Marillion $2,500 AUD ($2,582 USD) per
month to cover office related expenses which is included in operating expenses.
Effective July 15, 2012, the Company entered into a six-month Consulting
Services Agreement with GHL Group, Ltd., whose President, Gregory H. Laborde is
a Director. Pursuant to the Consulting Services Agreement, GHL Group received
500,000 shares of the Company's restricted common stock and payments of $3,000
monthly for services including but not limited to evaluation of financial
forecasts, assisting in the development of business and financial plans and
assisting in the identification of potential acquisitions and financial sources.
The 500,000 shares were valued at the $0.09 per share price on July 15, 2012 and
$45,000 was recorded as related party contractor fees on that date. The contract
expired January 15, 2013 and has continued on a month to month basis under the
terms of the expired agreement.
At June 30, 2012, due to related parties mainly 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, $9,815 due to Raine
Ventures under its contractor agreement and $321,000 due to Theodore A.
Greenberg for compensation.
At September 30, 2012, due to related parties mainly 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, $8,575 due to Raine
Ventures under its contractor agreement and $371,000 due to Theodore A.
Greenberg for compensation.
NOTE 6. PROPERTY AND EQUIPMENT
-------------------------------
Property and equipment consists of the following:
September 30, 2012 June 30, 2012
------------------ -------------
Computer and Audio Visual Equipment $ 442,124 $ 437,659
Office equipment and Improvements 68,859 68,859
------------------ -------------
510,983 506,518
Less accumulated depreciation and amortization (481,599) (472,418)
------------------ -------------
$ 29,384 $ 34,100
================== =============
Depreciation and amortization expense was $9,182 for the three months ended
September 30, 2012 and $17,378 for the three months ended September 30, 2011.
Effective July 1, 2012 US dollar is the functional currency for the entire
Company. Prior to July 1, 2012 property and equipment, net were stated in the
functional currency where located and where applicable were translated to the
reporting currency of the US Dollar at each period end. Accordingly, property
and equipment, net were subject to change as a result of changes in foreign
currency exchange rates.
NOTE 7. INCOME TAXES
---------------------
As of June 30, 2012, the Company had net operating loss carryovers for United
States income tax purposes of approximately $1,130,600, which begin to expire in
2030. 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 U.S.
-11-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2012
(UNAUDITED)
federal tax returns and has filed state and local tax returns due since the
share transaction. The Company is in the process of filing State and local tax
returns for Infinity from 2005-2009. The Company believes no material tax
balance is due for all tax returns which have not yet been filed. The Company
has not provided a tax benefit for the three months ended September 30, 2012 and
September 30, 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, 2009.
As a corporation formed in the United States, the Company is subject to the
United States corporation income tax on worldwide income. Since majority
ownership of the Company's shares are held by Australian residents, the Company
is deemed to be an Australian resident corporation and is subject to Australian
corporate income tax on worldwide net income which for Infinity was from the
time of the share exchange discussed in Note 1. Corporate income taxes paid to
Australia will generally be available as a credit against United States
corporation income tax. Prior to the share exchange with Infinity, the Company
did not have nexus to any individual state in the United States and accordingly
no deferred tax provision has been recognized for state taxes. Australia does
not have any state corporation income tax. Future changes in Company operations
might impact the geographic mix which could affect the Company's overall
effective tax rate.
The Company applies the provisions of ASC 740 "Income Taxes", which provides
clarification related to the process associated with accounting for uncertain
tax positions recognized in the interim financial statements. ASC 740 prescribes
a more likely than not threshold for financial statement recognition and
measurement of a tax position taken, or expected to be taken, in a tax return.
ASC 740 also provides guidance related to, amongst other things, classification,
accounting for interest and penalties associated with tax positions, and
disclosure requirements.
The Company classifies interest and penalties, if any, related to tax
uncertainties as income tax expense. There have not been any material changes in
our liability for unrecognized tax benefits, including interest and penalties,
during the three months ended September 30, 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,
156,000 of these options are held by Pierce McNally a director of the Company,
196,000 options exercisable at 50 cents per share expiring January 5, 2019,
36,500 of these options are held by Pierce McNally a director of the Company,
The balance of these options 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
-12-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2012
(UNAUDITED)
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 three months ended September 30, 2012, the Company issued 500,000
shares of common stock to GHL Group, Ltd. for consulting services detailed in
Note 5 and did not issue any options or warrants.
As further detailed in Note 10, on October 11, 2012 1,500,000 options
exercisable at $0.08 per share expiring on October 10, 2022 were issued to
Theodore A. Greenberg, the Company's Chief Financial Officer and a Director and
1,500,000 options exercisable at $0.08 per share expiring on October 10, 2022
were issued to Henry Pinskier who joined the Company as a director in October
2012.
NOTE 9. SUPPLEMENTAL SCHEDULE OF OPERATING EXPENSES
---------------------------------------------------
Three Months Three Months
Ended Ended
September 30, September 30,
2012 2011
---------------- ----------------
Related Party Contractor Fees (1) $ 200,697 $ 213,052
Officer's Salary 50,000 50,000
Independent Contractors 84,552 114,359
Commission Expense 27,546 13,922
Professional Fees 29,109 136,776
Travel Expenses 12,297 9,436
Telephone and Data Lines 27,557 34,544
Other Operating Costs 59,129 69,268
---------------- ---------------
Total Operating Expenses $ 490,887 $ 641,357
================ ===============
----------------------------
(1) Related party contractors include Marillion which provides services to
the Company including for Edward Dale to act as Chief Executive Officer
of the Company, Raine Ventures which provides services to the Company
including for Dan Raine to act as Vice President for Business
Development, GHL Group, Ltd., whose President, Gregory H. Laborde is a
Director, and through March 1, 2013 included Jesselton, Ltd. which
provided services to the Company including Clinton Carey serving as
Chief Operating Officer of the Company.
-13-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2012
(UNAUDITED)
NOTE 10. SUBSEQUENT EVENTS
---------------------------
On October 11, 2012, the Company's board of directors approved the Company's
2012 stock option plan and grants of 3,000,000 options to purchase the Company's
common stock with an exercise price of $0.08 per share. 1,500,000 of these
options were granted the Theodore A. Greenberg, the Company's Chief Financial
Officer and a Director of the Company and 1,500,000 of these options were
granted to Henry Pinskier who joined the Company as a Director in October 2012.
On November 20, 2012 the Company issued 15,385 shares of common stock to a
consultant as partial payment for services.
On December 31, 2012 the Company and Netbloo entered into an asset purchase
agreement for the Company to purchase Netbloo's interest in the MagCast JV
Agreement and Market Pro Max a product which helps companies run online
information businesses for total consideration of 13,487,363 of the Company's
common shares. Netbloo received a three year contractor agreement with annual
compensation of $300,000 which is payable in monthly installments of $25,000 and
may be terminated after two years subject to a six month termination payment.
The contractor agreement was effective October 1, 2012.
Management has evaluated subsequent events to determine if events or
transactions occurring through the date on which the financial statements were
available to be issued, require potential adjustment to or disclosure in the
Company's financial statements.
-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.
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.
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
-15-
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.
In May of 2012 the Company signed a JV Agreement with Netbloo for the MagCast
Publishing Platform ("MagCast") which was jointly developed. MagCast provides
customers access to a cloud-based service to create an application ("App") to
publish a digital magazine on Apple Corporation's online marketplace Apple
Newsstand and includes executive training modules as well as a three-month trial
subscription to the Company's Immediate Edge subscription product and other
bonus products. Under the terms of the JV Agreement the Company is responsible
for marketing, sales and administration and Netbloo is responsible for product
development. MagCast was launched in May 2012 and a majority of sales were the
result of affiliate marketing relationships which resulted in commissions of 50%
of gross revenue for those sales to the affiliate responsible for the sale. All
MagCast sales revenue has been recorded gross by the Company and commission
expense has been recorded for the amount due to Netbloo which is 50% of revenue
reduced by affiliate commissions and other allowable costs.
On December 31, 2012 the Company and Netbloo entered into an asset purchase
agreement for the Company to purchase Netbloo's 50% interest in the MagCast JV
Agreement and Market Pro Max, a product which helps companies run online
information businesses for a purchase price of 13,487,368 shares of the
Company's common stock. Netbloo received a three year contractor agreement with
annual compensation of $300,000 which is payable in monthly installments of
$25,000 and may be terminated after two years subject to a six month termination
payment. The contractor agreement was effective October 1, 2012.
The Company has no plans at this time for purchases or sales of fixed assets
which would occur in the next twelve months.
The Company has no expectation or anticipation of significant changes in number
of employees in the next twelve months.
RESULTS OF OPERATIONS
FOR THE THREE MONTH PERIOD ENDED SEPTEMBER 30, 2012 COMPARED TO THE THREE MONTH
PERIOD ENDED SEPTEMBER 30, 2011.
During the three months ended September 30, 2012, 30DC, Inc. recognized revenues
of $449,739 from its operations compared to $415,258 during the three months
ended September 30, 2011. Revenues of the Company were from the following
sources during the three months ended September 30, 2012 compared to September
30, 2011.
Three Months Ended Three Months Ended Increase or
September 30, 2012 September 30, 2011 (Decrease)
------------------ ------------------- -------------
Revenue
Commissions $ 103,817 $ 102,500 $ 1,317
Subscription Revenue 118,237 194,889 (76,552)
Products and Services 86,105 14,073 72,032
Seminars and Mentoring 141,580 103,796 37,784
------------------ ------------------- -------------
Total Revenues $ 449,739 $ 415,258 $ 34,481
------------------ ------------------- -------------
The $76,552 decrease in subscription revenue was due to discontinuation of the
Challenge Plus which had revenue of $29,573 in the three month period ended
September 30, 2011 and a net decrease in active subscribers for the Immediate
Edge. For the three months ended September 30, 2012 the Immediate Edge active
subscriber base averaged 450 per month and for the three months ended September
-16-
30, 2011 the Immediate Edge active subscriber base averaged 547 per month. The
decrease in Immediate Edge subscribers resulted from a promotion in May 2011
which produced a short term increase in subscribers during the three months
ended September 30, 2011 and did not repeat during the three months ended
September 30, 2012.
The $72,032 increase in products and services revenue was due to $76,457 in
sales of the MagCast Publishing Platform during the quarter ended September 30,
2012 which was not yet launched in the quarter ended September 30, 2011.
The $37,784 increase in seminars and mentoring income resulted primarily from an
increase in price of the mentoring program and premium pricing for platinum
mentoring students. The Company's mentoring program has been historically priced
from $5,000 to $10,000 per year and the revenue has been recognized ratably over
the one year term. The platinum mentoring program was priced at $25,000 per
year. The number of active mentoring students was similar; for the three months
ended September 30, 2012 there was an average of 76 mentoring students per month
and for the three months ended September 30, 2011 there was an average of 77
mentoring students. The Company discontinued its historical mentoring program as
of December 31, 2012 to redirect Company resources toward products and services
sales growth which management believes has more potential for long-term growth
than mentoring which is labor intensive and does have the ability to leverage
and scale.
During the three months ended September 30, 2012, the Company incurred $490,887
in operational expenses compared to $641,357 during the three months ended
September 30, 2011. Operational expenses during the three months ended September
30, 2012 and 2011, include the following categories:
Three Months Ended Three Months Ended Increase or
September 30, 2012 September 30, 2011 Decrease
------------------ ------------------ -----------
Accounting Fees $ 20,000 $ 115,388 $ (95,388)
Credit Card Processing Fees 12,305 12,896 (591)
Commissions 27,546 13,922 13,624
Independent Contractors 84,552 114,359 (29,807)
Depreciation 9,182 17,378 (8,196)
Internet Expenses 20,642 16,458 4,184
Legal Fees 9,109 21,388 (12,279)
Officer's Salaries 50,000 50,000 -
Payroll Taxes 4,118 10,212 (6,094)
Related Party Contractors 200,697 213,052 (12,355)
Telephone and Data Lines 27,557 34,544 (6,987)
Travel & Entertainment 12,297 9,705 2,592
Other Operating Expenses 12,882 12,055 827
------------------ ------------------ ------------
Total Operating Expenses $ 490,887 $ 641,357 $ (150,470)
================== ================== ============
The decrease of $95,388 in accounting fees was due to a delay in the audit for
the Company's June 30, 2012 year-end and an increase in fees due to multiple
filings during the September 2011 quarter covering a number of prior periods.
The increase of $13,634 in commissions resulted from affiliate commissions and
collaborative arrangement commissions due to the increase in products sold
including the MagCast Publishing Platform in the September 2012 quarter compared
to the September 2011 quarter.
The decrease of $29,807 in independent contractors is primarily due to the
reduction of one contractor in the IE division who was paid approximately
$10,000 in the September 2011 quarter and the reduction of two contractors in
the 30 Day division who were paid a total of approximately $15,000 in the
-17-
September 2011 quarter on of whom was strictly related to the Challenge Plus
subscription product which has been discontinued.
The decrease in legal fees of $12,279 was from a decrease in SEC counsel costs
due a delay in the Company filing its 10K for the year ended June 30, 2012 and
multiple filings in the September 2011 quarter.
Related Party Contractor Fees consist of payments to Marillion Partnership,
Raine Ventures, LLC and through March 1, 2012, 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 as well as the consulting
contract with GHL Group, Ltd. whose President, Gregory H. Laborde is a Director
of the Company. The $12,355 net decrease results from a decrease of $66,912 for
Jesselton which is no longer a contractor to the Company offset by the $7,500
paid to GHL, Group, Ltd. in the September 2012 quarter and 500,000 shares of
common stock issued to GHL Group, Ltd. valued at $45,000.
During the three months ended September 30, 2012, the Company recognized a net
loss from continuing operations of ($41,178) compared to a net loss of
($232,501) during the three months ended September 30, 2011. The decreased loss
of $191,323 was due to the decrease in operating expenses of $150,470 and the
increase in revenues of $34,481.
LIQUIDITY AND CAPITAL RESOURCES
The Company had a cash balance of $547,688 at September 30, 2012 and the Company
had a working capital deficit of $1,699,709. At June 30, 2013 the Company had a
working capital deficit of approximately $1,840,000; the approximately $140,000
additional working capital deficit was funded by an increase in the amount due
to related parties. Subsequent to September 30, 2012 the Company received
$105,000 in cash from the sale of 300,000 shares of Strategic Environmental and
Energy Resources, Inc. which were included in Assets of Discontinued Operations.
To fund working capital for the remainder of the year ending June 30, 2013 and
in the year ending June 30, 2014, the Company expects to raise capital and to
improve the results of operations from increasing revenue as well as a reduction
in operating costs. Increased revenue is expected to come from further sales of
MagCast Publishing Platform, including recurring revenue as the Company
transitions to monthly licenses, Market Pro Max which has not been extensively
marketed and introduction of new products some of which will be extensions of
existing product lines. During the year ended June 30, 2012 operating costs
included significant amounts due to Netbloo under the collaborative arrangement
which subsequent to the Company's acquisition of the other 50% of the
collaborative arrangement from Netbloo are no longer owed.
Included in liabilities of discontinued operations at September 30, 2012 is
$159,051 (including $35,031 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. Approximately $50,000 of this amount has been repaid subsequent to
September 30, 2012.
During the three month period ended September 30, 2012, the Company used
$466,308 in operating activities. During the three month period ended September
30, 2011, the Company used $4,938 in operating activities. The increased use of
funds of $461,370 was due to payments of accrued affiliate commissions and
accrued collaborative arrangement commissions offset by collection of accounts
receivable and the decreased operating loss. Certain amounts which were in
accrued expenses at June 30, 2012 are included in accounts payable at September
30, 2012 which is reflected in the change in accounts payable.
-18-
GOING CONCERN
The condensed consolidated financial statements have been prepared using
accounting principles generally accepted in the United States of America
applicable for a going concern which assumes that the Company will realize its
assets and discharge its liabilities in the ordinary course of business. As of
September 30, 2012, the Company has a working capital deficit of approximately
$1,700,000 and has accumulated losses of approximately $2,782,000 since its
inception. At June 30, 2013 the Company had a working capital deficit of
approximately $1,840,000; the approximately $140,000 additional working capital
deficit was funded by an increase in the amount due to related parties.
Subsequent to September 30, 2012 the Company received $105,000 in cash from the
sale of 300,000 shares of Strategic Environmental and Energy Resources, Inc.
which were included in Assets of Discontinued Operations. The Company's ability
to continue as a going concern is dependent upon the ability of the Company to
obtain the necessary financing or to earn profits from its business operations
to meet its obligations and pay its liabilities arising from normal business
operations when they come due. In May 2012 the Company launched MagCast which
the Company expects to be an integral part of its businesses on an ongoing
basis. MagCast is being sold through an affiliate network which expands the
Company's selling capability and has a broad target market beyond the Company's
traditional customer base. Until the Company achieves sustained profitability it
does not have sufficient capital to meet its needs and continues to seek loans
or equity placements to cover such cash needs.
No commitments to provide additional funds have been made and there can be no
assurance that any additional funds will be available to cover expenses as they
may be incurred. If the Company is unable to raise additional capital or
encounters unforeseen circumstances, it may be required to take additional
measures to conserve liquidity, which could include, but not necessarily be
limited to, issuance of additional shares of the Company's stock to settle
operating liabilities which would dilute existing shareholders, curtailing its
operations, suspending the pursuit of its business plan and controlling overhead
expenses. The Company cannot provide any assurance that new financing will be
available to it on commercially acceptable terms, if at all. These conditions
raise substantial doubt about the Company's ability to continue as a going
concern.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
-------------------------------------------------------------------
The Company earns the majority of its revenue in United States dollars ("USD")
and pays a significant amount of its expense in Australian dollars ("AUD").
Material fluctuations in the exchange rate between USD and AUD may have material
impact on the Company's results of operations.
ITEM 4. CONTROLS AND PROCEDURES
--------------------------------
DISCLOSURES CONTROLS AND PROCEDURES
We have adopted and maintain disclosure controls and procedures (as such term is
defined in Rules 13a 15(e) and 15d-15(e) under the Securities Exchange Act of
1934, as amended (the "Exchange Act")) that are designed to ensure that
information required to be disclosed in our reports under the Exchange Act, is
recorded, processed, summarized and reported within the time periods required
under the SEC's rules and forms and that the information is gathered and
communicated to our management, including our Chief Executive Officer (Principal
Executive Officer) and Principal Financial Officer, as appropriate, to allow for
timely decisions regarding required disclosure.
As required by SEC Rule 15d-15(b) for the quarter ended September 30, 2012, 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
-19-
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.
MANAGEMENT'S QUARTERLY REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING.
With the participation of our Chief Executive Officer and Chief Accounting
Officer, we have evaluated the effectiveness of our disclosure controls and
procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended (the " Exchange Act ")), as of the
end of the period covered by this report. Based upon such evaluation, our Chief
Executive Officer and Chief Financial Officer have concluded that, as of the end
of such periods, our disclosure controls and procedures were not effective due
to the material weaknesses noted below, in ensuring that (i) information
required to be disclosed by us in the reports that we file or submit under the
Exchange Act is recorded, processed, summarized and reported, within the time
periods specified in the Securities and Exchange Commission's rules and forms
and (ii) information required to be disclosed by us in the reports that we file
or submit under the Exchange Act is accumulated and communicated to our
management, including our principal executive and principal financial officers,
or persons performing similar functions, as appropriate to allow timely
decisions regarding required disclosure.
(1) Due to the small size of its staff, the Company did not have
sufficient segregation of duties to support its internal control over
financial reporting.
(2) The Company has installed accounting software which is not
comprehensive and which does not prevent erroneous or unauthorized
changes to previous reporting periods and does not provide an adequate
audit trail or entries made in the accounting software.
REMEDIATION OF MATERIAL WEAKNESS
As our current financial condition allows, we are in the process of analyzing
and developing our processes for the establishment of formal policies and
procedures with necessary segregation of duties, which will establish mitigating
controls to compensate for the risk due to lack of segregation of duties.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
There was no change in our internal control over financial reporting that
occurred during the fiscal quarter ended September 30, 2012, that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
-20-
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, 2012 through September 30, 2012 the Company issued the
following equity securities;
On July 15, 2012, the Company issued 500,000 common shares to GHL Group, Ltd.
whose President, Gregory H. Laborde is a Director, pursuant to a contract to
provide consulting services to the Company.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
---------------------------------------
Included in liabilities of discontinued operations at September 30, 2011 is
$190,367 (including $58,347 included in due to related parties) in notes payable
plus related accrued interest that are in default for lack of repayment by their
due date.
ITEM 4. REMOVED AND RESERVED
----------------------------
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.
--------------------------------------------------------------------------------
-21-
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: July 16, 2013 By:/s/ Edward Dale
--------------------------------------
Edward Dale
Principal Executive Officer
Chief Executive Officer
President
Dated: July 16, 2013 By:/s/ Theodore A. Greenberg
--------------------------------------
Theodore A. Greenberg,
Principal Accounting Officer
Chief Financial Officer
-22