Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For Quarterly Period Ended December 31, 2013
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Transition period from _______________ to ______________
COMMISSION FILE NUMBER: 000-30999
30DC, INC.
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(Exact name of registrant as specified in its charter)
MARYLAND 16-1675285
--------------------------------- --------------------------------------
(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 February 7, 2014, the number of shares outstanding of the registrant's
class of common stock was 87,413,464.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
PAGE
----
Item 1. Financial Statements 2
Condensed Consolidated Balance Sheets as of December 31, 2013
(Unaudited) and June 30, 2013 3
Condensed Consolidated Statements of Operations (Unaudited) for
the Six Months and Three Months Ended December 31, 2013 and 2012 4
Condensed Consolidated Statements of Cash Flows (Unaudited) for
the Six Months Ended December 31, 2013 and 2012 5
Notes to Condensed Consolidated Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 12
Item 3. Quantitative and Qualitative Disclosures About Market Risk 18
Item 4. Controls and Procedures 18
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 20
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 20
Item 3. Defaults upon Senior Securities 20
Item 4. Mine Safety Disclosures 20
Item 5. Other Information 20
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
December June
31, 2013 30, 2013
---------------- -------------------
Unaudited
ASSETS
Current Assets
Cash and Cash Equivalents $ 144,721 $ 116,650
Restricted Cash 187,609 47,984
Accrued Commissions Receivable 2,000 32,035
Accounts Receivable 237,596 26,114
Prepaid Expenses 8,138 3,648
Assets of Discontinued Operations 89,833 72,458
---------------- -------------------
Total Current Assets 669,897 298,889
Property and Equipment, Net 21,638 23,045
Intangible Assets, Net 253,000 286,000
Goodwill 2,252,849 2,252,849
---------------- -------------------
Total Assets $ 3,197,384 $ 2,860,783
================ ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable $ 297,168 $ 514,294
Accrued Expenses and Refunds 673,636 374,219
Deferred Revenue 123,849 23,649
Due to Related Parties 699,342 924,057
Liabilities of Discontinued Operations 226,009 303,358
---------------- -------------------
Total Current Liabilities 2,020,004 2,139,577
---------------- -------------------
Total Liabilities 2,020,004 2,139,577
---------------- -------------------
Stockholders' Equity
Preferred Stock, Par Value $0.001, 10,000,000 Authorized, -0- Issued - -
Common Stock, Par Value $0.001, 100,000,000 authorized,
87,413,464 and 86,986,939 issued and outstanding respectively 87,413 86,987
Paid in Capital 4,005,671 3,880,469
Accumulated Deficit (2,812,846) (3,143,392)
Accumulated Other Comprehensive Loss (102,858) (102,858)
---------------- -------------------
Total Stockholders' Equity 1,177,380 721,206
---------------- -------------------
Total Liabilities and Stockholders' Equity $ 3,197,384 $ 2,860,783
================ ===================
The accompanying notes are an integral part of the unaudited condensed
consolidated financial statements.
-3-
30DC, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Operations
Unaudited
For the Three Months Ended For the Six Months Ended
December 31, December 31,
2013 2012 2013 2012
---------------- ------------------ -------------- --------------
Revenue
Commissions $ 12,979 $ 60,147 $ 32,285 $ 163,964
Subscription Revenue 96,841 136,916 193,580 255,153
Products and Services 194,991 319,853 2,118,896 405,958
Seminars and Mentoring - 85,504 - 227,084
---------------- ------------------ -------------- --------------
Total Revenue 304,811 602,420 2,344,761 1,052,159
Operating Expenses 729,325 794,250 2,119,702 1,285,167
---------------- ------------------ -------------- --------------
Operating Income (Loss) (424,514) (191,830) 225,059 (233,008)
Other Income
Forgiveness of Debt 6,260 8,746 93,513 8,746
---------------- ------------------ -------------- --------------
Total Other Income 6,260 8,746 93,513 8,746
---------------- ------------------ -------------- --------------
Income (Loss) From Continuing Operations (418,254) (183,084) 318,572 (224,262)
Income (Loss) From Discontinued Operations 11,962 (3,957) 11,974 (8,974)
---------------- ------------------ -------------- --------------
Net Income (Loss) $ (406,292) $ (187,041) $ 330,546 $ (233,236)
================ ================== ============== ==============
Weighted Average Common Shares Outstanding
Basic 87,376,507 83,550,967 87,223,215 78,451,650
Diluted 87,376,507 83,550,967 87,723,215 78,451,650
Earnings Per Common Share (Basic)
Continuing Operations $ (0.00) $ (0.00) $ 0.00 $ (0.00)
Discontinued Operations 0.00 (0.00) 0.00 (0.00)
Net Income (Loss) Per Common Share $ (0.00) $ (0.00) $ 0.00 $ (0.00)
Earnings Per Common Share (Diluted)
Continuing Operations $ (0.00) $ (0.00) $ 0.00 $ (0.00)
Discontinued Operations 0.00 (0.00) 0.00 (0.00)
Net Income (Loss) Per Common Share $ (0.00) $ (0.00) $ 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
Six Months Ended December 31
Unaudited
2013 2012
----------------- --------------------
Cash Flows from Operating Activities:
Net Income (Loss) $ 330,546 $ (233,236)
(Income) Loss From Discontinued Operations (11,974) 8,974
Adjustments to Reconcile Loss from Continuing Operations
to Net Cash Provided By (Used) In Operations
Depreciation and Amortization 41,008 25,988
Equity Based Payments To Non-Employees - 47,000
Equity Based Payments To Employees 49,528 104,100
Gain on Debt Forgiveness (93,513) (8,746)
Changes in Operating Assets and Liabilities
Restricted Cash (139,625) (74,874)
Accrued Commissions Receivable 30,035 4,651
Accounts Receivable (211,482) 129,887
Prepaid Expenses (4,490) -
Accounts Payable (75,613) 89,654
Accrued Expenses and Refunds 299,417 (804,830)
Deferred Revenue 100,200 (219,565)
Due to Related Parties (224,715) 137,036
----------------- --------------------
Net Cash Provided By (Used in) Operating Activities 89,322 (793,961)
----------------- --------------------
Cash Flows from Investing Activities
Purchases of Property and Equipment (6,601) (10,758)
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Net Cash Used in Investing Activitities (6,601) (10,758)
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Cash Flows from Discontinued Operations
Cash Flows From Operating Activities (54,650) (27,210)
----------------- --------------------
Net Cash Used in Discontinued Operations (54,650) (27,210)
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Increase (Decrease) in Cash and Cash Equivalents 28,071 (831,929)
Cash and Cash Equivalents - Beginning of Period 116,650 1,031,167
----------------- --------------------
Cash and Cash Equivalents - End of Period $ 144,721 $ 199,238
================= ====================
Supplemental Disclosures of Non Cash Financing Activity Cash paid during the
period for:
Interest $ 30,796 $ 1,790
Income taxes 600 -
Common Stock Issued to Settle Liabilities $ 104,690 $ -
Common Stock Issued for Asset Acquisition:
Customer Lists $ - $ 75,000
Software - 255,000
Goodwill - 748,989
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
DECEMBER 31, 2013
(UNAUDITED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
--------------------------------------------------
BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with United States generally accepted accounting
principles ("GAAP") and with instructions to Form-10Q and Article 10 of
Regulation S-X. Accordingly, they do not include all the information required by
GAAP for a complete set of financial statements. In the opinion of management,
all adjustments, (including normal recurring accruals) considered necessary for
a fair presentation have been included in the financial statements. Operating
results for the interim period are not necessarily indicative of the results
that may be expected for the fiscal year ended June 30, 2014 or any other
period. In addition, the balance sheet data at June 30, 2013 was derived from
the audited financial statements but does not include all disclosures required
by GAAP. This Form 10-Q should be read in conjunction with the Audited Financial
Statements for the year ended June 30, 2013 included in the Company's annual
report on Form 10-K which was filed on December 23, 2013.
The unaudited condensed consolidated financial statements include the accounts
of 30DC, Inc., (f/k/a Infinity Capital Group, Inc.) and its subsidiary 30DC,
Inc., Delaware, ("30DC DE").
REVENUE RECOGNITION
The Company offers customers the option to purchase its digital products for a
single payment or for a higher price consisting of a down payment and additional
payments over a period of time which can be as long as one year. The Company
deems the sale to have occurred at the time of initial purchase and records the
full amount paid and/or due from a customer as revenue. Typically customers are
offered a period to review the product and request a refund and if a refund is
requested the company reverses the revenue which was recorded at the time of the
sale. The Company has recorded a liability for future refunds and reduced
revenue by that amount. If a customer defaults on an additional payment, the
customer loses access to the digital product. Based upon its past experience
with extended payment plans, the Company has estimated the number of future
defaulted payments and has reduced revenue and accounts receivable by that
amount.
For an additional charge, the Company offers customers ancillary services which
are not required to be purchased with a product. These services include
additional technical support and/or specific product services. The Company
recognizes revenue when the service is completed; receipts for services which
have not been completed are included in deferred revenue.
NOTE 2. GOING CONCERN
---------------------
The condensed consolidated financial statements have been prepared using
accounting principles generally accepted in the United States of America
applicable for a going concern which assumes that the Company will realize its
assets and discharge its liabilities in the ordinary course of business. As of
December 31, 2013, the Company had a working capital deficit of approximately
$1,350,000 and had accumulated losses of approximately $2,813,000 since its
inception. The Company's ability to continue as a going concern is dependent
upon its ability to obtain the necessary financing or to earn profits from its
business operations to meet its obligations and pay its liabilities arising from
normal business operations when they come due. In May 2012, the Company launched
MagCast which the Company expects to be an integral part of its businesses on an
ongoing basis. MagCast is being sold through an affiliate network which expands
the Company's selling capability and has a broad target market beyond the
Company's traditional customer base. In August 2013, the Company relaunched
MagCast with a large-scale promotion for which approximately 75% of sales were
through affiliates. The Company does not expect to have a promotion of this
scale more than once per year. Until the Company achieves sustained
-6-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013
(UNAUDITED)
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 3. ACQUISITION AND PRO FORMA FINANCIAL INFORMATION
-------------------------------------------------------
In October 2012 the Company reached an agreement for the Company to purchase
Netbloo's 50% interest in the MagCast JV Agreement and Market Pro Max an online
marketing platform that allows anyone to create digital products and quickly
build a variety of eCommerce marketing websites for a purchase price of
13,487,363 shares of the Company's common stock. Netbloo received a three year
contractor agreement with annual compensation of $300,000 which is payable in
monthly installments of $25,000 and may be terminated after two years subject to
a six month termination payment. The contractor agreement was effective October
1, 2012 and final documents were signed on December 31, 2012.
The following unaudited consolidated pro forma information gives effect to the
Netbloo acquisition as if this transaction had occurred at the beginning of each
period presented. The following unaudited pro forma information is presented for
illustration purposes only and is not necessarily indicative of the results that
would have been attained had the acquisition of this business been completed at
the beginning of each period presented, nor are they indicative of results that
may occur in any future periods.
Six Months Ended December 31,
2012
(Unaudited)
-------------------------------
Revenues $ 1,067,917
Operating Expenses 1,354,719
Other Income 8,746
-------------------------------
Loss from Continuing Operations (278,056)
Loss from Discontinued Operations (8,974)
-------------------------------
Net Loss $ (287,030)
===============================
Basic and Diluted Loss Per Share $ (0.00)
Weighted Average Shares Outstanding - Basic
& Diluted 86,881,252
NOTE 4. DISCONTINUED OPERATIONS
-------------------------------
On September 10, 2010, immediately prior to the share exchange with 30DC DE,
Infinity withdrew its election to operate as a Business Development Company
("BDC") under the Investment Company Act of 1940 ("1940 Act"). Infinity
historically operated as a non-diversified, closed-end management investment
company and prepared its financial statements as required by the 1940 Act. 30DC
is no longer actively operating the BDC and the assets, liabilities and results
of operations of Infinity's former business are shown as discontinued operations
in the Company's financial statements subsequent to the share exchange with
30DC. Investment companies report assets at fair value and the Company has
continued to report investment assets in discontinued operations on this basis.
-7-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013
(UNAUDITED)
Results of Discontinued Operations for the
Six Months Ended Six Months Ended
December 31, 2013 December 31, 2012
------------------------- -------------------------
Revenues $ - $ -
Operating expenses 6,197 8,141
Loss from operations (6,197) (8,141)
Forgiveness of debt 796 -
Unrealized gain on marketable securities 17,375 (833)
------------------------- -------------------------
Net (loss) income $ 11,974 $ (8,974)
========================= =========================
Three Months Ended Three Months Ended
December 31, 2013 December 31, 2012
------------------------- -------------------------
Revenues $ - $ -
Operating expenses 4,267 3,957
Loss from operations (4,267) (3,957)
Unrealized gain on marketable securities 16,229 -
------------------------- -------------------------
Net (loss) income $ 11,962 $ (3,957)
========================= =========================
Assets and Liabilities of Discontinued Operations as of
December 31, 2013 June 30, 2013
------------------- ------------------
ASSETS
Marketable securities $ $89,833 $ 72,458
------------------- ------------------
Total assets of discontinued operations $ 89,833 $ 72,458
=================== ==================
LIABILITIES
Accounts payable $ 73,258 $ 80,028
Accrued expenses 59,298 67,375
Notes payable 70,050 102,020
Due to related parties 23,403 53,935
------------------- ------------------
Total liabilities of discontinued operations $ 226,009 $ 303,358
=================== ==================
Notes Payable
Included in liabilities of discontinued operations at December 31, 2013 and June
30, 2013 are $70,050 and $102,051 respectively (including $-0- and $31 in due to
related parties respectively) in notes payable plus related accrued interest of
which are all in default for lack of repayment by their due date. For the six
months ended December 31, 2013 and December 31, 2012 the Company incurred
interest expense on notes payable of $6,100 and $7,013 respectively which is
included in the Statement of Operations under income (loss) from discontinued
operations.
-8-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013
(UNAUDITED)
NOTE 5. RELATED PARTY TRANSACTIONS
-----------------------------------
At December 31, 2013, due to related parties totaled $699,342. This mainly
consisted of $4,437 due to Raine Ventures under its contractor agreement which
includes the services of Dan Raine serving as the Company's Vice President of
Business Development, $40,915 due to Netbloo Media, Ltd. for earnings from the
collaborative arrangement prior to 30DC acquiring Netbloo's 50% interest in the
MagCast JV (note 3), $42,050 accrued for directors' fees for services of
non-executive directors and $612,000 due to Theodore A. Greenberg, CFO and
director, for compensation.
NOTE 6. INCOME TAXES
--------------------
As of June 30, 2013, the Company had net operating loss carryovers for United
States income tax purposes of approximately $1,277,400, which begin to expire in
2030. For income tax purposes, net income for the six month period ended
December 31, 2013 is completely offset by the net operating loss carryovers;
accordingly no income tax provision has been provided. For future periods, the
U.S. net operating loss carryovers may be subject to limitation under Internal
Revenue Code Section 382 should there be a greater than 50% change in ownership
as determined under the regulations.
NOTE 7. STOCKHOLDERS' EQUITY
----------------------------
COMMON STOCK
During the six months ended December 31, 2013, the Company issued common stock
as follows:
300,000 shares of common stock to Michael A. Littman as payment for $78,000
included in accounts payable. The Company recorded $30,000 of forgiveness of
debt for this transaction which is included as other income in the Statement of
Operations. Mr. Littman is an attorney who has provided services to the Company
and who provided services to Infinity prior to the share exchange.
The Company also recorded $57,253 of forgiveness of debt for reduced cash
payment of $95,453 ($96,500 AUD) over a 10 month period to settle an outstanding
liability of $152,706 to an Australian law firm which originated prior to 30DC's
transaction with Infinity in 2010 and was previously included in accounts
payable. The Company also recorded $6,260 of forgiveness of debt for reduced
cash payment to settle final payment due the Company's prior independent
auditing firm. The prior auditing firm also performed services to enable issuing
an opinion for the June 30, 2012 comparative year included with the Company's
June 30, 2013 Form 10K for which, as part of the settlement of the amount due,
no fees were charged.
26,525 shares of common stock to a creditor as full payment for a note payable
and accrued interest totaling $6,896. The Company recorded $796 of forgiveness
of debt for this transaction which is included in the Discontinued Operations
section of the Statement of Operations.
100,000 shares of common stock to a creditor as full payment for a note payable
and accrued interest totaling $19,794. The Company recorded $2,206 in additional
interest expense for this transaction which is included in the Discontinued
Operations section of the Statement of Operations.
-9-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013
(UNAUDITED)
WARRANTS
Information relating to outstanding warrants is as follows:
Weighted
Weighted Average
Number Average Remaining
of Exercise Contract
Shares Price Life (years)
---------------------------------------------
Outstanding warrants at 06/30/13 3,401,522 $ 0.50 2.30
Granted - - -
Exercised - - -
Forfeited/expired - - -
Outstanding warrants at 12/31/13 3,401,522 0.50 1.80
Exercisable on 12/31/13 3,401,522 0.50 1.80
NOTE 8. STOCK BASED COMPENSATION PLANS
---------------------------------------
The Company follows FASB Accounting Standards Codification No. 718 -
Compensation - Stock Compensation for share based payments to employees. The
Company follows FASB Accounting Standards Codification No. 505 for share based
payments to Non-Employees.
The Company recognized expense in the amount of $49,528 and $104,100 for the six
months ended December 31, 2013 and December 31, 2012 respectively and $24,764
and $104,100 for the three months ended December 31, 2013 and December 31, 2012
respectively for options granted in prior periods the cost of which is being
recorded on a straight-line basis over the vesting period. There was no impact
on the Company's cash flow.
Further information relating to stock options is as follows:
WEIGHTED
WEIGHTED AVERAGE
NUMBER AVERAGE REMAINING
OF EXERCISE CONTRACT
SHARES PRICE LIFE (YEARS)
---------------------------------------------
Outstanding options at 06/30/13 3,600,000 $ 0.18 8.61
Granted - - -
Exercised - - -
Forfeited/expired - - -
Outstanding options at 12/31/13 3,600,000 0.18 8.11
Exercisable on 12/31/13 1,600,000 0.31 7.27
The options have a contractual term of ten years. The aggregate intrinsic value
of shares outstanding and exercisable was $10,000 at December 31, 2013. Total
intrinsic value of options exercised was $0 for the three months ended December
31, 2013 as no options were exercised during this period.
At December 31, 2013, shares available for future stock option grants to
employees and directors under the 2012 Stock Option Plan were 4,500,000.
-10-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013
(UNAUDITED)
NOTE 9. SUPPLEMENTAL SCHEDULE OF OPERATING EXPENSES
---------------------------------------------------
Six Months Ended Six Months Ended
December 31, 2013 December 31, 2012
-------------------- -------------------
Related Party Contractor Fees (1) $ 450,666 $ 470,899
Officer's Salary 124,764 152,050
Directors' Fees 79,764 52,050
Independent Contractors 287,460 193,096
Commission Expense 754,918 119,147
Professional Fees 101,374 95,441
Credit Card Processing Fees 114,915 26,551
Telephone and Data Lines 28,012 52,204
Other Operating Costs 177,829 123,729
-------------------- -------------------
Total Operating Expenses $ $2,119,702 $ 1,285,167
==================== ===================
--------------------------------
(1) Related party contractors include Marillion which provides services to the
Company including for Edward Dale to act as Chief Executive Officer of the
Company, Raine Ventures which provides services to the Company including
for Dan Raine to act as Vice President for Business Development, GHL Group,
Ltd., whose President, Gregory H. Laborde is a Director and Netbloo which
was the joint developer of the MagCast Publishing Platform
Three Months Ended Three Months Ended
December 31, 2013 December 31, 2012
-------------------- --------------------
Related Party Contractor Fees (1) $ 228,657 $ 270,202
Officer's Salary 62,382 102,050
Directors' Fees 39,882 52,050
Independent Contractors 149,041 108,544
Commission Expense 35,570 91,601
Professional Fees 66,545 66,332
Credit Card Processing Fees 13,302 14,246
Telephone and Data Lines 16,398 24,647
Other Operating Costs 117,548 64,578
-------------------- --------------------
Total Operating Expenses $ 729,325 $ 794,250
==================== ====================
---------------------------
(1) Related party contractors include Marillion which provides services to the
Company including for Edward Dale to act as Chief Executive Officer of the
Company, Raine Ventures which provides services to the Company including
for Dan Raine to act as Vice President for Business Development, GHL Group,
Ltd., whose President, Gregory H. Laborde is a Director and Netbloo which
was the joint developer of the MagCast Publishing Platform
-11-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
--------------------------------------------------------------------------------
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH OUR UNAUDITED
FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED HEREIN. IN CONNECTION WITH, AND
BECAUSE WE DESIRE TO TAKE ADVANTAGE OF, THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995, WE CAUTION READERS REGARDING
CERTAIN FORWARD LOOKING STATEMENTS IN THE FOLLOWING DISCUSSION AND ELSEWHERE IN
THIS REPORT AND IN ANY OTHER STATEMENT MADE BY, OR ON OUR BEHALF, WHETHER OR NOT
IN FUTURE FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION. FORWARD-LOOKING
STATEMENTS ARE STATEMENTS NOT BASED ON HISTORICAL INFORMATION AND WHICH RELATE
TO FUTURE OPERATIONS, STRATEGIES, FINANCIAL RESULTS OR OTHER DEVELOPMENTS.
FORWARD LOOKING STATEMENTS ARE NECESSARILY BASED UPON ESTIMATES AND ASSUMPTIONS
THAT ARE INHERENTLY SUBJECT TO SIGNIFICANT BUSINESS, ECONOMIC AND COMPETITIVE
UNCERTAINTIES AND CONTINGENCIES, MANY OF WHICH ARE BEYOND OUR CONTROL AND MANY
OF WHICH, WITH RESPECT TO FUTURE BUSINESS DECISIONS, ARE SUBJECT TO CHANGE.
THESE UNCERTAINTIES AND CONTINGENCIES CAN AFFECT ACTUAL RESULTS AND COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED IN ANY FORWARD LOOKING
STATEMENTS MADE BY, OR ON OUR BEHALF. WE DISCLAIM ANY OBLIGATION TO UPDATE
FORWARD-LOOKING STATEMENTS.
OVERVIEW
30DC Inc. (Delaware) ("30DC DE") was incorporated on October 17, 2008 in the
state of Delaware and prior to July 15, 2009, 30DC DE had no active business
operations. On July 15, 2009, 30DC acquired the business of the "30 Day
Challenge" and "Immediate Edge" from two of 30DC's founding shareholders as part
of a plan to consolidate their business operations. 30 Day Challenge began in
2005 by offering a free online ecommerce training program. Immediate Edge began
in 2007 offering an online education program subscription service offering
high-end internet marketing instruction and strategies for experienced online
commerce practitioners.
On September 10, 2010, Infinity Capital Group, Inc., a Maryland Corporation,
("Infinity") entered into a Plan and Agreement of Reorganization (the
"Agreement") with 30DC DE, and the Shareholders of 30DC DE. ("30DC DE
Shareholders"). In exchange for 100% of the issued and outstanding shares of
30DC DE, Infinity issued 60,984,000 shares of its restricted common stock. The
shareholders of 30DC DE received 13.2 shares of common stock of Infinity for
every one share of 30DC DE. Upon closing Edward Dale was appointed to the
Infinity Board of Directors and named Chief Executive Officer of Infinity which
was subsequently renamed 30DC, Inc. (Maryland) ("30DC"). Infinity, as a result
of the transaction, became the sole outstanding shareholder of 100% of the
outstanding common stock of 30DC DE. For purposes of accounting, 30DC DE was
considered the accounting acquirer. As of the date of the transaction, Infinity
discontinued its historical operations and the business of 30DC DE is now the
business of 30DC.
In May of 2012 the Company signed a Joint Venture Agreement ("JV Agreement")
with Netbloo Media. Ltd. for the MagCast Publishing Platform ("MagCast") which
was jointly developed. MagCast provides customers access to a cloud-based
service to create an application ("App") to publish a digital magazine on Apple
Corporation's online marketplace Apple Newsstand and includes executive training
modules as well as a three-month trial subscription to the Company's Immediate
Edge subscription product and other bonus products. Under the terms of the JV
Agreement the Company was responsible for marketing, sales and administration
and Netbloo was responsible for product development. MagCast was launched in May
2012 and a majority of sales were the result of affiliate marketing
relationships which resulted in commissions of 50% of gross revenue for those
sales to the affiliate responsible for the sale. All MagCast sales revenue was
recorded gross by the Company and commission expense was recorded for the amount
due to Netbloo which was 50% of revenue reduced by affiliate commissions and
other allowable costs.
-12-
In October 2012 the Company reached an agreement to purchase Netbloo's 50%
interest in the MagCast JV Agreement and Market Pro Max, a product which helps
companies run online information businesses for a purchase price of 13,487,368
shares of the Company's common stock. Netbloo received a three year contractor
agreement with annual compensation of $300,000 which is payable in monthly
installments of $25,000 and may be terminated after two years subject to a six
month termination payment. The contractor agreement was effective October 1,
2012 and final documents were signed on December 31, 2012.
The Company has continued to update the MagCast platform and released version 4
in the summer of 2013 which enabled customer to offer a version of their
magazine tailored for the IPhone which significantly expanded the potential
number of magazine readers. The Company now offers ancillary services to assist
customers in creating their Apps and provides customers with training in
developing and marketing their digital publications.
The Company has no plans at this time for purchases or sales of fixed assets
which would occur in the next twelve months.
The Company has no expectation or anticipation of significant changes in number
of employees in the next twelve months.
RESULTS OF OPERATIONS
FOR THE THREE MONTH PERIOD ENDED DECEMBER 31, 2013 COMPARED TO THE THREE MONTH
PERIOD ENDED DECEMBER 31, 2012.
During the three months ended December 31, 2013, 30DC, Inc. recognized revenues
of $304,811 from its operations compared to $602,420 during the three months
ended December 31, 2012. Revenues of the Company were from the following sources
during the three months ended December 31, 2013 compared to December 31, 2012.
Three Months
Three Months Ended Ended Increase or
December 31, 2013 December 31, 2013 (Decrease)
-------------------- ------------------- --------------
Revenue
Commissions $ 12,979 $ 60,147 $ (47,168)
Subscription Revenue 96,841 136,916 (40,075)
Products and Services 194,991 319,853 (124,862)
Seminars and Mentoring - 85,504 (85,504)
-------------------- ------------------- --------------
Total Revenues $ 304,811 $ 602,420 $ (297,609)
The Company earns commissions for products sold by third parties to customers
referred by the Company. The $47,168 decrease in commission revenue during the
three months ended December 31, 2013 compared to the three months ending
December 31, 2012 was the result of commissions earned from a successful third
party product in 2012 which did not repeat in 2013.
The $40,075 decrease in subscription revenue was due to a decrease in the
average number of monthly subscribers to the Immediate Edge. For the three
months ended December 31, 2013 the Immediate Edge active subscriber base
averaged 355 per month and for the three months ended December 31, 2012 the
Immediate Edge active subscriber base averaged 458 per month.
The $124,862 decrease in products and services revenue was primarily due to the
decrease in sales of the MagCast publishing platform and related services to
$171,169 during the quarter ended December 31, 2013 from $315,457 during the
quarter ended December 31, 2012. In the December 2012 quarter, MagCast sales
were primarily through affiliate referrals of new customers, the Company did not
did not hold any affiliate promotions for MagCast during December 2013 quarter
and sales were primarily additional licenses and service to existing customers.
-13-
The $85,804 decrease in seminars and mentoring income resulted from phase out of
the Company's historic mentoring program at the end of December 2012. The
Company discontinued its historical mentoring program as of December 31, 2012 to
redirect Company resources toward products and services sales growth which
management believes has more potential for long-term growth than mentoring which
is labor intensive and does have the ability to leverage and scale.
During the three months ended December 31, 2013, the Company incurred $729,325
in operational expenses compared to $794,250 during the three months ended
December 31, 2012. Operational expenses during the three months ended December
31, 2013 and 2012, include the following categories:
Three Months Ended Three Months Ended Increase or
December 31, 2013 December 31, 2012 Decrease
--------------------------------------------------
Accounting Fees $ 51,600 $ 47,285 $ 4,315
Credit Card Processing Fees 13,302 14,246 (944)
Commissions 35,570 91,601 (56,031)
Independent Contractors 149,041 108,544 40,497
Depreciation and Amortization 20,673 16,806 3,867
Directors Fees 39,882 52,050 (12,168)
Internet Expenses 24,365 17,003 7,362
Legal Fees 14,945 19,047 (4,102)
Officer's Salaries 62,382 102,050 (39,668)
Related Party Contractors 228,657 270,202 (41,545)
Telephone and Data Lines 16,398 24,647 (8,249)
Travel & Entertainment 50,303 10,064 40,239
Other Operating Expenses 22,207 20,705 1,502
--------------------------------------------------
Total Operating Expenses $ 729,325 $ 794,250 $ (64,925)
==================================================
The decrease of $56,031 in commissions resulted from the decrease in sales of
products and services of $124,862 in the December 2013 quarter compared to the
December 2012 quarter and the fact that a higher percentage of sales in the
December 2012 quarter were through affiliate relationships.
The increase of $40,497 in independent contractors is primarily due to the
approximately $11,000 for a contractor who helped during the annual offering of
the free Challenge program and was retained through the quarter to work on
additional development projects, $18,000 for Clinton Carey, former Chief
Operating Officer of the Company who is helping shape sales strategy to extend
marketing of MagCast outside the Company's traditional customer base,
approximately $6,000 for investor relations costs and $5,000 for an analysis by
a strategic marketing consultant.
The decrease of $12,168 in directors' fees results from a $52,050 charge for
amortization of stock option expense over the vesting period, for stock options
previously issued to Henry Pinskier, the Company's board chair, in the December
2012 quarter compared to a $12,382 charge for amortization of stock option
expense over the vesting period in the December 2013 quarter and $27,500 for
directors fee resulting from the Company's board approval of directors' fees for
non-executive directors in the total amount of $110,000 per year in September
2013.
The decrease of $39,668 in officer's salaries results from a $52,050 charge for
amortization of stock option expense over the vesting period in the December
2012 quarter compared to a $12,382 charge for amortization of stock option
expense over the vesting period in the December 2013 quarter for stock options
previously issued to Theodore A. Greenberg, chief financial officer and a
director of the Company.
Related Party Contractor Fees consist of payments to Marillion Partnership and
Raine Ventures, LLC under contracts for services which include Edward Dale
acting as 30DC's Chief Executive Officer and Dan Raine acting as 30DC's Vice
President of Business Development as well as the consulting contract with GHL
-14-
Group, Ltd. whose President, Gregory H. Laborde is a Director of the Company and
a services contract with Netbloo Media, Ltd. which was the joint developer of
the MagCast Publishing Platform. The $41,545 net de results from primarily from
a $40,000 one-time bonus awarded to the Marillion Partnership upon completion of
the asset acquisition which included the remaining 50% of the MagCast Publishing
Platform in the December 2012 quarter.
The $8,249 decrease in telephone and date lines expense is primarily due to an
approximate $8,000 decrease in the contracted amount with Telstra AU.
Travel and Entertainment increased by $40,239 due to a company-wide group
meeting and travel to an investor conference, both in November 2013.
During the three months ended December 31, 2013, the Company recognized a net
loss from continuing operations of $418,254 compared to a net loss of ($183,084)
during the three months ended December 31, 2013. The increased loss of $235,170
was primarily due to the decrease in revenues of $297,609 offset by the decrease
in operating expenses of $64,925.
FOR THE SIX MONTH PERIOD ENDED DECEMBER 31, 2013 COMPARED TO THE SIX MONTH
PERIOD ENDED DECEMBER 31, 2012.
During the six months ended December 31, 2013, 30DC, Inc. recognized revenues of
$2,344,761 from its operations compared to $1,052,159 during the six months
ended December 31, 2012. Revenues of the Company were from the following sources
during the six months ended December 31, 2013 compared to December 31, 2012.
Six Months Ended Six Months Ended Increase or
December 31, 2013 December 31, 2012 (Decrease)
------------------- ------------------- -------------
Revenue
Commissions $ 32,285 $ 163,964 $ (131,679)
Subscription Revenue 193,580 255,153 (61,573)
Products and Services 2,118,896 405,958 1,712,938
Seminars and Mentoring - 227,084 (227,084)
------------------- ------------------- -------------
Total Revenues $ 2,344,761 $ 1,052,159 $ 1,292,602
------------------- ------------------- -------------
The Company earns commissions for products sold by third parties to customers
referred by the Company. The $131,769 decrease in commission revenue during the
six months ended December 31, 2013 compared to the six months ending December
31, 2012 was the result of commissions earned from a successful third party
product in 2012 which did not repeat in 2013.
The $61,573 decrease in subscription revenue was due to a decrease in the
average number of monthly subscribers to the Immediate Edge. For the six months
ended December 31, 2013 the Immediate Edge active subscriber base averaged 349
per month and for the six months ended December 31, 2012 the Immediate Edge
active subscriber base averaged 454 per month.
The $1,712,938 increase in products and services revenue was primarily due to
the approximately $2,046,000 in sales of the MagCast Publishing Platform during
the six months ended December 31, 2013, compared to the approximately $392,000
in MagCast sales in the six months ended December 31, 2012. The large increase
in sales resulted from a relaunch promotion in August 2013 of which
approximately 75% of sales where though affiliates who earned affiliate
commissions and affiliate bonuses. The Company has no future relaunches planned
during the remainder of the fiscal year ending June 30, 2014.
-15-
The $227,084 decrease in seminars and mentoring income resulted from phase out
of the Company's historic mentoring program at the end of December 2012. The
Company discontinued its historical mentoring program as of December 31, 2012 to
redirect Company resources toward products and services sales growth which
management believes has more potential for long-term growth than mentoring which
is labor intensive and does have the ability to leverage and scale.
During the six months ended December 31, 2013, the Company incurred $2,119,702
in operational expenses compared to $1,285,167 during the six months ended
December 31, 2012. Operational expenses during the six months ended December 31,
2013 and 2012, include the following categories:
Six Months Ended Six Months Ended Increase or
December 31, 2013 December 31, 2012 Decrease
-------------------------------------------------
Accounting Fees $ 73,807 $ 67,285 $ 6,522
Credit Card Processing Fees 114,915 26,551 88,364
Commissions 754,918 119,147 635,771
Independent Contractors 287,460 193,096 94,364
Depreciation and Amortization 41,008 25,988 15,020
Directors Fees 79,764 52,050 27,714
Internet Expenses 44,775 37,645 7,130
Legal Fees 27,567 28,156 (589)
Officer's Salaries 124,764 152,050 (27,286)
Related Party Contractors 450,666 470,899 (20,233)
Telephone and Data Lines 28,012 52,204 (24,192)
Travel & Entertainment 50,935 22,361 28,574
Other Operating Expenses 41,111 37,735 3,376
------------------------------------------------
Total Operating Expenses $ 2,119,702 $ 1,285,167 $ 834,535
================================================
The increase of $88,364 in credit card processing fees resulted from the
increase in sales of products and services of approximately $1,713,000 during
the six months ended December 2013 compared to the six months ended December
2012. Credit card fees on accounts receivable have been accrued to match the
period the expense is recognized with the period the related income is
recognized.
The increase of $635,771 in commissions resulted from the increase in sales of
products and services of approximately $1,713,000 during the six months ended
December 2013 compared to the six months ended December 2012. Commissions on
accounts receivable have been accrued to match the period the expense is
recognized with the period the related income is recognized. Approximately 75%
of sales during the August 2013 MagCast relaunch were subject to affiliate
commissions and approximately $126,000 in bonuses were earned by affiliates for
referral and sales contests during the relaunch.
The increase of $94,364 in independent contractors is primarily due to the
approximately $19,000 increased cost for contractors for maintenance and support
of the MagCast Publishing Platform, approximately $12,000 cost for an affiliate
manager who was contracted to help with the affiliate program related to the
MagCast promotional relaunch, approximately $21,000 for a contractor who helped
during the annual offering of the free Challenge program and was retained
through the quarter to work on additional development projects, $36,000 for
Clinton Carey, former Chief Operating Officer of the Company who is helping
shape sales strategy to extend marketing of MagCast outside the Company's
traditional customer base, approximately $6,000 for investor relations costs and
$5,000 for an analysis by a strategic marketing consultant.
The increase of $15,020 in depreciation and amortization is due to $22,000
higher amortization of intangible assets from the asset acquisition in October
2012 in the six month period ending December 31, 2013 offset by a decrease in
-16-
depreciation of approximately $7,000 due to the end of depreciable life for some
of the Company's fixed assets.
The increase of $27,714 in directors' fees is due to $55,000 in director fees
for the six month period ended December 31, 2013 which resulted from the
Company's board September 2013 approval of directors' fees for non-executive
directors in the total amount of $110,000 per year, offset by a decrease from
$52,050 to $24,382 in the amount of expense related to stock options previously
issued to Henry Pinskier, a director and chairman of the Company which is being
amortized on a straight-line basis over the vesting period.
The decrease of $27,286 in officer's salaries results from a decrease of $52,050
to $24,382 in the amount of expense related to stock options previously issued
to Theodore A. Greenberg, chief financial officer and a director of the Company
which is being amortized on a straight-line basis over the vesting period.
Related Party Contractor Fees consist of payments to Marillion Partnership and
Raine Ventures, LLC under contracts for services which include Edward Dale
acting as 30DC's Chief Executive Officer and Dan Raine acting as 30DC's Vice
President of Business Development as well as the consulting contract with GHL
Group, Ltd. whose President, Gregory H. Laborde is a Director of the Company and
a services contract with Netbloo Media, Ltd. which was the joint developer of
the MagCast Publishing Platform. The $20,233 net decrease results primarily from
a $40,000 one-time bonus awarded to the Marillion Partnership upon completion of
the asset acquisition which included the remaining 50% of the MagCast Publishing
Platform in the six months ended December 31, 2012, approximately $31,000
decrease in the amount paid to GHL, Group, Ltd. which was due to $45,000 in
stock issued to GHL in the six months ended December 31, 2012 and approximately
$23,000 less paid the Marillion Partnership which resulted from a change in the
AU/USD exchange rate offset by from $75,000 for Netbloo which started in October
2012.
The $24,192 decrease in telephone and date lines expense is primarily due to an
approximate $20,000 decrease in the contracted amount with Telstra AU and
approximately $4,000 because a telephone contract for $6,000 per quarter, paid
in advance, is now being recognized as prepaid expense for the amount prepaid
beyond December 31, 2013.
Travel and Entertainment increased by $28,574 due to a company-wide group
meeting and travel to an investor conference, both in November 2013 offset by a
number of trips by Edward Dale in the six month period ended December 31, 2012
to present and sell MagCast at conferences sponsored by affiliates.
During the six months ended December 31, 2013, the Company recognized net income
from continuing operations of $318,572 compared to a net loss of ($224,262)
during the six months ended December 31, 2013. The increased net income of
$542,834 was primarily due to the increase in revenues of $1,292,602 and $84,767
additional gain on forgiveness of debt offset by the increase in operating
expenses of $834,535.
LIQUIDITY AND CAPITAL RESOURCES
The Company had a cash balance of $144,721 at December 31, 2013 and the Company
had a working capital deficit of $1,350,107. To fund working capital in the year
ending June 30, 2014, the Company expects to raise capital and to improve the
results of operations from increasing revenue as well as a reduction in
operating costs. Increased revenue is expected to come from further sales of
MagCast Publishing Platform, an increase in monthly license subscriptions for
Market Pro Max which has not been extensively marketed and introduction of new
products some of which will be extensions of existing product lines.
Included in liabilities of discontinued operations at December 31, 2013 is
$70,050 in notes payable plus related accrued interest that are in default for
lack of repayment by their due date.
-17-
During the six month period ended December 31, 2013, operating activities
provided the Company with $89,322. During the six month period ended December
31, 2012, Company used $793,961 in operations. The increase of $883,283 provided
by operating activities was a combination of the increase of in net income from
continuing operations of approximately $564,000, and payment of significant
accrued commissions from the June 2012 MagCast launch in the December 2012
period.
GOING CONCERN
The condensed consolidated financial statements have been prepared using
accounting principles generally accepted in the United States of America
applicable for a going concern which assumes that the Company will realize its
assets and discharge its liabilities in the ordinary course of business. As of
December 31, 2013, the Company has a working capital deficit of approximately
$1,350,000 and has accumulated losses of approximately $2,813,000 since its
inception. The Company's ability to continue as a going concern is dependent
upon the ability of the Company to obtain the necessary financing or to earn
profits from its business operations to meet its obligations and pay its
liabilities arising from normal business operations when they come due. In May
2012 the Company launched MagCast which has become an integral part of its
businesses on an ongoing basis. MagCast is being sold through an affiliate
network which expands the Company's selling capability and has a broad target
market beyond the Company's traditional customer base. Until the Company
achieves sustained profitability it does not have sufficient capital to meet its
needs and continues to seek loans or equity placements to cover such cash needs.
No commitments to provide additional funds have been made and there can be no
assurance that any additional funds will be available to cover expenses as they
may be incurred. If the Company is unable to raise additional capital or
encounters unforeseen circumstances, it may be required to take additional
measures to conserve liquidity, which could include, but not necessarily be
limited to, issuance of additional shares of the Company's stock to settle
operating liabilities which would dilute existing shareholders, curtailing its
operations, suspending the pursuit of its business plan and controlling overhead
expenses. The Company cannot provide any assurance that new financing will be
available to it on commercially acceptable terms, if at all. These conditions
raise substantial doubt about the Company's ability to continue as a going
concern.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
------------------------------------------------------------------
The Company earns the majority of its revenue in United States dollars ("USD")
and pays a significant amount of its expense in Australian dollars ("AUD").
Material fluctuations in the exchange rate between USD and AUD may have material
impact on the Company's results of operations.
ITEM 4. CONTROLS AND PROCEDURES
-------------------------------
DISCLOSURES CONTROLS AND PROCEDURES
We have adopted and maintain disclosure controls and procedures (as such term is
defined in Rules 13a 15(e) and 15d-15(e) under the Securities Exchange Act of
1934, as amended (the "Exchange Act")) that are designed to ensure that
information required to be disclosed in our reports under the Exchange Act, is
recorded, processed, summarized and reported within the time periods required
under the SEC's rules and forms and that the information is gathered and
communicated to our management, including our Chief Executive Officer (Principal
Executive Officer) and Principal Financial Officer, as appropriate, to allow for
timely decisions regarding required disclosure.
As required by SEC Rule 15d-15(b) for the quarter ended December 31, 2013, our
Chief Executive Officer and Chief Financial Officer, carried out an evaluation
under the supervision and with the participation of our management, of the
effectiveness of the design and operation of our disclosure controls and
procedures pursuant to Exchange Act Rule 15d-14 as of the end of the period
covered by this report. Based on the foregoing evaluation, they have concluded
that our disclosure controls and procedures are not effective in timely alerting
them to material information required to be included in our periodic SEC filings
and to ensure that information required to be disclosed in our periodic SEC
-18-
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 December 31, 2013, that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
-19-
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
-------------------------
None.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
-------------------------------------------------------------------
During the period October 1, 2013 through December 31, 2013 the Company issued
the following equity securities;
On November 4, 2013, 100,000 shares of common stock were issued to a creditor as
full payment for a note payable and accrued interest totaling $19,794.
EXEMPTION FROM REGISTRATION CLAIMED
All of the above sales by the Company of its unregistered securities were made
by the Company in reliance upon Section 4(2) of the Securities Act of 1933, as
amended (the "1933 Act"). All of the individuals and/or entities that purchased
the unregistered securities were primarily existing shareholders, known to the
Company and its management, through pre-existing business relationships, as long
standing business associates. All purchasers were provided access to all
material information, which they requested, and all information necessary to
verify such information and were afforded access to management of the Company in
connection with their purchases. All purchasers of the unregistered securities
acquired such securities for investment and not with a view toward distribution,
acknowledging such intent to the Company. All certificates or agreements
representing such securities that were issued contained restrictive legends,
prohibiting further transfer of the certificates or agreements representing such
securities, without such securities either being first registered or otherwise
exempt from registration in any further resale or disposition.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
---------------------------------------
Included in liabilities of discontinued operations at December 31, 2013 is
$70,050 in notes payable plus related accrued interest that are in default for
lack of repayment by their due date.
ITEM 4. MINE SAFETY DISCLOSURES
-------------------------------
Not Applicable.
ITEM 5. OTHER INFORMATION
-------------------------
None.
-20-
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: February 7, 2014 By:/s/ Edward Dale
---------------------------------
Edward Dale
Principal Executive Officer
Chief Executive Officer
President
Dated: February 7, 2014 By:/s/ Theodore A. Greenberg
---------------------------------
Theodore A. Greenberg,
Principal Accounting Officer
Chief Financial Officer
-22
