The accompanying notes are an integral part of the unaudited condensed
consolidated financial statements.
The accompanying notes are an integral part of the unaudited
condensed consolidated financial statements.
The accompanying notes are an integral part of the unaudited
condensed consolidated financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2014
(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 and has been adjusted to reclassify the divested operations of the
Immediate Edge (see note 4) in assets and liabilities of discontinued
operations; such adjustment has not been audited. 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 and amended on March 26, 2014 and April 4, 2014.
The unaudited condensed consolidated financial statements include the accounts
of 30DC, Inc., (f/k/a Infinity Capital Group, Inc.) and its subsidiary 30DC,
Inc., Delaware, ("30DC DE").
REVENUE RECOGNITION
The Company offers customers the option to purchase its digital products for a
single payment or for a higher price consisting of a down payment and additional
payments over a period of time which can be as long as one year. Pursuant to ASC
605 the Company has determined that revenue is realizable and the earnings
process is complete and the four criteria for revenue recognition stated in SAB
Topic 13 are met at the time of the initial purchase. Accordingly, the Company
deems the sale to have occurred at the time of initial purchase and records the
full amount paid and/or due from a customer as revenue. Typically customers are
offered a period to review the product and request a refund and if a refund is
requested the company reverses the revenue which was recorded at the time of the
sale. The Company records a liability for future refunds and reduces revenue by
that amount. If a customer defaults on an additional payment, the customer loses
access to the digital product. Based upon its past experience with extended
payment plans, the Company has estimated the number of future defaulted payments
and has reduced revenue and accounts receivable by that amount.
For an additional charge, the Company offers customers ancillary services which
are not required to be purchased with a product. These services include
additional technical support and/or specific product services. The Company
recognizes revenue when the service is completed; receipts for services which
have not been completed are included in deferred revenue.
NET INCOME OR LOSS PER SHARE
The Company computes net income or loss per share in accordance with ASC 260
"Earnings per Share." Under ASC 260, basic net income or loss per share is
computed by dividing net loss per share available to common stockholders by the
weighted average number of shares outstanding for the period and excludes the
effects of any potentially dilutive securities. Diluted earnings per share,
includes the dilution that would occur upon the exercise or conversion of all
potentially dilutive securities into common stock using the "treasury stock"
and/or "if converted" methods as applicable. In computing diluted earnings per
share for the nine month period ended March 31, 2014, the Company has included
as outstanding 2,000,000 options which are exercisable and have an exercise
price below the market price for the Company's shares. For all other periods
presented, inclusion of additional shares would be anti-dilutive and no
adjustment to outstanding shares has been made to compute diluted earnings per
share.
-6-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2014
(UNAUDITED)
NOTE 2. GOING CONCERN
The condensed consolidated financial statements have been prepared using
accounting principles generally accepted in the United States of America
applicable for a going concern which assumes that the Company will realize its
assets and discharge its liabilities in the ordinary course of business. As of
March 31, 2014, the Company had a working capital deficit of approximately
$1,522,000 and had accumulated losses of approximately $3,031,000 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 marketing affiliates which are unrelated parties who earn commissions by
referring customers to the Company. The Company does not expect to have a
promotion of this scale more than once per year. Until the Company achieves
sustained profitability it does not have sufficient capital to meet its needs
and continues to seek loans or equity placements to cover such cash needs. No
commitments to provide additional funds have been made and there can be no
assurance that any additional funds will be available to cover expenses as they
may be incurred. If the Company is unable to raise additional capital or
encounters unforeseen circumstances, it may be required to take additional
measures to conserve liquidity, which could include, but not necessarily be
limited to, issuance of additional shares of the Company's stock to settle
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. DIVESTITURE
Effective February 28, 2014, the Company divested assets and liabilities that
made up its Immediate Edge subscription business ("Edge") to Raine Ventures, LLC
("Raine") in exchange for the 10,560,000 common shares of the Company which
Raine had held. Included with the Edge business was cash of approximately $1,000
and intangible assets including goodwill of approximately $225,000. Raine
assumed liability for deferred revenue of approximately $19,000. The Company
recorded zero gain or loss on the divestiture. Operating results for the Edge
have been reclassified as discontinued operations for each period presented in
these financial statements (see note 5). Raine had been party to a contractor
agreement with the Company which had expired in 2012 and was extended on a month
to month basis and was terminated concurrent with the divestiture.
NOTE 4. 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.
-7-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2014
(UNAUDITED)
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.
Nine Months Ended
March 31, 2013
(Unaudited)
-----------------------
Revenues $ 1,074,612
Operating Expenses 1,601,513
Other Income 13,461
-----------------------
Loss from Continuing Operations (513,440)
Income from Discontinued Operations 87,314
-----------------------
Net Loss $ (426,126)
=======================
Basic and Diluted Loss Per Share $ (0.00)
Weighted Average Shares Outstanding - Basic
& Diluted 86,987,648
|
NOTE 5. DISCONTINUED OPERATIONS
The Company has included two businesses in discontinued operations; the
Immediate Edge business which was divested effective February 28, 2014 (see note
3) and the business of Infinity which was discontinued after the share exchange
with 30DC DE on September 10, 2010. Prior to the share exchange, Infinity
withdrew its election to operate as a Business Development Company ("BDC") under
the Investment Company Act of 1940 ("1940 Act"). Infinity historically operated
as a non-diversified, closed-end management investment company and prepared its
financial statements as required by the 1940 Act. 30DC is no longer actively
operating the BDC and the assets, liabilities and results of operations of
Infinity's former business are shown as discontinued operations in the Company's
financial statements subsequent to the share exchange with 30DC. Investment
companies report assets at fair value and the Company has continued to report
investment assets in discontinued operations on this basis.
Results of Discontinued Operations for the
NINE MONTHS ENDED MARCH 31, 2014 NINE MONTHS ENDED MARCH 31, 2013
IMMEDIATE EDGE INFINITY TOTAL IMMEDIATE EDGE INFINITY TOTAL
------------------------------------------ ------------------------------------------
Revenues $ 266,495 $ - $ 266,495 $ 371,472 $ - $ 371,472
Operating expenses 287,017 8,943 295,960 322,776 11,455 334,231
Income (Loss) from operations (20,522) (8,943) (29,465) 48,696 (11,455) 37,241
Forgiveness of debt - 796 796 - - -
Realized gain on marketable securities - - - - 35,645 35,645
Unrealized gain on marketable securities - 25,062 25,062 - 14,428 14,428
------------------------------------------ ------------------------------------------
Net Income (Loss) $ (20,522) $ 16,915 $ (3,607) $ 48,696 $ 38,618 $ 87,314
========================================== ==========================================
THREE MONTHS ENDED MARCH 31, 2014 THREE MONTHS ENDED MARCH 31, 2013
IMMEDIATE EDGE INFINITY TOTAL IMMEDIATE EDGE INFINITY TOTAL
------------------------------------------ ------------------------------------------
Revenues $ 72,360 $ - $ 72,360 $ 126,705 $ - $ 126,705
Operating expenses 65,921 2,746 68,667 105,419 3,314 108,733
Income (Loss) from operations 6,439 (2,746) 3,693 21,286 (3,314) 17,972
Realized gain on marketable securities - - - - 35,645 35,645
Unrealized gain on marketable securities - 7,687 7,687 - 15,261 15,261
------------------------------------------ ------------------------------------------
Net Income (Loss) $ 6,439 $ 4,941 $ 11,380 $ 21,286 $ 47,592 $ 68,878
========================================== ==========================================
|
-8-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2014
(UNAUDITED)
Assets and Liabilities of Discontinued Operations as of
MARCH 31, 2014 JUNE 30, 2013
IMMEDIATE EDGE INFINITY TOTAL IMMEDIATE EDGE INFINITY TOTAL
-------------- -------- ----- -------------- -------- -----
Assets
Cash $ - $ - $ - $ 278 $ - $ 278
Prepaid expenses - - - 3,648 - 3,648
Marketable securities - 97,521 97,521 - 72,458 72,458
------------------------------------------ -----------------------------------------
Total Current Assets - 97,521 97,521 3,926 72,458 76,384
Goodwill - - - 225,285 - 225,285
------------------------------------------ -----------------------------------------
Total Assets of Discontinued Operations $ - $ 97,521 $ 97,521 $ 229,211 $ 72,458 $ 301,669
========================================== =========================================
LIABILITIES
Accounts payable $ - $ 72,657 $ 72,657 $ 3,060 $ 80,028 $ 83,088
Accrued expenses - 60,717 60,717 6,467 67,375 73,842
Deferred revenue - - - 17,454 - 17,454
Notes payable - 66,050 66,050 - 102,020 102,020
Due to related parties - 21,000 21,000 - 53,935 53,935
------------------------------------------ -----------------------------------------
Total Liabilities of Discontinued Operations $ - $ 220,424 $ 220,424 $ 26,981 $ 303,358 $ 330,339
========================================== =========================================
|
Notes Payable
Included in liabilities of discontinued operations at March 31, 2014 and June
30, 2013 are $66,050 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 nine months ended March 31, 2014 and March 31, 2013 the Company incurred
interest expense on notes payable of $7,764 and $9,960 respectively which is
included in the Statement of Operations under income (loss) from discontinued
operations.
NOTE 6. RELATED PARTY TRANSACTIONS
At March 31, 2014, due to related parties totaled $768,125. This mainly
consisted of $30,915 due to Netbloo for earnings from the collaborative
arrangement prior to 30DC acquiring Netbloo's 50% interest in the MagCast JV
(note 4), $25,000 due to Netbloo under their contractor agreement, $66,500
accrued for directors' fees for services of non-executive directors and $640,000
due to Theodore A. Greenberg, CFO and director, for compensation.
NOTE 7. 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 nine month period ended March
31, 2014 is completely offset by the net operating loss carryovers; accordingly
no income tax provision has been provided. For future periods, the U.S. net
operating loss carryovers may be subject to limitation under Internal Revenue
Code Section 382 should there be a greater than 50% change in ownership as
determined under the regulations.
-9-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2014
(UNAUDITED)
NOTE 8. STOCKHOLDERS' EQUITY
COMMON STOCK
During the nine months ended March 31, 2014, 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.
During the nine months ended March 31, 2014, the Company redeemed common stock
as follows:
Effective February 28, 2014, the Company divested assets and liabilities that
made up its Immediate Edge subscription business ("Edge") to Raine Ventures, LLC
("Raine") in exchange for the 10,560,000 common shares of the Company which
Raine had held and which the Company has retired. The Company reported no gain
or loss on the divestiture, accordingly the redeemed shares were valued at the
$207,335 net book value of the divested assets and liabilities.
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 3/31/14 3,401,522 0.50 1.55
Exercisable on 3/31/14 3,401,522 0.50 1.55
|
-10-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2014
(UNAUDITED)
The aggregate intrinsic value of warrants outstanding and exercisable was $0 at
March 31, 2014. Total intrinsic value of warrants exercised was $0 for the three
months ended March 31, 2014 as no warrants were exercised during this period.
NOTE 9. 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 $58,383 and $128,864 for the
nine months ended March 31, 2014 and March 31, 2013 respectively and $8,855 and
$24,764 for the three months ended March 31, 2014 and March 31, 2013
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 3/31/14 3,600,000 0.18 7.86
Exercisable on 3/31/14 2,600,000 0.22 7.60
|
The options have a contractual term of ten years. The aggregate intrinsic value
of options outstanding and exercisable was $40,000 at March 31, 2014. Total
intrinsic value of options exercised was $0 for the three months ended March 31,
2014 as no options were exercised during this period.
At March 31, 2014, shares available for future stock option grants to employees
and directors under the 2012 Stock Option Plan were 4,500,000.
-11-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2014
(UNAUDITED)
NOTE 10. SUPPLEMENTAL SCHEDULE OF OPERATING EXPENSES
Nine Months Ended Nine Months Ended
March 31, 2014 March 31, 2013
------------------- -------------------
Related Party Contractor Fees (1) $ 488,813 $ 516,691
Officer's Salary 179,191 214,432
Directors' Fees 111,691 64,432
Independent Contractors 365,244 236,276
Commission Expense 771,862 147,975
Professional Fees 135,500 128,851
Credit Card Processing Fees 115,629 22,225
Telephone and Data Lines 26,475 47,480
Other Operating Costs 199,464 153,599
------------------- -------------------
Total Operating Expenses $ 2,393,869 $ 1,531,961
=================== ===================
|
(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, GHL Group, Ltd., whose President, Gregory H. Laborde is a Director
and Netbloo which was the joint developer of the MagCast Publishing
Platform
Three Months Ended Three Months Ended
March 31, 2014 March 31, 2013
-------------------- --------------------
Related Party Contractor Fees (1) $ 163,147 $ 170,792
Officer's Salary 54,427 62,382
Directors' Fees 31,927 12,382
Independent Contractors 118,777 84,407
Commission Expense 16,945 30,300
Professional Fees 34,126 33,410
Credit Card Processing Fees 10,353 6,958
Telephone and Data Lines 9,656 12,286
Other Operating Costs 55,905 51,234
------------------- --------------------
Total Operating Expenses $ 495,263 $ 464,151
=================== ====================
-----------------------------------
|
(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, GHL Group, Ltd., whose President, Gregory H. Laborde is a Director
and Netbloo which was the joint developer of the MagCast Publishing
Platform
-12-
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.
-13-
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 customers to offer a version of their
magazine tailored for the IPhone which significantly expanded the potential
number of magazine readers. In February 2014, the Company released a version of
MagCast which enabled customers to offer a version of their magazine for devices
using an Android operating system further expanding 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.
Effective February 28, 2014, the Company divested assets and liabilities that
made up its Immediate Edge subscription business ("Edge") to Raine Ventures, LLC
("Raine") in exchange for the 10,560,000 common shares of the Company which
Raine had held. The Company recorded zero gain or loss on the divestiture. Raine
had been party to a contractor agreement with the Company which had expired in
2012 and was extended on a month to month basis and was terminated concurrent
with the divestiture.
The Company has no plans at this time for purchases or sales of fixed assets
which would occur in the next twelve months.
The Company has no expectation or anticipation of significant changes in number
of employees in the next twelve months.
RESULTS OF OPERATIONS
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2014 COMPARED TO THE THREE MONTH
PERIOD ENDED MARCH 31, 2013.
During the three months ended March 31, 2014, 30DC, Inc. recognized revenues of
$265,613 from continuing operations compared to $251,462 during the three months
ended March 31, 2013. Revenues from continuing operations were from the
following sources during the three months ended March 31, 2014 compared to March
31, 2013.
Three Months Three Months
Ended Ended Increase or
March 31, 2014 March 31, 2013 (Decrease)
----------------- ------------------- ---------------
Revenue
Commissions $ 26,912 $ 31,242 $ (4,330)
Subscription Revenue - 1,369 (1,369)
Products and Services 238,701 213,351 25,350
Seminars and Mentoring - 5,500 (5,500)
----------------- ------------------- ---------------
Total Revenues $ 265,613 $ 251,462 $ 14,151
|
The $25,350 increase in products and services revenue was mainly due to $14,927
in sales of new products and $14,955 in revenue recognized for technical
services related to the MagCast Publishing Platform.
-14-
During the three months ended March 31, 2014, the Company incurred $495,263 in
operational expenses for continuing operations compared to $464,151 during the
three months ended March 31, 2013. Operational expenses during the three months
ended March 31, 2014 and 2013, include the following categories:
THREE MONTHS ENDED THREE MONTHS ENDED INCREASE OR
MARCH 31, 2014 MARCH 31, 2013 DECREASE
------------------ ------------------ -----------
Accounting Fees $ 22,805 $ 25,000 $ (2,195)
Credit Card Processing Fees 10,353 6,958 3,395
Commissions 16,945 30,301 (13,356)
Independent Contractors 118,777 84,407 34,370
Depreciation and Amortization 19,957 20,902 (945)
Directors Fees 31,927 12,382 19,545
Internet Expenses 13,905 6,747 7,158
Legal Fees 11,321 8,410 2,911
Officer's Salaries 54,427 62,382 (7,955)
Related Party Contractors 163,147 170,792 (7,645)
Telephone and Data Lines 9,656 12,286 (2,630)
Travel & Entertainment 2,814 4,140 (1,326)
Other Operating Expenses 19,229 19,444 (215)
------------------ ------------------ -----------
Total Operating Expenses $ 495,263 $ 464,151 $ 31,112
================== ================== ===========
|
The decrease of $13,356 in commissions resulted from the fact that a higher
percentage of sales in the March 2013 quarter were through marketing affiliate
relationships.
The increase of $34,370 in independent contractors is primarily due to the
approximately $8,000 for a contractor who helped during the annual offering of
the free Challenge program and was retained for part of 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, and $5,000
for an analysis by a strategic marketing consultant.
The increase of $19,545 in directors' fees results from $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 offset by a decrease of $7,955 in the charge for amortization of stock
option expense over the vesting period, for stock options previously issued to
Henry Pinskier, the Company's board chair, in the March 2014 quarter from the
amount in the March 2013 quarter.
During the three months ended March 31, 2014, the Company recognized a net loss
from continuing operations of $229,650 compared to a net loss of $207,974 during
the three months ended March 31, 2013. The increased loss of $21,676 was
primarily due to the increase in operating expenses of $31,112 offset by the
increase in revenues of $14,151.
FOR THE NINE MONTH PERIOD ENDED MARCH 31, 2014 COMPARED TO THE NINE MONTH PERIOD
ENDED MARCH 31, 2013.
During the nine months ended March 31, 2014, 30DC, Inc. recognized revenues of
$2,416,239 from continuing operations compared to $1,058,854 during the nine
months ended March 31, 2013. Revenues from continuing operations were from the
following sources during the nine months ended March 31, 2014 compared to March
31, 2013.
-15-
Nine Months Ended Nine Months Ended Increase or
March 31, 2014 March 31, 2013 (Decrease)
------------------- ------------------- --------------
Revenue
Commissions $ 58,642 $ 192,532 $ (133,890)
Subscription Revenue - 14,670 (14,670)
Products and Services 2,357,597 619,068 1,738,529
Seminars and Mentoring - 232,584 (232,584)
------------------- ------------------- --------------
Total Revenues $ 2,416,239 $ 1,058,854 $ 1,357,385
------------------- ------------------- --------------
|
The Company earns commissions for products sold by third parties to customers
referred by the Company. The $133,890 decrease in commission revenue during the
nine months ended March 31, 2014 compared to the nine months ending March 31,
2013 was the result of commissions earned from a successful third party product
in the 2013 period which did not repeat in 2014 period.
The $1,738,529 increase in products and services revenue was primarily due to
the approximately $2,257,000 in sales of the MagCast Publishing Platform during
the nine months ended March 31, 2014, compared to the approximately $588,000 in
MagCast sales in the nine months ended March 31, 2013. The large increase in
sales resulted from a relaunch promotion in August 2013 of which approximately
75% of sales where though marketing affiliates (unrelated entities) who earned
affiliate commissions and affiliate bonuses. The Company has no future
relaunches planned during the remainder of the fiscal year ending June 30, 2014.
The $232,584 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 nine months ended March 31, 2014, the Company incurred $2,393,869 in
operational expenses from continuing operations compared to $1,531,961 during
the nine months ended March 31, 2013. Operational expenses during the nine
months ended March 31, 2014 and 2013, include the following categories:
NINE MONTHS ENDED NINE MONTHS ENDED INCREASE OR
MARCH 31, 2014 MARCH 31, 2013 DECREASE
----------------- ----------------- -----------
Accounting Fees $ 96,612 $ 92,285 $ 4,327
Credit Card Processing Fees 115,629 22,225 93,404
Commissions 771,862 147,975 623,887
Independent Contractors 365,244 236,276 128,968
Depreciation and Amortization 60,965 46,891 14,074
Directors Fees 111,691 64,432 47,259
Internet Expenses 30,386 23,602 6,784
Legal Fees 38,888 36,566 2,322
Officer's Salaries 179,191 214,432 (35,241)
Related Party Contractors 488,813 516,691 (27,878)
Telephone and Data Lines 26,475 47,480 (21,005)
Travel & Entertainment 47,982 26,501 21,481
Other Operating Expenses 60,131 56,605 3,526
----------------- ----------------- -----------
Total Operating Expenses $ 2,393,869 $ 1,531,961 $ 861,908
================= ================= ===========
|
-16-
The increase of $93,404 in credit card processing fees resulted from the
increase in sales of products and services of approximately $1,739,000 during
the nine months ended March 2014 compared to the nine months ended March 2013.
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 $623,887 in commissions resulted from the increase in sales of
products and services of approximately $1,739,000 during the nine months ended
March 2014 compared to the nine months ended March 2013. 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 marketing affiliate commissions
and approximately $126,000 in bonuses were earned by marketing affiliates for
referral and sales contests during the relaunch. Marketing affiliates refer
customers to the Company and earn commissions if the customer makes a purchase;
marketing affiliates are not related to the Company.
The increase of $128,968 in independent contractors is primarily due to the
approximately $30,000 increased cost for contractors for maintenance and support
of the MagCast Publishing Platform, approximately $13,000 cost for an affiliate
manager who was contracted to help with the affiliate program related to the
MagCast promotional relaunch, approximately $29,000 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, $54,000 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,
$10,000 for an analysis by a strategic marketing consultant and a reduction of
approximately $18,000 due to a favorable change in exchange rate reducing the
cost pay foreign contractors.
The increase of $14,074 in depreciation and amortization is due to $22,000
higher amortization of intangible assets from the asset acquisition in October
2012 in the nine month period ending March 31, 2014 offset by a decrease in
depreciation of approximately $8,000 due to the end of depreciable life for some
of the Company's fixed assets.
The increase of $47,259 in directors' fees is due to $82,500 in director fees
for the nine month period ended March 31, 2014 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 $64,432 to
$29,191 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 $35,341 in officer's salaries results from a decrease of $64,432
to $29,191 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 under
the contract for services which includes Edward Dale acting as 30DC's Chief
Executive Officer, 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 $27,878 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 nine months ended March 31, 2013, approximately $36,000 less paid the
Marillion Partnership which resulted from a change in the AU/USD exchange rate
and approximately $27,000 decrease in the amount paid to GHL, Group, Ltd. which
was due to $45,000 in stock issued to GHL in the nine months ended March 31,
2013 offset by additional cash payments to GHL of approximately $18,000 and
$75,000 additional paid Netbloo which started in October 2012.
The $21,005 decrease in telephone and date lines expense is primarily due to a
decrease in the contracted amount with Telstra AU.
-17-
Travel and Entertainment increased by $21,481 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 nine month period ended March 31, 2013 to
present and sell MagCast at conferences sponsored by affiliates.
During the nine months ended March 31, 2014, the Company recognized net income
from continuing operations of $115,883 compared to a net loss of ($459,646)
during the nine months ended March 31, 2013. The increased net income of
$575,529 was primarily due to the increase in revenues of $1,357,385 and $80,052
additional gain on forgiveness of debt offset by the increase in operating
expenses of $861,908.
LIQUIDITY AND CAPITAL RESOURCES
The Company had a cash balance of $102,015 at March 31, 2014 and the Company had
a working capital deficit of $1,522,451. To fund working capital for the next 12
months, the Company expects to raise capital and to improve the results of
operations from increasing revenue as well as a reduction in operating costs.
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. The Company intends to raise
capital, however, the Company has not commenced any offerings and cannot
guarantee that they will be successful in its capital raising efforts. If the
results of operations and capital raised, if any, are not sufficient to fund the
company's expenses as they come due, the Company will defer amounts due to
related parties and to the extent possible utilize shares of the Company to
satisfy its liabilities.
Included in liabilities of discontinued operations at March 31, 2014 is $66,050
in notes payable plus related accrued interest that are in default for lack of
repayment by their due date.
During the nine month period ended March 31, 2014, operating activities provided
the Company with $100,609. During the nine month period ended March 31, 2013,
Company used $981,560 in operations. The increase of $1,082,169 provided by
operating activities was a combination of the increase of in net income from
continuing operations of approximately $576,000, and payment of significant
accrued commissions from the June 2012 MagCast launch in the March 2013 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
March 31, 2014, the Company has a working capital deficit of approximately
$1,522,000 and has accumulated losses of approximately $3,031,000 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
-18-
raise substantial doubt about the Company's ability to continue as a going
concern.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company earns the majority of its revenue in United States dollars ("USD")
and pays a significant amount of its expense in Australian dollars ("AUD").
Material fluctuations in the exchange rate between USD and AUD may have material
impact on the Company's results of operations.
ITEM 4. CONTROLS AND PROCEDURES
DISCLOSURES CONTROLS AND PROCEDURES
We have adopted and maintain disclosure controls and procedures (as such term is
defined in Rules 13a 15(e) and 15d-15(e) under the Securities Exchange Act of
1934, as amended (the "Exchange Act")) that are designed to ensure that
information required to be disclosed in our reports under the Exchange Act, is
recorded, processed, summarized and reported within the time periods required
under the SEC's rules and forms and that the information is gathered and
communicated to our management, including our Chief Executive Officer (Principal
Executive Officer) and Principal Financial Officer, as appropriate, to allow for
timely decisions regarding required disclosure.
As required by SEC Rule 15d-15(b) for the quarter ended March 31, 2014, our
Chief Executive Officer and Chief Financial Officer, carried out an evaluation
under the supervision and with the participation of our management, of the
effectiveness of the design and operation of our disclosure controls and
procedures pursuant to Exchange Act Rule 15d-14 as of the end of the period
covered by this report. Based on the foregoing evaluation, they have concluded
that our disclosure controls and procedures are not effective in timely alerting
them to material information required to be included in our periodic SEC filings
and to ensure that information required to be disclosed in our periodic SEC
filings is accumulated and communicated to our management, including our Chief
Executive Officer, to allow timely decisions regarding required disclosure as a
result of the deficiency in our internal control over financial reporting
discussed below.
MANAGEMENT'S QUARTERLY REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING.
With the participation of our Chief Executive Officer and Chief Accounting
Officer, we have evaluated the effectiveness of our "internal control over
financial reporting" (as such term is defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934, as amended (the " Exchange Act ")),
as of the end of the period covered by this report. Based upon such evaluation,
our Chief Executive Officer and Chief Financial Officer have concluded that, as
of the end of such period, our "internal control over financial reporting" is
not effective due to the material weaknesses noted below, in ensuring that (i)
information required to be disclosed by us in the reports that we file or submit
under the Exchange Act is recorded, processed, summarized and reported, within
the time periods specified in the Securities and Exchange Commission's rules and
forms and (ii) information required to be disclosed by us in the reports that we
file or submit under the Exchange Act is accumulated and communicated to our
management, including our principal executive and principal financial officers,
or persons performing similar functions, as appropriate to allow timely
decisions regarding required disclosure.
(1) 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.
-19-
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 March 31, 2014, 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 January 1, 2014 through March 31, 2014 the Company did not
issue any equity securities.
Effective February 28, 2014 the Company redeemed 10,560,000 shares from Raine
Ventures, Inc. as part of the divestiture of the Immediate Edge business. The
Company recognized no gain or loss from the divestiture.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Included in liabilities of discontinued operations at March 31, 2014 is $66,050
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.
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: May 14, 2014 By:/s/ Edward Dale
------------------------------------
Edward Dale
Principal Executive Officer
Chief Executive Officer
President
Dated: May 14, 2014 By:/s/ Theodore A. Greenberg
------------------------------------
Theodore A. Greenberg,
Principal Accounting Officer
Chief Financial Officer
|
-22-