UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For Quarterly Period Ended September 30, 2010
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[__] No[__]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check One).
Large accelerated filer [___] Accelerated filer [___]
Non-accelerated filer [___] Smaller reporting company [_X_]
(Do not check if a smaller
reporting company)
Indicate by check mark whether the Registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes[__] No[_X_]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
As of August 17, 2011 the number of shares outstanding of the registrant's class
of common stock was 74,520,248.
TABLE OF CONTENTS
PAGE
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements 2
Condensed Consolidated Balance Sheets as of September 30, 2010 (Unaudited) and
June 30, 2010 3
Condensed Consolidated Statements of Operations (Unaudited) for the Three Months Ended
September 30, 2010 and 2009 4
Condensed Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended
September 30, 2010 and 2009 5
Notes to Condensed Consolidated Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 18
Item 3. Quantitative and Qualitative Disclosures About Market Risk 21
Item 4. Controls and Procedures 22
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 23
Item 1A. Risk Factors 23
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 23
Item 3. Defaults upon Senior Securities 24
Item 4. Removed and Reserved 24
Item 5. Other Information 24
Item 6. Exhibits 24
Signatures 25
-1-
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
----------------------------
-2-
30DC, INC. AND SUBSIDIARY
BALANCE SHEETS
September June
30, 2010 30, 2010
--------------- --------------------
Unaudited
Assets
Current Assets
Cash and Cash Equivalents $ 53,118 $ 28,405
Accrued Commissions Receivable 66,642 66,705
Deferred Financing Costs - 7,500
Assets of Discontinued Operations 185,531 -
--------------- --------------------
Total Current Assets 305,291 102,610
Property and Equipment, Net 112,961 111,516
Goodwill 1,503,860 -
--------------- --------------------
Total Assets $ 1,922,112 $ 214,126
=============== ====================
Liabilities and Stockholders' Deficiency
Current Liabilities
Accounts Payable $ 490,978 $ 272,438
Accrued Expenses and Refunds 466,300 248,319
Deferred Revenue 341,804 278,118
Private Placement Subscriptions Received - 501,590
Due to Related Parties 290,587 202,380
Liabilities of Discontinued Operations 412,237 -
--------------- --------------------
Total Current Liabilities 2,001,906 1,502,845
--------------- --------------------
Total Liabilities 2,001,906 1,502,845
--------------- --------------------
Stockholders' Deficiency
Preferred Stock, Par Value $0.0001, 10,000,000 Authorized, -0- Issued - -
Common Stock, Par Value $0.0001, 100,000,000 authorized, 72,440 60,984
72,439,924 and 60,984,000 issued and outstanding respectively
Paid in Capital 2,152,620 -
Accumulated Deficiency (2,208,710) (1,327,911)
Accumulated Other Comprehensive Loss (96,144) (21,792)
--------------- --------------------
Total Stockholders' Deficiency (79,794) (1,288,719)
--------------- --------------------
Total Liabilities and Stockholders' Deficiency $ 1,922,112 $ 214,126
=============== ====================
The accompanying notes are an integral part of the
condensed consolidated financial statements.
-3-
30DC, INC. AND SUBSIDIARY
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
THREE MONTHS ENDED SEPTEMBER 30
UNAUDITED
2010 2009
----------------- -----------------
Revenue
Commissions $ 97,235 $ 151,526
Subscription Revenue 160,661 205,673
Products and Services 3,632 -
Seminars and Mentoring 140,674 20,607
----------------- -----------------
Total Revenue 402,202 377,806
Operating Expenses 1,338,271 474,166
----------------- -----------------
Operating loss (936,069) (96,360)
Other Expense
Foreign Currency Loss (7,052) (5,611)
----------------- -----------------
Total Other Expense (7,052) (5,611)
----------------- -----------------
Loss From Continuing Operations (943,121) (101,971)
Income From Discontinued Operations 1,800 -
----------------- -----------------
Net Loss (941,321) (101,971)
Foreign Currency Translation Loss (74,352) (19,945)
----------------- -----------------
Comprehensive Loss $ (1,015,673) $ (121,916)
================= =================
Weighted Average Common Shares Outstanding
Basic 62,753,972 60,984,000
Diluted 62,753,972 60,984,000
Loss Per Common Share (Basic and Diluted)
Continuing Operations (0.01) (0.00)
Discontinued Operations 0.00 -
----------------- -----------------
Net Loss Per Common Share $ (0.01) $ (0.00)
================= =================
The accompanying notes are an integral part of
the condensed consolidated financial statements.
-4-
30DC, INC. AND SUBSIDIARY
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED SEPTEMBER 30
UNAUDITED
2010 2009
--------------- --------------
Cash Flows from Operating Activities:
Loss From Continuing Operations $ (943,121) $ (101,971)
Adjustments to Reconcile Loss from Continuing Operations
to Net Cash Used In Operations
Depreciation 16,506 13,770
Equity Based Payments To Non-Employees 546,025 -
Changes in Operating Assets and Liabilities
Accrued Commissions Receivable 9,955 (83,830)
Accounts Payable (33,500) (129,298)
Accrued Expenses and Refunds 209,490 39,791
Deferred Revenue 24,698 (24,586)
Due to Related Parties 60,542 194,201
--------------- --------------
Net Cash Used in Operating Activities (109,405) (91,923)
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Cash Flows from Investing Activities
Purchases of Property and Equipment (1,806) (34,336)
Cash - Acquired In Acquisition 3,350 -
--------------- --------------
Net Cash Provided By (Used) in Investing Activities 1,544 (34,336)
--------------- --------------
Cash Flows from Financing Activities
Sale of common stock 129,400
Stock Subscriptions Receivable - 120
Deferred Financing Costs 7,500 -
Private Placement Subscriptions Received - 200,000
--------------- --------------
Net Cash Provided by Financing Activities 136,900 200,120
--------------- --------------
Cash Flows from Discontinued Operations
Cash Flows From Operating Activities (350) -
--------------- --------------
Net Cash Used in Discontinued Operations (350) -
--------------- --------------
Effect of Foreign Exchange Rate Changes on Cash (3,976) 1,697
--------------- --------------
Increase in Cash and Cash Equivalents 24,713 75,558
Cash and Cash Equivalents - Beginning of Period 28,405 26,415
--------------- --------------
Cash and Cash Equivalents - End of Period $ 53,118 $ 101,973
=============== ==============
Supplemental Disclosures of Non Cash Financing Activity
Private Placement Subscriptions Received Reclassified to Equity $ 501,590
The accompanying notes are an integral part of the
condensed consolidated financial statements.
-5-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2010
(UNAUDITED)
NOTE 1. DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION AND LIQUIDITY
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30DC, Inc., Delaware, ("30DC DE") was incorporated on October 17, 2008 in the
state of Delaware, as a holding company, for the purpose of building, acquiring
and managing international web-based sales and marketing companies. On July 15,
2009, 30DC DE completed the acquisitions of the business and assets of 30 Day
Challenge ("30 Day") and Immediate Edge ("Immediate"). 30 Day was acquired from
the Marillion Partnership and Edward Wells Dale, both of Victoria, Australia, in
consideration for the issuance of 2,820,000 shares of Common Stock of 30DC DE.
Immediate was acquired from Dan Raine of Cheshire, United Kingdom, in
consideration for the issuance of 600,000 shares of Common Stock of 30DC DE. The
acquired businesses were sold subject to specific liabilities which included
accounts payable, accrued expenses and deferred revenue. The acquisitions were
pursuant to an agreement dated November 14, 2008. Mr. Dale and Mr. Raine were
part of the founding group of shareholders of 30DC and in conjunction with the
acquisitions, Mr. Dale was named the Chief Executive Officer of 30DC DE. In
accordance with the provisions of Accounting Standards Codification ("ASC") 805,
"Business Combinations", the acquisitions of 30 Day and Immediate were accounted
for as transactions between entities under common control, whereby the acquired
assets and liabilities of 30 Day and Immediate were recognized in the Financial
Statements at their carrying amounts and the acquisitions are reflected in the
accompanying Financial Statements for the three months ended September 30, 2009
as if they occurred as of the beginning of the period.
On September 10, 2010, shareholders of 30DC DE exchanged 100% of their 30DC DE
shares for 60,984,000 shares of Infinity Capital Group, Inc. ("Infinity"), a
publicly traded company which trades over the counter ("OTC") on the OTC Pink
market operated by OTC Market Group, Inc. 30DC DE became a wholly owned
subsidiary of Infinity Capital Group, Inc. which has subsequently changed its
name to 30DC, Inc. ("30DC" and together with its subsidiary "the Company").
After the share exchange, the former shareholders in 30DC DE. held approximately
90% of the outstanding shares in Infinity and the officers of 30DC DE became the
officers of Infinity. 30DC DE was the accounting acquirer in the transaction and
its historical financial statements will be the historical financial statements
of 30DC. Infinity's operations were discontinued and subsequent to the share
exchange are accounted for as discontinued operations.
30DC offers internet marketing services and related training that help Internet
companies in operating their businesses. 30DC's core business units are 30 Day
and Immediate. 30 Day, with more than 90,000 active online participants, offers
a free e-commerce training program year round along with an online education
subscription service and periodic premium live seminars that are targeted to
experienced internet business operators. Immediate is an online educational
program subscription service offering high-end Internet marketing instruction
and strategies for experienced online commerce practitioners. Other revenue
streams include sales of instructional courses and software tools related to
internet marketing and from commissions on third party products sold via
introduction to the 30DC customer base of active online participants and
subscribers which are referred to as affiliate marketing commissions. The
Company's recorded and unrecorded assets consist primarily of property and
equipment and internally developed intangible property such as domain names,
websites, customer lists, copyrights and goodwill.
The Company 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.
-6-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2010
(UNAUDITED)
The Company had a cash balance of $53,118 at September 30, 2010 and current
liabilities exceeded current assets by $1,696,614. Subsequent to September 30,
2010 the Company raised an additional $220,300 in new capital investment and
settled approximately $400,000 in liabilities by issuing shares of the Company's
common stock and bringing the total amount of expenses and liabilities settled
in stock up to approximately $800,000 since the beginning of the Company's
fiscal year in July 2010. To fund working capital for the next twelve months,
the Company expects to raise additional capital, to settle additional
liabilities using the Company's stock and to improve the results of operations
from increasing revenue and a reduction in operating costs which during the
first quarter included significant non-recurring transaction costs. As further
discussed in Note 13, the Company has signed an agreement with RivusTV Ltd.
pursuant to which the companies have initiated a joint capital raising effort.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
--------------------------------------------------
BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with United States generally accepted accounting
principles ("GAAP") and with instructions to Form-10Q and article 10 of
Regulation S-X. Accordingly, they do not include all the information required by
GAAP for a complete set of financial statements. In the opinion of management,
all adjustments, (including normal recurring accruals) considered necessary for
a fair presentation have been included in the financial statements. Operating
results for the interim period are not necessarily indicative of the results
that may be expected for the fiscal year ended June 30, 2011 or any other
period. This Form 10-Q should be read in conjunction with the Audited Financial
Statements and accompanying notes to the Financial Statements for the year ended
June 30, 2010 included on Form 8K which was filed on June 24, 2011.
The unaudited condensed consolidated financial statements include the accounts
of 30DC, Inc., (f/k/a Infinity Capital Group, Inc.) and its subsidiary 30DC DE
for the period beginning September 10, 2010, the date of the share exchange with
Infinity, and ending September 30, 2010. For the three months ending September
30, 2009 and for the period beginning July 1, 2010 and ending September 10, 2010
only the accounts of 30DC DE are included in the financial statements.
PROPERTY AND EQUIPMENT
Equipment is recorded at cost less accumulated depreciation and amortization.
Maintenance and repairs are charged to operations as incurred. Asset and related
accumulated depreciation amounts are relieved from the accounts for retirements
or dispositions. Depreciation on equipment is computed using the straight-line
method. Estimated useful lives of three to ten years are used for equipment,
while leasehold improvements are amortized, using the straight line method, over
the shorter of either their economic useful lives or the term of the leases.
GOODWILL AND INTANGIBLE ASSETS
The Company accounts for goodwill and intangible assets in accordance with ASC
350 "Intangibles-Goodwill and Other" ("ASC 350"). ASC 350 requires that goodwill
and other intangibles with indefinite lives be tested for impairment annually or
on an interim basis if events or circumstances indicate that the fair value of
an asset has decreased below its carrying value.
Goodwill represents the excess of the purchase price over the fair value of net
assets acquired in the Company's share exchange with Infinity which occurred on
September 10, 2010. ASC 350 requires that goodwill be tested for impairment at
the reporting unit level (operating segment or one level below an operating
segment) on an annual basis and between annual tests when circumstances indicate
-7-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2010
(UNAUDITED)
that the recoverability of the carrying amount of goodwill may be in doubt.
Application of the goodwill impairment test requires judgment, including the
identification of reporting units; assigning assets and liabilities to reporting
units, assigning goodwill to reporting units, and determining the fair value.
Significant judgments required to estimate the fair value of reporting units
include estimating future cash flows, determining appropriate discount rates and
other assumptions. Changes in these estimates and assumptions or the occurrence
of one or more confirming events in future periods could cause the actual
results or outcomes to materially differ from such estimates and could also
affect the determination of fair value and/or goodwill impairment at future
reporting dates.
LONG LIVED ASSETS
In accordance with ASC 360 "Property Plant and Equipment," the Company reviews
the carrying value of intangibles subject to amortization and long-lived assets
for impairment at least annually or whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
Recoverability of long-lived assets is measured by comparison of its carrying
amount to the undiscounted cash flows that the asset or asset group is expected
to generate. If such assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amount of the
property, if any, exceeds its fair market value.
ACCUMULATED OTHER COMPREHENSIVE INCOME
Accumulated Other Comprehensive Income consists of cumulative adjustments of
foreign currency translation which is further discussed in the foreign currency
translation and measurement note.
REVENUE RECOGNITION
The Company generally applies revenue recognition principles in accordance with
ASC 605, "Revenue Recognition". Accordingly, revenue is generally recognized
when persuasive evidence of an agreement exists, services have been rendered or
product delivery has occurred, the selling price to the customer is fixed or
determinable and collectability is reasonable assured.
The Company generates revenues in five categories, (i) commissions, (ii)
seminars and mentoring (iii) subscriptions and (iv) products and services.
Commissions are all affiliate marketing commissions generated when a customer is
referred to a third-party via the Internet and the customer makes a purchase,
which is paid for at the time of purchase. Revenue from commissions is
recognized when the customer purchase is made from the third-party. Seminars and
mentoring are educational in nature. Seminars are live events held in different
cities throughout the world where customers will pay a fee to attend what is
typically a three-day event. Seminar fees are paid in advance and classified as
deferred revenue until the seminar is held. Mentoring services are offered over
a period of time, typically a one-year period. Fees for mentoring are paid in
advance and mentoring revenue is recognized ratably over the period of service.
All subscription revenue is from monthly online subscriptions for information on
internet marketing. All subscriptions are paid in advance and subscription
revenue is recognized ratably over the term of the subscription. Products and
services revenues are from sales of online educational courses and productivity
tools which customers use in their Internet marketing businesses. Revenue from
products and services is recognized when the customer purchase is made. Deferred
revenue consists of the unearned portion of subscription payments, seminar fees
and mentoring revenue as of the financial statement date. Deferred revenue was
$341,804 and $278,118 at September 30, 2010 and June 30, 2010 respectively.
-8-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2010
(UNAUDITED)
EQUITY-BASED PAYMENTS TO NON-EMPLOYEES
The Company accounts for equity instruments issued to non-employees in
accordance with the provisions of ASC 505-50, "Equity-Based Payments to
Non-Employees", which requires that such equity instruments are recorded at
their fair value on the measurement date, with the measurement of such
compensation being subject to periodic adjustment as the underlying equity
instruments vest.
FOREIGN CURRENCY TRANSLATION AND REMEASUREMENT
The functional currency of the Company's 30 Day Challenge division is the
Australian dollar ("AUD"). All other Company operations use the United States
dollar as their functional currency. Under ASC 830 "Foreign Currency Matters",
functional currency assets and liabilities are translated into the reporting
currency, US Dollars, using period end rates of exchange and the related
translation adjustments are recorded as a separate component of accumulated
other comprehensive income. Functional statements of operations amounts
expressed in functional currencies are translated using average exchange rates
for the respective periods. Re-measurement adjustments and gains or losses
resulting from foreign currency transactions are recorded as foreign exchange
gains or losses in the Statement of Operations.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and use assumptions that affect certain reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of income and expenses
during the reported period. Significant estimates in these financial statements
are the estimated useful lives used to calculate depreciation of property and
equipment and the estimate of the Company's future taxable income used to
calculate the Company's deferred tax valuation allowance. The Company evaluates
all of its estimates on an on-going basis.
NET LOSS PER SHARE
The Company computes net loss per share in accordance with ASC 260 (formerly
SFAS No. 128, "Earnings Per Share.") Under ASC 260, basic net loss per share is
computed by dividing net loss per share available to common stockholders by the
weighted average number of shares outstanding for the period and excludes the
effects of any potentially dilutive securities. Diluted earnings per share, if
presented, would include the dilution that would occur upon the exercise or
conversion of all potentially dilutive securities into common stock using the
"treasury stock" and/or "if converted" methods as applicable. The computation of
basic loss per share for the three months ended September 30, 2010 and 2009
excludes potentially dilutive securities consisting of 5,108,410 warrants and
600,000 options at September 30, 2010 because their inclusion would be
anti-dilutive. In computing net loss per share, warrants with an insignificant
exercise price are deemed to be outstanding common stock.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (Topic 220):
Presentation of Comprehensive Income. This guidance improves the comparability,
consistency and transparency of financial reporting and increases the prominence
of items reported in other comprehensive income. The guidance provided by this
update becomes effective for interim and annual periods beginning on or after
December 15, 2011. Since this ASU will only change the format of financial
statements it is expected that the adoption of this ASU will not have a material
effect on a Company's condensed consolidated financial position and results of
operations.
-9-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2010
(UNAUDITED)
Other accounting standards that have been issued or proposed by the FASB or
other standards-setting bodies that do not require adoption until a future date
are not expected to have a material impact on our financial statements upon
adoption.
NOTE 3. DISCONTINUED OPERATIONS
-------------------------------
INTRODUCTION
On September 10, 2010, immediately prior to the share exchange with 30DC DE,
Infinity withdrew its election to operate as a Business Development Company
("BDC") under the Investment Company Act of 1940 ("1940 Act"). Infinity
historically operated as a non-diversified, closed-end management investment
company and prepared its financial statements as required by the 1940 Act. 30DC
is no longer actively operating the BDC and the assets, liabilities and results
of operations of Infinity's former business are shown as discontinued operations
in the Company's financial statements subsequent to the share exchange with
30DC.
Results of Discontinued Operations for the
Three Months Ended September 30, 2010
Revenues $ -
Operating Expenses 1,700
------------
Loss from operations (1,700)
Unrealized gain on marketable securities 3,500
------------
Net Income $ 1,800
============
Assets and Liabilities of Discontinued Operations
as of September 30, 2010
Assets
------------------
Marketable securities $ 185,531
============
Total assets of discontinued operations $ 185,531
============
Liabilities
------------------
Accounts payable $ 94,866
Accrued expenses 34,973
Notes payable 139,520
Due to related parties 142,878
------------
Total liabilities of discontinued operations $ 412,237
============
Notes Payable
Included in liabilities of discontinued operations at September 30, 2010 are
$209,906 (including $70,386 of notes payable included in due to related parties)
in notes payable plus related accrued interest which are in default for lack of
repayment by their due date. For the period subsequent to the share exchange
with 30DC DE through September 30, 2010 the Company incurred interest expense on
notes payable of $1,490 which is included in the Statement of Operations under
discontinued operations.
-10-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2010
(UNAUDITED)
NOTE 4. PRO FORMA FINANCIAL INFORMATION
---------------------------------------
The following unaudited consolidated pro forma information gives effect to the
share exchange with Infinity (discussed in Note 1) as if this transaction had
occurred 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.
Three Months Ended Three Months Ended
September 30, 2010 September 30, 2009
(Unaudited) (Unaudited)
------------------- -------------------
Revenues $ 402,202 $ 377,804
Operating Expenses 1,383,649 505,366
------------------ -------------------
Loss from Continuing Operations (981,447) (127,562)
Loss from Discontinued Operations (25,698) (409,025)
------------------ -------------------
Net Loss (1,007,145) (536,587)
Foreign Currency Translation Loss (74,352) (19,945)
------------------ -------------------
Comprehensive Loss (1,081,497) (556,532)
================== ===================
Basic and Diluted Loss Per Share (.01) (.01)
Weighted Average Shares Outstanding - Basic
& Diluted 67,806,849 67,531,391
NOTE 5. PRIVATE PLACEMENT MEMORANDUM
-------------------------------------
In August 2010, 30DC issued a private placement memorandum ("PPM") seeking to
raise a maximum of $3,000,000 at a price of 26 cents per unit or 11,538,462
units if the $3,000,000 maximum is raised. Each unit consists of one share of
Common Stock of Infinity, a warrant exercisable for 90 days from the date of
issuance (subsequently amended to expire March 15, 2011), to purchase one share
of Common Stock of Infinity with an exercise price of 37 cents, and a warrant
exercisable for five years from the date of issuance, to purchase one share of
Common Stock of Infinity for 50 cents. 30DC received $501,590 between July 2009
and June 2010 under a prior PPM for which a closing did not occur and the funds
were considered to be interest free loans pending closing. At June 30, 2010, the
$501,590 is included as private placement subscriptions received in the
liability section of the Balance Sheet. Pursuant to an agreement with the
subscribers, the $501,590 became part of the August 2010 PPM. A first closing of
the August 2010 PPM was held on September 22, 2010 consisting of the $501,590
received under the prior PPM and $162,500 in new investment funds, less capital
raising costs of $33,100 for net proceeds of $630,990 which represents 2,554,205
units consisting of 2,554,205 shares of common stock and 2,554,205 of each of
the two warrants.
NOTE 6. RELATED PARTY TRANSACTIONS
-----------------------------------
The Company entered into three-year Contract For Services Agreements commencing
July 2009 with the Marillion Partnership ("Marillion") for services which
includes Mr. Edward Dale acting as the Company's Chief Executive Officer, with
23V Industries, Ltd. ("23V") for services which include Mr. Dan Raine acting as
the Company's Vice President of Business Development and with Jesselton, Ltd.
("Jesselton") for services which include Mr. Clinton Carey acting as the
Company's Chief Operating Officer. Effective April 1, 2010, Raine Ventures, LLC
replaced 23V Industries, Ltd in providing consulting services to the Company
which include Mr. Raine acting as the Company's Vice President of Business
Development. These agreements are non-cancelable by either party for the initial
two years and then with six months notice by either party for the duration of
-11-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2010
(UNAUDITED)
the contract. Mr. Dale and Mr. Carey are directors of the Company, Mr. Dale and
Marillion hold majority interest in the Company's outstanding common stock and
Mr. Raine is the beneficial owner of greater than 10% of the Company's
outstanding common stock. Marillion Partnership is owned by affiliates of Mr.
Dale, 23V and Raine Ventures are owned 100% by Mr. Raine.
Cash remuneration under Marillion, 23V and Raine Ventures agreements is $250,000
per year and $200,000 under the Jesselton agreement. If in any year starting
from the commencement date, revenues of 30DC, Inc. doubles then a bonus equal to
50% of cash remuneration will be due in shares of 30DC, Inc. as additional
compensation. The bonus was not earned in the fiscal year ending June 30, 2010
and nothing has been accrued in the September 30, 2010 financial statements,
since the bonus was not earned for the fiscal year ending June 30, 2011.
During the term of the agreements, Marillion, Jesselton, 23V and Raine Ventures
are prohibited from engaging in any other business activity that competes with
30DC, Inc. without written consent of the 30DC, Inc. Board of Directors.
In July 2009, when 30DC acquired 30 Day and Immediate, Messrs. Dale and Carey
signed executive services agreements with the Company and Mr. Raine signed a
consulting services agreement with the Company. Pursuant to the agreements with
Marillion, Jesselton and 23V (effective April 1, 2010 Raine Ventures replaced
23V), the contract for services agreements memorialized the pre existing
contractual relationship and formally set the terms and conditions between the
parties from July 1, 2009 and all prior understandings and agreements - oral or
written were merged therein, including the respective executive services and
consulting services agreements. All compensation under the contract for services
agreements is identical with the respective executive services and consulting
agreements. Where applicable under local law, all payroll and other taxes are
the responsibility of Marillion, Jesselton and 23V and they have provided the
Company with indemnification of such taxes which under the prior contracts may
have been a liability of the Company. The parties acknowledged that the
effective date of the agreements relates back to the contractual relationship
between the parties.
30DC's Board of Directors approved a bonus to Marillion based upon the net cash
flow of the Company's 30 Day Challenge division and a bonus to 23V (succeeded by
Raine Ventures) based upon the net cash flow of the Company's Immediate Edge
division until such time as 30DC had completed a merger or public stock listing,
which occurred on September 10, 2010. For the three month period ended September
30, 2010 the bonus for Marillion was $79,643 and total compensation was $142,143
and the bonus for 23V was $-0- and total compensation was $62,500. For the three
month period ended September 30, 2009 the bonus for Marillion was $-0- and total
compensation was $58,968 and the bonus for Raine Ventures was $23,971 and total
compensation was $86,471. Subsequent to the September 10, 2010 merger, Marillion
and Raine Ventures are being paid in accordance with their contracted amounts.
Jesselton earned $250,000 upon completion of the share exchange between 30DC and
Infinity on September 10, 2010. $125,000 of this amount was satisfied by
issuance of 480,770 of the Company's common shares. The remaining $125,000 is
included in due to related parties in the liability section of the balance
sheet. Jesselton also settled $200,000 of contract fees for the fiscal year
ending June 30, 2010 for an additional 769,231 common shares of the Company,
Due to related parties also includes $50,000 due to Jesselton under their
contract for services agreement and $50,000 due to Theodore A. Greenberg, 30DC's
CFO for compensation. Mr. Greenberg has agreed to receive this amount and an
additional $50,000 due through December 31, 2010 in common shares of the
Company.
-12-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2010
(UNAUDITED)
NOTE 7. PROPERTY AND EQUIPMENT
-------------------------------
Property and equipment consists of the following:
September 30, 2010 June 30, 2010
------------------ -------------
Computer and Audio Visual Equipment $ 391,927 $ 339,630
Office equipment and Improvements 65,191 53,129
------------------ -------------
457,118 392,759
Less accumulated depreciation and
amortization (344,157) (281,243)
------------------ -------------
$ 112,961 $ 111,516
================== =============
Depreciation and amortization expense was $16,506 for the three months ended
September 30, 2010 and $13,770 for the three months ended September 30, 2009.
Property and equipment, net are stated in the functional currency where located
and where applicable are translated to the reporting currency of the US Dollar
at each period end. Accordingly, property and equipment, net are subject to
change as a result of changes in foreign currency exchange rates.
NOTE 8. INCOME TAXES
---------------------
As of June 30, 2010, 30DC DE had net operating loss carryovers for United States
income tax purposes of approximately $806,100, which expire in 2031. The U.S.
net operating loss carryovers may be subject to limitation under Internal
Revenue Code Section 382 should there be a greater than 50% change in ownership
as determined under the regulations. Additionally, the Company is in the process
of filing all its federal returns since 2008 and all its state and local returns
for Infinity since 2005. The Company's net operating loss carryovers will only
be available to offset any future taxable income once the Company files its
federal tax returns. The Company has not provided a tax benefit for the three
months ended September 30, 2010 and 2009, as it is not more likely than not that
such benefit will be realized. All unfiled income tax returns are subject to
income tax examination by tax authorities and the statute of limitations for tax
examinations does not begin to run until returns are filed.
As a corporation formed in the United States, the Company is subject to the
United States corporation income tax on worldwide income. Since majority
ownership of the Company's shares are held by Australian residents, the Company
is deemed to be an Australian resident corporation and is subject to Australian
corporate income tax on worldwide net income which for Infinity was from the
time of the share exchange. Corporate income taxes paid to Australia will
generally be available as a credit against United States corporation income tax.
Prior to the share exchange with Infinity, the Company did not have nexus to any
individual state in the United States and accordingly no deferred tax provision
has been recognized for state taxes for results of operations prior to September
10, 2010. Australia does not have any state corporation income tax. Future
changes in Company operations might impact the geographic mix which could affect
the Company's overall effective tax rate.
The Company applies the provisions of ASC 740, which provides clarification
related to the process associated with accounting for uncertain tax positions
recognized in our interim financial statements. ASC 740 prescribes a more likely
than not threshold for financial statement recognition and measurement of a tax
position taken, or expected to be taken, in a tax return. ASC 740 also provides
guidance related to, amongst other things, classification, accounting for
interest and penalties associated with tax positions, and disclosure
requirements.
The Company classifies interest and penalties, if any, related to tax
uncertainties as income tax expense. There have not been any material changes in
our liability for unrecognized tax benefits, including interest and penalties,
during the three months ended September 30, 2010. We do not currently anticipate
-13-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2010
(UNAUDITED)
that the total amount of unrecognized tax benefits will significantly increase
or decrease within the next twelve months.
NOTE 9. REVENUE CONCENTRATION
-----------------------------
For the three months ended September 30, 2010 the Company earned revenue from
one customer representing approximately 13% of total revenues. For the three
months ended September 30, 2009 the Company earned revenue from two customers of
approximately 21% and 12%.
NOTE 10. STOCKHOLDERS' EQUITY
-----------------------------
COMMON STOCK
Prior to the share exchange with Infinity on September 10, 2010, 30DC DE
outstanding common shares were as follows:
Shares
---------
Common shares outstanding, July 1, 2009 1,200,000
Issuance of shares for acquisitions 3,420,000
---------
Common shares outstanding, September 10, 2010 4,620,000
=========
The share exchange ratio was 13.2:1 with 30DC DE shareholders receiving
60,984,000 of Infinity common shares for exchanging their 4,620,000 common
shares of 30DC DE. The share exchange resulted in 30DC DE becoming a
wholly-owned subsidiary of Infinity but for accounting purposes 30DC was deemed
the acquirer. In the financial statements, for comparison purposes, shares
outstanding at June 30, 2010 were restated to the 60,984,000 post-exchange
amount from the 4,620,000 which were actually outstanding on that date.
In August 2010, 30DC issued the private placement memorandum ("PPM") discussed
in Note 5. A first closing was held on September 22, 2010 for which 2,554,205
units were issued consisting of 2,554,205 shares of common stock and 2,554,205
of each of the two warrants.
On September 30, 2010, the Company issued common shares to settle outstanding
liabilities and for shares due under services agreements as follows;
Cameron Associates, an investor relations firm, pursuant to a contract signed
December 8, 2009 under which Cameron was due 50,000 shares of the Company's
common stock which was adjusted to 660,000 shares under the exchange ratio.
Jesselton, Ltd, was issued a total of 1,250,001 common shares of the Company
(see Note 6).
Corholdings Pty Ltd., settled $125,000 AUD ($115,525 USD) of the $250,000 AUD
($231,050 USD) fee they were due for advising on the process which resulted in
completion of the share exchange for 444,327 common shares of the Company.
-14-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2010
(UNAUDITED)
Summary of Common Stock Outstanding;
Prior to the share exchange 4,620,000
Exchange Ratio 13.2
---------------------
Shares Issued in the Exchange 60,984,000
Infinity Outstanding pre Exchange 6,547,391
PPM Closing 2,554,205
Cameron Associates 660,000
Jesselton, Ltd. 1,250,001
Corholdings, Pty Ltd. 444,327
---------------------
Common Shares Outstanding September 30, 2010 72,439,924
=====================
WARRANTS AND OPTIONS
The Company has 600,000 fully vested options outstanding as follows:
404,000 options exercisable at 80 cents per share expiring August 7, 2018
196,000 options exercisable at 50 cents per share expiring January 5, 2019
192,500 of these options are held by Pierce McNally a director of the Company
and the balance are held by a former employee and former directors of Infinity.
161,163 warrants (net of forfeitures) are due to Imperial Consulting Network
under an agreement signed in June 2010 at an exercise price of $0.0001 per
share. Such warrants are yet to be issued.
Pursuant to the PPM discussed in Note 6, a first closing was held on September
22, 2010 under which 2,554,205 warrants at 37 cents per share, expiring December
21, 2010 were issued along with 2,554,205 warrants at 50 cents per share
expiring September 22, 2015. The warrants expiring December 21, 2010 were
subsequently extended to March 15, 2011 and expired unexercised.
See Note 13 for common stock and warrants issued subsequent to September 30,
2010.
NOTE 11. COMMITMENTS AND CONTINGENCIES
---------------------------------------
In February 2010, 30DC engaged Prestige Financial Center, Inc. ("Prestige") a
registered Broker Dealer to provide investment banking and advisory services to
the Company. Upon execution of the contract, the Company paid Prestige a $25,000
nonrefundable due diligence and retainer fee. Under terms of the contract as
revised in June 2010, Prestige is due a reverse merger fee of an option to
purchase at least 1% of the Company's outstanding common shares at the
completion of a reverse merger with a publicly-traded company at an exercise
price of $0.001 per share. Other terms include a 10% cash financing fee and
warrants equal to 7% for capital raised (as defined under the agreement to
exclude certain funding sources) during the term of the agreement along with a
5% acquisition fee for any completed acquisitions which Prestige introduced to
the Company. The Prestige agreement had an initial term of six months and was
automatically renewable, however the agreement can be canceled at any time after
the initial six months. The Company and Prestige entered into a release
agreement dated October 28, 2010 under which Prestige will receive 675,314
shares of the Company's restricted common stock and both parties released each
other from any other claims.
-15-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2010
(UNAUDITED)
NOTE 12. SUPPLEMENTAL SCHEDULE OF OPERATING EXPENSES
----------------------------------------------------
Three Months Ended Three Months Ended
September 30, 2010 September 30, 2009
------------------ ------------------
Related Party Contractor Fees Base Compensation (1) $ 175,000 $ 175,000
Related party Contractor Fees Bonus Compensation (1)(2) 79,643 20,439
Officer's Salary 50,000 -
Independent Contractors 168,769 116,150
Transaction Fees (3) 670,138 -
Professional Fees 57,362 46,562
Travel Expenses 54,519 35,483
Other Operating Costs 82,840 80,532
------------------ ------------------
Total Operating Expenses $ 1,338,271 $ 474,166
================== ==================
-----------------------------------------------------
(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 and 23V and Raine Ventures which provides services to the Company
including for Dan Raine to act as Vice President for Business Development
and Jesselton, Ltd. which provides services to the Company including
Clinton Carey serving as Chief Operating Officer of the Company.
(2) 30DC's Board of Directors approved a bonus to Marillion based upon the net
cash flow of the Company's 30 Day Challenge division (formerly 30 Day) and
a bonus to 23V and Raine Ventures based upon the net cash flow of the
Company's Immediate Edge division (formerly Immediate) until such time as
30DC had completed a merger or public stock listing which occurred on
September 10, 2010.
(3) Transaction fees were incurred upon completion of the 30DC/Infinity share
exchange for consulting services which resulted in completion of the share
exchange. $250,000 was due to Jesselton, Ltd., $250,000 AUD ($231,050) was
due to Corholdings Pty, Ltd. and Prestige was due 675,314 common shares
which were valued at $189,088.
NOTE 13. SUBSEQUENT EVENTS
---------------------------
The August 2010 PPM was extended to March 15, 2011 and in place of the warrant
exercisable for 90 days from the date of issuance, all subscribers to the PPM
received warrants exercisable through March 15, 2011 at an exercise price of 37
cents per warrant. Subsequent to September 30, 2010, additional PPM closings
resulted in $220,300 in new investment funds which represents an additional
847,317 units consisting of 847,317 shares of common stock and 847,317 of each
of the two warrants. The March 15, 2011 warrants have expired with none
exercised.
In February 2011, Theodore A. Greenberg, CFO of 30DC, agreed to accept 480,770
shares of the Company's common stock as settlement of $125,000 owed to him by
the Company.
On August 24, 2011 the Company entered into an agreement to a Share Sale and
Purchase Agreement (the "Purchase") with RivusTV Ltd, ("Rivus") which was
organized and exists in Victoria, Australia. Rivus offers a solution to
broadcast digital content across the Internet on a revenue share basis. The
purchase price for 100% of Rivus' issued and outstanding shares is 45% of 30DC's
adjusted issued and outstanding shares immediately prior to closing which
equates to 31% of the total outstanding after closing without regards to the
-16-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2010
(UNAUDITED)
adjustment factor. The adjustment factor to 30DC's outstanding shares accounts
for 30DC's non-operating liabilities and is expected to increase the deemed
outstanding by approximately four million shares which would increase Rivus post
closing ownership by an additional 1%. The Purchase is subject to both 30DC and
Rivus completing satisfactory due diligence on each other and a minimum capital
raise of $5 million AUD (currently $5.25 million USD) by October 31, 2011 or
such other that date that the parties shall agree.
Management has evaluated subsequent events to determine if events or
transactions occurring through the date on which the financial statements were
available to be issued, require potential adjustment to or disclosure in the
Company's financial statements.
-17-
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 DE was incorporated on October 17, 2008 in the state of Delaware and prior
to July 15, 2009, 30DC DE had no active business operations. On July 15, 2009,
30DC acquired the business of the "30 Day Challenge" and "Immediate Edge" from
two of 30DC's founding shareholders as part of a plan to consolidate their
business operations. 30DC DE was created to build and manage international
web-based sales and marketing companies. 30 Day Challenge and Immediate Edge are
30DC's two business divisions. 30 Day Challenge offers a free online ecommerce
training program and an online education subscription service. In addition,
periodic premium live seminars are produced which are intended to target
experienced Internet business operators. Immediate Edge is an online education
program subscription service offering high-end internet marketing instruction
and strategies for experienced online commerce practitioners.
On September 10, 2010, Infinity Capital Group, Inc., a Maryland Corporation,
("Infinity") entered into a Plan and Agreement of Reorganization (the
"Agreement") with 30DC DE, and the Shareholders of 30DC DE. ("30DC DE
Shareholders"). In exchange for 100% of the issued and outstanding shares of
30DC DE, Infinity issued 60,984,000 shares of its restricted common stock. The
shareholders of 30DC DE received 13.2 shares of common stock of Infinity for
every one share of 30DC DE. Upon closing Messrs. Edward Dale and Clinton Carey
were appointed to the Infinity Board of Directors and subsequently Infinity was
renamed 30DC, Inc. (Maryland) ("30DC'). Mr. Dale is the President, Chief
Executive Officer and a director of 30DC. In addition, he is the manager of the
former majority shareholder of 30DC DE, Marillion Partnership. Mr. Carey is the
Chief Operating Officer and a director of 30DC DE. Further, Mr. Dale was
appointed the Chief Executive Officer of Infinity and Mr. Carey was appointed
the Chief Operating Officer of Infinity.
Infinity, as a result of the transaction, became the sole outstanding
shareholder of 100% of the outstanding common shares of common stock of 30DC DE.
For purposes of accounting, 30DC DE will be considered the accounting acquirer.
As of the date of the transaction, Infinity discontinued its historical
operations and the business of 30DC DE is now the business of 30DC.
The Company has not filed its quarterly reports for the quarters ended December
31, 2010 and March 31, 2011, respectively. The Company is in the process of
preparing such reports for filing.
-18-
The Company has no plans at this time for purchases or sales of fixed assets
which would occur in the next twelve months.
Other than the Purchase (as defined in Note 13 to the financial statements), the
Company has no expectation or anticipation of significant changes in number of
employees in the next twelve months.
RESULTS OF OPERATIONS
FOR THE THREE MONTH PERIOD ENDED SEPTEMBER 30, 2010 COMPARED TO THE THREE MONTH
PERIOD ENDED SEPTEMBER 30, 2009.
During the three months ended September 30, 2010, 30DC, Inc. recognized revenues
of $402,202 from its operations compared to $377,806 during the three months
ended September 30, 2009. Revenues of the Company were from the following
sources during the three months ended September 30, 2010 compared to September
30, 2009.
Three Months Ended Three Months Ended Increase or
September 30, 2010 September 30, 2009 (Decrease)
------------------ ------------------ ---------------
Revenue
Commissions $ 97,235 $ 151,526 $ (54,291)
Subscription Revenue 160,661 205,673 (45,012)
Products and Services 3,632 - 3,632
Seminars and Mentoring 140,674 20,607 120,067
------------------ ------------------ ---------------
Total Revenues $ 402,202 $ 377,806 $ 24,396
------------------ ------------------ ---------------
The $54,291 decrease in commissions was a result of a longer duration of the
Company's free Challenge program during which time commissions earned are the
lowest amount during the year. The Challenge format was revised from four
consecutive weeks to a format of four weeks of instruction stretching over a
seven week period. The extra time allowed participants to catch up if they were
falling behind, to join late and catch up and also more time to start utilizing
what they learned before moving on to the next step. These revisions resulted in
an increase in completion and traffic generated by the program. Commissions
earned were also impacted by the number of new participants each year which was
down from 2009 to 2010.
The $45,012 decrease in subscription revenue was due to a net decrease in active
subscribers. The active subscriber base is dynamic with new subscriptions and
cancellations ongoing. Typically, new subscribers enroll after completing the
challenge so the extended period of the Challenge postponed the timing for new
subscribers until later in the quarter in 2010 vs. 2009.
The $120,067 increase in seminars and mentoring income is primarily from an
increase in the number of customers participating in the mentoring program which
is priced from $5,000 to $10,000 per year and the revenue from which is
recognized ratably over the one year term.
During the three months ended September 30, 2010, 30DC incurred $1,338,271 in
operational expenses compared to $474,166 during the three months ended
September 30, 2009. Operational expenses during the three months ended September
30, 2010 and 2009, include the following categories:
-19-
THREE MONTHS ENDED THREE MONTHS ENDED INCREASE OR
SEPTEMBER 30, 2010 SEPTEMBER 30, 2009 DECREASE
------------------ ------------------ -------------
Accounting Fees $ 31,306 $ 13,408 $ 17,898
Paypal Fees 10,178 9,384 794
Commissions 5,467 3,060 2,407
Independent Contractors 168,769 116,150 52,619
Depreciation 16,506 13,768 2,738
Internet Expenses 14,914 12,500 2,414
Legal Fees 26,056 33,154 (7,098)
Officer's Salaries 50,000 - 50,000
Payroll Taxes 11,245 3,010 8,235
Related Party Contractors 254,643 195,439 59,204
Telephone 5,568 10,428 (4,860)
Transaction Fees 670,138 - 670,138
Travel & Entertainment 54,519 35,483 19,036
Other Operating Expenses 18,962 28,382 (9,420)
------------------ ------------------ -------------
Total Operating Expenses $ 1,338,271 $ 474,166 $ 864,105
================== ================== =============
The increase of $17,898 in accounting fees was related to audited financial
statements for June 30, 2008 and June 30, 2009.
The increase of $52,619 in independent contractors includes $41,375 for investor
relations consultants of which $26,375 was equity based compensation and
approximately $9,000 increase due to change in exchange rates.
The decrease of $7,098 in legal fees was due to expenditures in the prior period
related to the July 15, 2009 acquisitions of 30 Day Challenge and Immediate
Edge.
The increase of $50,000 in officer's salaries was for the Company's CFO,
Theodore A. Greenberg which was necessitated by the share exchange and
requirements for the Company's public filings.
Related Party Contractor Fees consist of payments to Marillion Partnership, 23V
Industries, Ltd. which was succeeded by Raine Ventures, LLC and Jesselton, Ltd.
under contracts for services which include Ed Dale acting as 30DC's Chief
Executive Officer, Dan Raine acting as 30DC's Vice President of Business
Development and Clinton Carey acting as 30DC's Chief Operating Officer
respectively. The $59,204 increase includes amounts due under the contracts for
services along with a bonus to Marillion based on the net cash flow of the 30
Day Challenge division through the date of the share exchange as approved by the
Company's board of directors.
The increase of $670,138 in transaction fees due to consultants advising on the
process which resulted in completion of the share exchange including $250,000 to
Jesselton, Ltd., $231,050 ($250,000 AUD) to Corholdings Pty Ltd and $189,088 to
Prestige Financial Center, Inc.
The increase of $19,036 in travel and entertainment relates mostly to an
overseas trip when the principals came from Australia to the United States for
meetings with Company advisors related to the Infinity transaction.
During the three months ended September 30, 2010, the Company recognized a net
loss from continuing operations of ($943,121) compared to a net loss of
($101,971) during the three months ended September 30, 2009. The increased loss
of $839,350 was a result of the $864,105 increase in operational expense shown
above offset by the $24,396 increase in revenues during the period.
-20-
LIQUIDITY AND CAPITAL RESOURCES
The Company had a cash balance of $53,118 at September 30, 2010 and current
liabilities exceed current assets by $1,696,614. Subsequent to September 30,
2010 the Company raised an additional $220,300 in new capital investment and
settled approximately $400,000 in liabilities by issuing shares of the Company's
common stock and bringing the total amount of expenses and liabilities settled
in stock up to approximately $800,000 since the beginning of the Company's
fiscal year in July 2010. To fund working capital for the next twelve months,
the Company expects to raise additional capital, to settle additional
liabilities using the Company's stock and to improve the results of operations
from increasing revenue and a reduction in operating costs which during the
first quarter included significant non-recurring transaction costs. As further
discussed in Note 13, the Company has signed an agreement with RivusTV Ltd.
pursuant to which the companies have initiated a joint capital raising effort.
Included in liabilities of discontinued operations at September 30, 2010 is
$209,906 (including $70,386 included in due to related parties) in notes payable
plus related accrued interest that are in default for lack of repayment by their
due date.
During the three month period ended September 30, 2010, the Company used
$109,407 in operating activities. During the three month period ended September
30, 2009, the Company used $91,926 in operating activities. The increased use of
funds of $17,481 was due to an increased operating loss offset by expenses paid
or settled with shares of company common stock and accrued but unpaid expenses.
During the three month period ended September 30, 2010, the Company used $1,806
in investing activities. During the three month period ended September 30, 2009,
the Company used $34,336 in investing activities. The decrease in investment of
$32,531 was due to decrease in the amount of computer and audio visual equipment
purchased by the Company.
During the three month period ended September 30, 2010, financing activities
provided the Company with $136,900. During the three month period ended
September 30, 2009, financing activities provided the Company with $200,120. In
each period receipts from the Company's private placement memorandum provided
the bulk of these funds with the 2009 period raising a larger sum of capital.
NEED FOR ADDITIONAL FINANCING
The Company 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.
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.
-21-
ITEM 4. CONTROLS AND PROCEDURES
--------------------------------
DISCLOSURES CONTROLS AND PROCEDURES
We have adopted and maintain disclosure controls and procedures (as such term is
defined in Rules 13a 15(e) and 15d-15(e) under the Securities Exchange Act of
1934, as amended (the "Exchange Act")) that are designed to ensure that
information required to be disclosed in our reports under the Exchange Act, is
recorded, processed, summarized and reported within the time periods required
under the SEC's rules and forms and that the information is gathered and
communicated to our management, including our Chief Executive Officer (Principal
Executive Officer) and Principal Financial Officer, as appropriate, to allow for
timely decisions regarding required disclosure.
As required by SEC Rule 15d-15(b) for the quarter ended September 30, 2010, 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 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 software that 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.
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This quarterly report does not include an attestation report of the Company's
registered public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by the Company's
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permit the Company to provide only management's
report in this annual report.
There was no change in our internal control over financial reporting that
occurred during the fiscal quarter ended September 30, 2010, that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
-------------------------
None.
ITEM 1A. RISK FACTORS
---------------------
None.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
-------------------------------------------------------------------
During the three months period ended September 30, 2010 the Company issued the
following equity securities;
On September 10, 2010, 60,984,000 shares of common stock were issued for the
4,620,000 shares of 30 DC, Inc. in a transaction whereby 30DC, Inc. became a
wholly-owned subsidiary of the Company.
On September 30, 2010, the Company issued common shares to settle some
outstanding liabilities and for shares owed under services agreements as
follows:
Cameron Associates, an investor relations firm pursuant to a
contract signed December 8, 2009 under which Cameron was due 50,000
shares of the Company's common stock which adjusted to 660,000 shares
under the exchange ratio,
Jesselton, Ltd., a consulting firm which Mr. Clinton Carey,
Chief Operating Officer of 30DC is associated with, settled $125,000 of
the $250,000 fee they were due for advising on the process which
resulted in completion of the share exchange and $200,000 on contract
fees for the fiscal year ending June 30, 2010 for a total of 1,250,001
common shares of the Company,
Corholdings Pty Ltd., settled $125,000 AUD ($115,525 USD) of
the $250,000 AUD ($231,050 USD) fee they were due for advising on the
process which resulted in completion of the share exchange for 444,327
common shares of the Company.
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 KNOWN TO THE COMPANY AND ITS MANAGEMENT,
THROUGH PRE-EXISTING BUSINESS RELATIONSHIPS. 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
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REGISTERED OR OTHERWISE EXEMPT FROM REGISTRATION IN ANY FURTHER RESALE OR
DISPOSITION.
On September 22, 2010, 2,554,205 shares of common stock were issued for the
first closing of the Company's private placement memorandum unit offering which
was issued in August 2010. In addition to the common stock, the units closed
included 2,554,205 warrants to purchase the Company's stock at 50 cents per
share which expire September 22, 2015 and 2,554,205 warrants to purchase the
Company's stock at 37 cents per share which expired March 15, 2011 without
exercise.
EXEMPTION FROM REGISTRATION CLAIMED
ALL OF THE ABOVE SALES BY THE COMPANY OF ITS UNREGISTERED SECURITIES WERE MADE
BY THE COMPANY IN RELIANCE UPON RULE 506 OF REGULATION D 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 September 30, 2010 is
$209,906 (including $70,386 due to related parties) in notes payable plus
related accrued interest that are in default for lack of repayment by their due
date.
ITEM 4. REMOVED AND RESERVED
----------------------------
ITEM 5. OTHER INFORMATION
-------------------------
None.
ITEM 6. EXHIBITS
----------------
The following is a complete list of exhibits filed as part of this Form 10-Q.
Exhibit numbers correspond to the numbers in the Exhibit Table of Item 601 of
Regulation S-K.
EXHIBIT NO. DESCRIPTION
------------------ -----------------------------------------------------
31.1 Section 302 Certification - CEO
31.2 Section 302 Certification - CFO
32.1 Section 906 Certification - CEO
32.2 Section 906 Certification - CFO
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SIGNATURES
Pursuant to the requirements of Section 12 of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
30DC, INC.
--------------
Registrant
Dated: August 30, 2011 By: /s/ Edward Dale
--------------------------------
Edward Dale
Principal Executive Officer
Chief Executive Officer
President
Dated: August 30, 2011 By: /s/ Theodore A. Greenberg
--------------------------------
Theodore A. Greenberg,
Principal Accounting Officer
Chief Financial Officer
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