UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For Quarterly Period Ended December 31, 2014
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the Transition period from _______________ to ______________
COMMISSION FILE NUMBER: 000-30999
30DC, INC.
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(Exact name of registrant as specified in its charter)
MARYLAND 16-1675285
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
of incorporation or organization)
80 BROAD STREET, 5TH FLOOR, NEW YORK, NY 10004
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(Address of principal executive offices) (Zip Code)
(212) 962-4400
Registrant's telephone number, including area code
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes[_x_] No[__]
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files).
Yes[_x_] No[__]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check One).
Large accelerated filer [___] Accelerated filer [___]
Non-accelerated filer [___] Smaller reporting company [_X_]
(Do not check if a smaller
reporting company)
Indicate by check mark whether the Registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes[__] No[_X_]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
As of February 12, 2015, the number of shares outstanding of the registrant's
class of common stock was 76,853,464.
TABLE OF CONTENTS
PAGE
PART I - FINANCIAL INFORMATION ----
Item 1. Financial Statements 2
Condensed Consolidated Balance Sheets (Unaudited) as of
December 31, 2014 and June 30, 2014 3
Condensed Consolidated Statements of Operations (Unaudited)
for the Three and Six Months Ended December 31, 2014 and 2013 4
Condensed Consolidated Statements of Cash Flows (Unaudited)
for the Six Months Ended December 31, 2014 and 2013 5
Notes to Condensed Consolidated Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 12
Item 3. Quantitative and Qualitative Disclosures About Market Risk 20
Item 4. Controls and Procedures 20
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 22
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 22
Item 3. Defaults upon Senior Securities 22
Item 4. Mine Safety Disclosures 22
Item 5. Other Information 22
Item 6. Exhibits 22
Signatures 23
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
----------------------------
-2-
30DC, INC. AND SUBSIDIARY
Condensed Consolidated Balance Sheets
December June
31, 2014 30, 2014
---------------- -------------------
Unaudited
Assets
Current Assets
Cash and Cash Equivalents $ 123,102 $ 102,684
Restricted Cash 90,000 83,730
Accrued Commissions Receivable 2,945 12,706
Accounts Receivable 49,433 38,313
Prepaid Expenses 21,028 24,291
Assets of Discontinued Operations 106,063 116,313
---------------- -------------------
Total Current Assets 392,571 378,037
Property and Equipment, Net 20,636 19,066
Intangible Assets, Net 187,000 220,000
Goodwill 2,027,564 2,027,564
---------------- -------------------
Total Assets $ 2,627,771 $ 2,644,667
================ ===================
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable $ 233,433 $ 190,228
Accrued Expenses and Refunds 607,629 625,565
Deferred Revenue 111,734 90,716
Due to Related Parties 916,253 805,483
Liabilities of Discontinued Operations 211,899 216,548
---------------- -------------------
Total Current Liabilities 2,080,948 1,928,540
---------------- -------------------
Total Liabilities 2,080,948 1,928,540
---------------- -------------------
Stockholders' Equity
Preferred Stock, Par Value $0.001, 10,000,000 Authorized, -0- Issued - -
Common Stock, Par Value $0.001, 100,000,000 authorized,
76,853,464 issued and outstanding 76,853 76,853
Paid in Capital 3,844,315 3,826,606
Accumulated Deficit (3,271,487) (3,084,474)
Accumulated Other Comprehensive Loss (102,858) (102,858)
---------------- -------------------
Total Stockholders' Equity 546,823 716,127
---------------- -------------------
Total Liabilities and Stockholders' Equity $ 2,627,771 $ 2,644,667
================ ===================
The accompanying notes are an integral part of the unaudited condensed
consolidated financial statements.
-3-
30DC, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Operations
Unaudited
For the Three Months Ended For the Six Months Ended
December 31, December 31,
2014 2013 2014 2013
---------------- ------------------ -------------- --------------
Revenue
Commissions $ 14,991 $ 12,755 $ 28,926 $ 31,729
Subscription Revenue 31,684 - 61,638 -
Products and Services 130,047 194,991 786,225 2,118,896
---------------- ------------------ -------------- --------------
Total Revenue 176,722 207,746 876,789 2,150,625
Operating Expenses 412,620 613,324 1,050,701 1,898,606
---------------- ------------------ -------------- --------------
Operating Income (Loss) (235,898) (405,578) (173,912) 252,019
Other Income
Forgiveness of Debt - 6,260 - 93,513
---------------- ------------------ -------------- --------------
Total Other Income - 6,260 - 93,513
---------------- ------------------ -------------- --------------
Income (Loss) From Continuing Operations (235,898) (399,318) (173,912) 345,532
Income (Loss) From Discontinued Operations 17,205 (6,974) (13,101) (14,986)
---------------- ------------------ -------------- --------------
Net Income (Loss) $ (218,693) $ (406,292) $ (187,013) $ 330,546
================ ================== ============== ==============
Weighted Average Common Shares Outstanding
Basic 76,853,464 87,376,507 76,853,464 87,223,215
Diluted 76,853,464 87,376,507 76,853,464 87,723,215
Earnings Per Common Share (Basic)
Continuing Operations $ (0.00) $ (0.00) $ (0.00) $ 0.00
Discontinued Operations 0.00 (0.00) (0.00) 0.00
Net Income (Loss) Per Common Share $ (0.00) $ (0.00) $ (0.00) $ 0.00
Earnings Per Common Share (Diluted)
Continuing Operations $ (0.00) $ (0.00) $ (0.00) $ 0.00
Discontinued Operations 0.00 (0.00) (0.00) 0.00
Net Income (Loss) Per Common Share $ (0.00) $ (0.00) $ (0.00) $ 0.00
The accompanying notes are an integral part of the unaudited condensed
consolidated financial statements.
-4-
30DC, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Cash Flows
Six Months Ended December 31
Unaudited
2014 2013
--------------- ----------------
Cash Flows from Operating Activities:
Net Income (Loss) $ (187,013) $ 330,546
Loss From Discontinued Operations 13,101 14,986
Adjustments to Reconcile Income from Continuing Operations
to Net Cash Provided By Operations
Depreciation and Amortization 36,888 41,008
Equity Based Payments To Employees 17,709 49,528
Gain on Debt Forgiveness - (93,513)
Changes in Operating Assets and Liabilities
Restricted Cash (6,270) (139,625)
Accrued Commissions Receivable 9,761 30,035
Accounts Receivable (11,120) (211,482)
Prepaid Expenses 3,263 (4,210)
Accounts Payable 43,205 (72,553)
Accrued Expenses and Refunds (17,936) 298,965
Deferred Revenue 21,018 102,640
Due to Related Parties 110,770 (229,152)
--------------- ----------------
Net Cash Provided By Operating Activities 33,376 117,173
--------------- ----------------
Cash Flows from Investing Activities
Purchases of Property and Equipment (5,458) (6,601)
--------------- ----------------
Net Cash Used in Investing Activitities (5,458) (6,601)
--------------- ----------------
Cash Flows from Discontinued Operations
Cash Flows From Operating Activities (7,500) (83,098)
--------------- ----------------
Net Cash Used in Discontinued Operations (7,500) (83,098)
--------------- ----------------
Increase in Cash and Cash Equivalents 20,418 27,474
Cash and Cash Equivalents - Beginning of Period 102,684 116,372
--------------- ----------------
Cash and Cash Equivalents - End of Period $ 123,102 $ 143,846
=============== ================
Supplemental Disclosures of Non Cash Financing Activity Cash paid
during the period for:
Interest $ 3,833 $ 30,796
Income taxes 300 600
Common Stock Issued to Settle Liabilities $ - $ 104,690
The accompanying notes are an integral part of the unaudited condensed
consolidated financial statements.
-5-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 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, 2015 or any other
period. In addition, the balance sheet data at June 30, 2014 was derived from
the audited financial statements but does not include all disclosures required
by GAAP. This Form 10-Q should be read in conjunction with the Audited Financial
Statements for the year ended June 30, 2014 included in the Company's annual
report on Form 10-K which was filed on October 10, 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 six month period ended December 31, 2013, the Company has included
as outstanding 1,000,000 options which are exercisable and have an exercise
price below the average market price for the Company's shares during the period.
For all other periods presented, potentially dilutive securities would be
anti-dilutive have not been included in computing diluted earnings per share.
-6-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 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
December 31, 2014, the Company had a working capital deficit of approximately
$1,688,000 and had accumulated losses of approximately $3,271,000 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 the past few years, the
Company switched its focus to developing its own products. 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 directly to customers and
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
April of 2014, the Company began offering the Ultimate Product System which
incorporates 30DC's digital marketing platform Market Pro Max. 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.
For the past few years, the Company offered MagCast through a once per year
large-scale promotion for which the majority of sales were through marketing
affiliates which are unrelated parties who earn commissions by referring
customers to the Company and a majority of the Company's annual sales were
during the promotion. The Company held a smaller promotion through marketing
affiliates in July 2014 than in prior years. The Company does not expect to have
a large-scale promotion during this fiscal year.
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 the three months and six
months ended December 31, 2013 (see note 4). 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.
-7-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014
(UNAUDITED)
NOTE 4. 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
Six Months Ended December 31, 2014 Six Months Ended December 31, 2013
------------------------------------------- ------------------------------------------
Immediate Edge Infinity Total Immediate Edge Infinity Total
-------------- -------------- ----------- -------------- -------------- ----------
Revenues $ - $ - $ - $ 194,135 $ - $ 194,135
Operating expenses - 2,851 2,851 221,095 6,197 227,292
Income (Loss) from operations - (2,851) (2,851) (26,960) (6,197) (33,157)
Forgiveness of debt - - - - 796 796
Unrealized gain (loss) on
marketable securities - (10,250) (10,250) - 17,375 17,375
-------------- -------------- ----------- -------------- -------------- ----------
Net Income (Loss) $ - $ (13,101) $ (13,101) $ (26,960) $ 11,974 $ (14,986)
============== ============== =========== ============== ============== ==========
Three Months Ended December 31, 2014 Three Months Ended December 31, 2013
------------------------------------------- ------------------------------------------
Immediate Edge Infinity Total Immediate Edge Infinity Total
-------------- -------------- ----------- -------------- -------------- ----------
Revenues $ - $ - $ - $ 97,066 $ - $ 97,066
Operating expenses - 1,373 1,373 116,002 4,267 120,269
Income (Loss) from operations - (1,373) (1,373) (18,936) (4,267) (23,203)
Unrealized gain on marketable securities - 18,578 18,578 - 16,229 16,229
-------------- -------------- ----------- -------------- -------------- ----------
Net Income (Loss) $ - $ 17,205 $ 17,205 $ (18,936) $ 11,962 $ (6,974)
============== ============== =========== ============== ============== ==========
Assets and Liabilities of Discontinued
Operations as of
December 31, 2014 June 30, 2014
------------------------------------------- ------------------------------------------
Immediate Edge Infinity Total Immediate Edge Infinity Total
-------------- -------------- ----------- -------------- -------------- ----------
Assets
Cash $ - $ - $ - $ - $ - $ -
Prepaid expenses - - - - - -
Marketable securities - 106,063 106,063 - 116,313 116,313
-------------- -------------- ----------- -------------- -------------- ----------
Total Current Assets - 106,063 106,063 - 116,313 116,313
Goodwill - - - - - -
-------------- -------------- ----------- -------------- -------------- ----------
Total Assets of Discontinued Operations $ - $ 106,063 $ 106,063 $ - $ 116,313 $ 116,313
============== ============== =========== ============== ============== ==========
LIABILITIES
Accounts payable $ - $ 72,201 $ 72,201 $ - $ 72,201 $ 72,201
Accrued expenses - 65,148 65,148 - 62,297 62,297
Deferred revenue - - - - - -
Notes payable - 53,550 53,550 - 61,050 61,050
Due to related parties - 21,000 21,000 - 21,000 21,000
-------------- -------------- ----------- -------------- -------------- ----------
Total Liabilities of Discontinued
Operations $ - $ 211,899 $ 211,899 $ - $ 216,548 $ 216,548
============== ============== =========== ============== ============== ==========
-8-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014
(UNAUDITED)
Notes Payable
Included in liabilities of discontinued operations at December 31, 2014 and June
30, 2014 are $53,550 and $61,050 respectively in notes payable plus related
accrued interest of which are all in default for lack of repayment by their due
date.
For the six months ended December 31, 2014 and December 31, 2013 the Company
incurred interest expense on notes payable of $2,851 and $6,100 respectively
which is included in the Statement of Operations under income (loss) from
discontinued operations.
Marketable Securities
At December 31, 2014 the fair value of marketable securities held for sale was
$106,063 which included cumulative net unrealized gains of $39,653. June 30,
2014 the fair value of marketable securities held for sale was $116,313 which
included cumulative net unrealized gains of $49,873.
NOTE 5. RELATED PARTY TRANSACTIONS
-----------------------------------
At December 31, 2014, due to related parties totaled $916,253. This primarily
consisted of $11,400 due to GHL Group, Ltd., whose President, Gregory H. Laborde
is a Director, under their consulting services agreement, $149,000 accrued for
directors' fees for services of non-executive directors, $50,000 due to Netbloo
Media, Ltd. under its contractor agreement and $704,000 due to Theodore A.
Greenberg, CFO and director, for compensation.
NOTE 6. INCOME TAXES
---------------------
As of June 30, 2014, the Company had net operating loss carryovers for United
States income tax purposes of approximately $925,300, which begin to expire in
2030. For income tax purposes, net income for the six month period ended
December 31, 2013 is completely offset by the net operating loss carryovers;
accordingly no income tax provision has been provided. For future periods, the
U.S. net operating loss carryovers may be subject to limitation under Internal
Revenue Code Section 382 should there be a greater than 50% change in ownership
as determined under the regulations.
NOTE 7. STOCKHOLDERS' EQUITY
----------------------------
COMMON STOCK
During the six months ended December 31, 2014, the Company did not issue any
common stock.
WARRANTS
Information relating to outstanding warrants is as follows:
Weighted Average
Number of Weighted Average Remaining
Shares Exercise Price Contract Life
----------------------------------------------
Outstanding warrants at 06/30/14 3,401,522 $ 0.50 1.30
Granted - - -
Exercised - - -
Forfeited/expired - - -
Outstanding warrants at 12/31/14 3,401,522 0.50 0.80
Exercisable on 12/31/14 3,401,522 0.50 0.80
-9-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014
(UNAUDITED)
The aggregate intrinsic value of warrants outstanding and exercisable was $0 at
December 31, 2014. Total intrinsic value of warrants exercised was $0 for the
six months ended December 31, 2014 as no warrants were exercised during this
period.
NOTE 8. STOCK BASED COMPENSATION PLANS
---------------------------------------
The Company follows FASB Accounting Standards Codification No. 718 -
Compensation - Stock Compensation for share based payments to employees. The
Company follows FASB Accounting Standards Codification No. 505 for share based
payments to Non-Employees.
The Company recognized expense in the amount of $17,709 and $49,528 for the six
months ended December 31, 2014 and December 31, 2013 respectively and $8,855 and
$24,764 for the three months ended December 31, 2014 and December 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 06/30/14 3,600,000 $ 0.18 7.61
Granted - - -
Exercised - - -
Forfeited/expired - - -
Outstanding options at 12/31/14 3,600,000 0.18 7.11
Exercisable on 12/31/14 2,600,000 0.22 6.85
The options have a contractual term of ten years. The aggregate intrinsic value
of options outstanding and exercisable was $0 at December 31, 2014. Total
intrinsic value of options exercised was $0 for the six months ended December
31, 2014 as no options were exercised during this period.
At December 31, 2014, shares available for future stock option grants to
employees and directors under the 2012 Stock Option Plan were 4,500,000.
-10-
30DC, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014
(UNAUDITED)
NOTE 9. SUPPLEMENTAL SCHEDULE OF OPERATING EXPENSES
---------------------------------------------------
Six Months Ended Six Months Ended
December 31, 2014 December 31, 2013
-------------------- --------------------
Related Party Contractor Fees (1) $ 321,974 $ 325,666
Officer's Salary 74,855 124,764
Directors' Fees 63,855 79,764
Independent Contractors 176,941 246,467
Commission Expense 149,910 754,918
Professional Fees 87,059 101,374
Credit Card Processing Fees 28,202 105,276
Telephone and Data Lines 19,139 16,819
Other Operating Costs 128,766 143,558
-------------------- --------------------
Total Operating Expenses $ 1,050,701 $ 1,898,606
==================== ====================
--------------------------------
(1) Related party contractors include Marillion an affiliate of the Company
that manages marketing and development for the Company and provides the
services of Edward Dale 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
December 31, 2014 December 31, 2013
-------------------- --------------------
Related Party Contractor Fees (1) $ 157,790 $ 166,158
Officer's Salary 37,428 62,382
Directors' Fees 31,928 39,882
Independent Contractors 70,565 128,299
Commission Expense 5,172 35,570
Professional Fees 29,855 66,545
Credit Card Processing Fees 1,949 8,342
Telephone and Data Lines 9,087 10,713
Other Operating Costs 68,846 95,433
-------------------- --------------------
Total Operating Expenses $ 412,620 $ 613,324
==================== ====================
--------------------------------
(1) Related party contractors include Marillion an affiliate of the Company
that manages marketing and development for the Company and provides the
services of Edward Dale 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
-11-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
--------------------------------------------------------------------------------
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH OUR UNAUDITED
FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED HEREIN. IN CONNECTION WITH, AND
BECAUSE WE DESIRE TO TAKE ADVANTAGE OF, THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995, WE CAUTION READERS REGARDING
CERTAIN FORWARD LOOKING STATEMENTS IN THE FOLLOWING DISCUSSION AND ELSEWHERE IN
THIS REPORT AND IN ANY OTHER STATEMENT MADE BY, OR ON OUR BEHALF, WHETHER OR NOT
IN FUTURE FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION. FORWARD-LOOKING
STATEMENTS ARE STATEMENTS NOT BASED ON HISTORICAL INFORMATION AND WHICH RELATE
TO FUTURE OPERATIONS, STRATEGIES, FINANCIAL RESULTS OR OTHER DEVELOPMENTS.
FORWARD LOOKING STATEMENTS ARE NECESSARILY BASED UPON ESTIMATES AND ASSUMPTIONS
THAT ARE INHERENTLY SUBJECT TO SIGNIFICANT BUSINESS, ECONOMIC AND COMPETITIVE
UNCERTAINTIES AND CONTINGENCIES, MANY OF WHICH ARE BEYOND OUR CONTROL AND MANY
OF WHICH, WITH RESPECT TO FUTURE BUSINESS DECISIONS, ARE SUBJECT TO CHANGE.
THESE UNCERTAINTIES AND CONTINGENCIES CAN AFFECT ACTUAL RESULTS AND COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED IN ANY FORWARD LOOKING
STATEMENTS MADE BY, OR ON OUR BEHALF. WE DISCLAIM ANY OBLIGATION TO UPDATE
FORWARD-LOOKING STATEMENTS.
OVERVIEW
30DC offers digital media training and publishing solutions for individuals,
professionals and businesses using the Internet and mobile media in operating
their businesses and in particular in marketing digital creations. Our flagship
training course, The Challenge, is offered once annually for a thirty-day period
at no fee as an interactive on-line education program. The Challenge content is
made available for purchase throughout the year as the Digital Success Bootcamp
training course. The course content of The Challenge is geared to individuals
and professionals with an interest in marketing using digital media. The
participants might be motivated to begin a new on-line business or extend an
existing brick-and-mortar business to an on-line platform. Increasingly,
Challenge participants are involved in the migration of commerce to mobile media
comprised of tablet computers and smartphones.
30DC's digital publishing solutions include the MagCast Digital Publishing
Platform for the publication of magazines and other content to mobile devices
through a mobile application or "app" and Market Pro Max, a system for on-line
marketing of digital products. The MagCast platform and Market Pro Max system
are licensed as software-as-a-service applications and are sold independently or
in conjunction with related training courses. Digital Publishing Blue Print
instructs participants in content monetization methods and the use of
proprietary content in developing brand awareness and marketing products or
services. The Ultimate Product System is a video-based program to help novice
e-marketers identify and define a market niche and package their digital
products for greatest marketability.
In addition to our core digital media training and publishing products and
solutions, from time to time we offer a series of on-line training products
related to the use of digital media for commerce and priced at nominal
subscription rates around $50 per month. We also offer individual courses
covering a variety of digital marketing topics such as how to drive traffic to
websites using social media platforms like Facebook. The Company provides
particular training courses to licensees of our MagCast Digital Publishing
Platform related to developing and marketing their digital publications and we
provide ancillary services to assist licensees in creating mobile apps with the
MagCast platform.
CORPORATE HISTORY
On September 10, 2010, Infinity Capital Group, Inc., a Maryland Corporation,
("Infinity") entered into a Plan and Agreement of Reorganization (the
"Agreement") with 30DC, Inc., a Delaware corporation, ("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
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its restricted common stock. The 30DC DE Shareholders received 13.2 shares of
common stock of Infinity for every one share of 30DC DE. Infinity, as a result
of the transaction, became the owning entity of 100% of the outstanding shares
of common stock of 30DC DE. For purposes of accounting, 30DC DE was considered
the accounting acquirer. The business of 30DC DE became the primary business of
Infinity. Infinity was renamed 30DC, Inc. (Maryland) ("30DC" and together with
its subsidiary "the Company"). 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").
In May of 2012 the Company signed a joint venture agreement ("JV Agreement")
with Netbloo Media, Ltd. ("Netbloo") for the joint development of the MagCast
Digital Publishing Platform ("MagCast"). MagCast provides customers access to a
cloud-based service to create an application ("App") to publish a digital
magazine on the digital distribution platforms Apple Newsstand and Google Play
and includes executive training modules to develop and market a digital
magazine. MagCast was launched in May 2012 and a majority of sales were the
result of affiliate marketing relationships which result in commission of 50% of
gross revenue for those sales to the affiliate responsible for the sale. In
October 2012 the Company reached an agreement 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.
Effective February 28, 2014, the Company divested assets and liabilities that
made up to Raine Ventures, LLC ("Raine") in exchange for the 10,560,000 common
shares of the Company which Raine had held. Please see Note 3 for further
details on the divestiture.
PRODUCT OFFERINGS
Our principal digital media training products and publishing solutions include
the following:
o The Challenge
o Digital Success Bootcamp
o MagCast Digital Publishing Platform
o Digital Publishing Blue Print
o Market Pro Max System
o Ultimate Market System
30DC was founded in 2005 by offering a free Internet marketing educational
program that was originally known as The 30 Day Challenge and has evolved into
the Company's current Challenge program. The Challenge is a thirty-day
interactive educational program configured to give participants the framework
and guidance to design and develop an on-line business. The course content is
made available by subscription throughout the year as the Ignition Blue Print
training course.
The Challenge program includes modules on a range of topics, including
researching market opportunity and competition, identifying and sustaining niche
markets, utilizing social media to build your business, among many other
subjects pertinent to Internet marketing. There are no prerequisites to taking
the course and participants come from around the globe. The course content of
The Challenge is geared to individuals, professionals and business people with
an interest in Internet marketing. The participants might be motivated to begin
a new on-line business or extend existing `brick-and-mortar' business to an
on-line platform. Increasingly, Challenge participants are involved in the
migration of business to the mobile media comprised of tablet computers and
smartphones.
The Challenge has predominately grown through our viral marketing campaign
whereby participants are encouraged to publicize the program through email and
social media, including Twitter, Facebook, FriendFeed and blogs focused on
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Internet marketing. The growth in The Challenge community has resulted in a
targeted community, to which the Company markets other high-valued added digital
media training courses and solutions as well as third-party products related to
Internet marketing.
The Company's first digital media solution, The MagCast Digital Publishing
Platform ("MagCast") originated from the collaboration of 30DC with Netbloo
Media Ltd. ("Netbloo') in a joint venture. It was first introduced in fiscal
year 2012, as a software-as-a-service for publication of digital magazines and
other proprietary content to mobile devices through mobile applications or
`apps' based on the Applie iOS and Google Android architectures. The MagCast
platform is relevant to the Company's historical customer base of Internet
marketers as well as a broader audience of users interested in marketing to
their clients through the mobile medium. Publications created on the MagCast
platform can be distributed to readers through Apple Newsstand or Google Play,
the app distribution channels for the two principal mobile device operating
systems. We believe the MagCast platform is distinctive among digital publishing
applications by providing users with a built-in suite of marketing functions and
tools. We believe we are the first to introduce such a product and expect these
features to differentiate the MagCast platform from competitors.
The Company has continued to update the MagCast software application to improve
functionality and 30DC has engaged a dedicated team of software developers to
create new product features. Initially mobile apps created using the MagCast
platform were available only to readers with Apple iPad devices. In the summer
2013, the Company released MagCast version 4, which enabled our customers to
offer a version of their publication tailored for the iPhone thereby
significantly expanding the potential number of magazine readers. MagCast
version 6 released in July 2014 enabled distribution through Google Play where
their digital magazine is available to users of Android devices. This update
included a variety of new features and capabilities such as dynamic in-app
purchasing, a survey funnel, e-mail sharing, push notifications, and Facebook
event tracking, among other modern marketing techniques that could benefit
MagCast platform users. In September 2014, MagCast version 7 was released with
an in-app sales funnel and the user interface was improved to facilitate list
building and issuance of new products and service offers. Version 7 was
optimized for both Google's Android architecture and Apple's iOS 8 operating
system, which are the two most popular mobile device architectures.
Digital Publishing Blueprint is a comprehensive training program that provides
instruction in developing and marketing a digital publication. The course is
designed to instruct participants in content monetization and the use of
proprietary content to create brand awareness and build sales. The fee for
Digital Publishing Blueprint includes a license for the MagCast Digitial
Publishing Platform.
Market Pro Max is on-line marketing system acquired in 2012 from Netbloo Media,
Ltd. Market Pro Max is made available to users as a software-as-a-service. The
application provides plug-n-play functionality to create on-line marketing sites
with little or no programming experience. Market Pro Max is targeted at digital
businesses and information publishers seeking to monetize content on-line.
Starting in 2014, Market Pro Max has been sold in conjunction with an on-line
training course Ultimate Product System. This video-based course helps the
novice e-marketer identify and define a market niche and package products for
greatest marketability.
BUSINESS MODEL AND GROWTH OPPORTUNITIES
We generate revenue through subscriptions to on-line training programs, the sale
of video-based training courses, and the sale of licenses for the use of our
proprietary digital publishing solutions. We also earn commissions on the sale
of third-party Internet marketing products and services to the 30DC customer
base and in particular during and after the annual Challenge training program.
Such revenue is referred to as affiliate marketing commissions.
The Company's long-term growth strategy is to increase its portfolio of products
and services while expanding the audience to which it markets those products and
services. Our business has historically been driven by the attraction of
participants to a no-fee Internet marketing program, The Challenge, and the
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retention of those participants as potential customers for other high
valued-added training programs and digital publishing solutions. Nearly 200,000
individuals have participated in The Challenge since its inception.
To expand the Company's access to potential customers, during the fiscal year
ended June 30, 2012, 30DC began a more comprehensive program of selling through
affiliate marketing relationships. Affiliates promote 30DC's products to their
respective customer bases and receive a commission from 30DC as a percentage of
gross revenue typically in a range of 30% to 50%.
In fiscal year 2013, the Company initiated its MagCast Certified Professional
(MCP) program for the resale of the MagCast Digital Publishing Platform. The MCP
program is intended to drive penetration of corporate and other vertical markets
with an interest in reaching their audiences with digital content on mobile
devices.
30DC's marketing strategy includes paid-for traffic generation to its product
web sites as well as the purchase of sales leads for product promotion through
targeted e-mails. Additionally, during fiscal year 2014, the Company began test
marketing on-line and mobile advertising, which has become more sophisticated
and enables targeting of customers who are more likely to be interested in 30DC
products and services. The initial advertising test focused on the Market Pro
Max system and related training program Ultimate Product System.
The Company has no plans at this time for purchases or sales of fixed assets
which would occur in the next twelve months.
The Company has no expectation or anticipation of significant changes in number
of employees in the next twelve months.
RESULTS OF OPERATIONS
FOR THE THREE MONTH PERIOD ENDED DECEMBER 31, 2014 COMPARED TO THE THREE MONTH
PERIOD ENDED DECEMBER 31, 2013.
During the three months ended December 31, 2014, 30DC, Inc. recognized revenues
of $176,722 from continuing operations compared to $207,746 during the three
months ended December 31, 2013. Revenues from continuing operations were from
the following sources during the three months ended December 31, 2014 compared
to December 31, 2013.
Three Months Three Months Increase
Ended Ended or
December 31, 2014 December 31, 2013 (Decrease)
------------------ ------------------ ----------------
Revenue
Commissions $ 14,991 $ 12,755 $ 2,236
Subscription Revenue 31,684 - 31,684
Products and Services 130,047 194,991 (64,944)
------------------ ------------------ ----------------
Total Revenues $ 176,722 $ 207,746 $ (31,024)
The $31,684 increase in subscription revenue was due to a new online forum
subscription product which was launched in April 2014 and has a recurring
monthly charge.
The $64,944 decrease in products and services revenue resulted from a number of
offsetting factors. Revenue from the MagCast Publishing Platform decreased by
$141,717 primarily due to a special promotion for existing customers to purchase
an additional license in October 2013 which did not repeat in the 2014 quarter.
This was partially offset by a $10,725 increase in sales of Market Pro Max
including the Ultimate Product System which is a training program that includes
a lifetime license for one Market Pro Max marketing web site and an increase in
sales of $66,113 in the sale of other products the company has developed on
topics such as increasing traffic to web sites.
-15-
During the three months ended December 31, 2014, the Company incurred $412,620
in operational expenses for continuing operations compared to $613,324 during
the three months ended December 31, 2014. Operational expenses during the three
months ended December 31, 2014 and 2013, include the following categories:
Three Months Ended Three Months Ended Increase or
December 31, 2014 December 31, 2013 Decrease
------------------ ------------------ -----------
Accounting Fees $ 16,000 $ 51,600 $ (35,600)
Advertising 22,526 - 22,526
Credit Card Processing Fees 1,949 8,342 (6,393)
Commissions 5,172 35,570 (30,398)
Independent Contractors 70,565 128,299 (57,734)
Depreciation and Amortization 18,561 20,673 (2,112)
Directors' Fees 31,928 39,882 (7,954)
Internet Expenses 8,138 8,226 (88)
Legal Fees 13,855 14,945 (1,090)
Officer's Salaries 37,428 62,382 (24,954)
Related Party Contractors 157,790 166,158 (8,368)
Telephone and Data Lines 9,087 10,713 (1,626)
Travel & Entertainment 1,079 44,536 (43,457)
Other Operating Expenses 18,542 21,998 (3,456)
------------------ -------------------------------
Total Operating Expenses $ 412,620 $ 613,324 $ (200,704)
================== ================== ============
The decrease of $35,600 in accounting fees was due to a decrease of $41,600 in
charges from the Company's independent auditing firm which was primarily due to
a delay in timing of the Company's audit for the fiscal year ending June 30,
2013 which resulted in charges being delayed beyond September 30, 2013 offset by
$6,000 paid to an e-commerce accounting firm which was engaged July 2014 to
automate and administer recording and reconciling 30DC's daily transactions.
The increase of $22,526 in advertising is due to the Company advertising its
digital products on Facebook and the cost of marketing consultant who helped
with the advertising campaign.
The decrease of $30,398 in commissions resulted from the $141,717 decrease in
revenue from the MagCast Publishing Platform, a portion of which are sales
marketing affiliate relationships which result in commission expense and an
under accrual of in the September 2013 quarter of approximately $15,000 for
commissions related to the promotional launch in August 2013 which increased
commissions in the December 2013 quarter.
The decrease of $57,734 in independent contractors is primarily due to the
Company terminating its relationship with two long-term contractors, one at the
end of July 2014, saving the Company approximately $9,000 per month, and one at
the end of August 2014, saving the Company approximately $6,000 per month. In
addition the December 2013 quarter included approximately $12,000 paid to a
contractor hired to help with the Company's annual free course, the Challenge,
$6,500 paid to investor relations consultants, $5,000 for a strategic consultant
and $3,000 for a valuation analyst. These increases were offset by an increase
of $6,000 per month to a contractor who has assumed additional responsibilities.
The decrease of $7,954 in directors' fees is from a reduction 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 December
2014 quarter from the amount in the December 2013 quarter due to fewer options
remaining unvested.
-16-
The decrease of $24,954 in officer's salaries was due to a reduction in a
reduction in base salary for Theodore A. Greenberg, the Company's CFO from
$200,000 to $132,000 per year and a reduction in the charge for amortization of
stock option expense over the vesting period, for stock options previously
issued to Mr. Greenberg in the December 2014 quarter from the amount in the
December 2013 quarter due to fewer options remaining unvested.
The decrease of $8,368 in Related Party Contractors was due to a change in the
exchange rate which reduced the US Dollar amount for Marillion Partners
contractor fees which are paid in Australian Dollars.
Travel and Entertainment decreased by $43,457 due to a company-wide group
meeting and travel to an investor conference, both in November 2013 which did
not repeat in the December 2014 quarter.
During the three months ended December 31, 2014, the Company recognized a net
loss from continuing operations of $235,898 compared to a net loss from
continuing operations of $399,318 during the three months ended December 31,
2013. The reduced net loss from continuing operations of $163,420 was due to the
decrease in operating expenses of $200,704 offset by a decrease in revenue of
$31,024 and forgiveness of debt income of $6,260 in the December 2013 quarter.
FOR THE SIX MONTH PERIOD ENDED DECEMBER 31, 2014 COMPARED TO THE SIX MONTH
PERIOD ENDED DECEMBER 31, 2013.
During the six months ended December 31, 2014, 30DC, Inc. recognized revenues of
$876,789 from continuing operations compared to $2,150,625 during the six months
ended December 31, 2013. Revenues from continuing operations were from the
following sources during the six months ended December 31, 2014 compared to
December 31, 2013.
Six Months Six Months
Ended Ended Increase or
December 31, 2014 December 31, 2013 (Decrease)
----------------- ----------------- -----------------
Revenue
Commissions $ 28,926 $ 31,729 $ (2,803)
Subscription Revenue 61,638 - 61,638
Products and Services 786,225 2,118,896 (1,332,671)
----------------- ----------------- -----------------
Total Revenues $ 876,789 $ 2,150,625 $ $ (1,273,836)
The $61,638 increase in subscription revenue was due to a new online forum
subscription product which was launched in April 2014 and has a recurring
monthly charge.
The $1,332,671 decrease in products and services revenue was mainly due to a
decrease of $1,430,830 in revenue from the MagCast Publishing Platform which
resulted from a smaller launch promotion in July 2014 than August 2013. This was
partially offset by a $30,689 increase in sales of Market Pro Max including the
Ultimate Product System which is a training program that includes a lifetime
license for one Market Pro Max marketing web site and an increase in sales of
$67,535 in the sale of other products the company has developed on topics such
as increasing traffic to web sites.
During the six months ended December 31, 2014, the Company incurred $1,050,701
in operational expenses for continuing operations compared to $1,898,606 during
the six months ended December 31, 2013. Operational expenses during the six
months ended December 31, 2014 and 2013, include the following categories:
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Six Months Ended Six Months Ended Increase or
December 31, 2014 December 31, 2013 Decrease
----------------- ----------------- --------------
Accounting Fees $ 67,250 $ 73,807 $ (6,557)
Advertising 33,912 192 33,720
Credit Card Processing Fees 28,202 105,276 (77,074)
Commissions 149,910 754,918 (605,008)
Independent Contractors 176,941 246,467 (69,526)
Depreciation and Amortization 36,889 41,008 (4,119)
Directors Fees 63,855 79,764 (15,909)
Internet Expenses 16,699 16,481 218
Legal Fees 19,809 27,567 (7,758)
Officer's Salaries 74,855 124,764 (49,909)
Related Party Contractors 321,974 325,666 (3,692)
Telephone and Data Lines 19,139 16,819 2,320
Travel & Entertainment 2,133 45,168 (43,035)
Other Operating Expenses 39,133 40,709 (1,576)
----------------- --------------------------------
Total Operating Expenses $ 1,050,701 $ 1,898,606 $ (847,905)
================= ================= ==============
The increase of $33,720 in advertising is due to the Company advertising its
digital products on Facebook and the cost of marketing consultant who helped
with the advertising campaign.
The decrease of $77,074 in credit card processing fees resulted from the
$1,273,836 decrease in revenue and a decrease of approximately 1.5% in the
effective credit card processing rate.
The decrease of $605,008 in commissions resulted from the $1,332,671 decrease in
products and services revenue, a significant portion of which are sales
marketing affiliate relationships which result in commission expense.
The decrease of $69,526 in independent contractors is primarily due to the
Company terminating its relationship with two long-term contractors, one at the
end of July 2014, saving the Company approximately $9,000 per month, and one at
the end of August 2014, saving the Company approximately $6,000 per month. In
addition the six months ended December 2013 included approximately $12,000 paid
to a contractor hired to help with the Company's annual free course, the
Challenge, $6,500 paid to investor relations consultants, $5,000 for a strategic
consultant and $3,000 for a valuation analyst. These increases were offset by an
increase of $6,000 per month to a contractor who has assumed additional
responsibilities.
The decrease of $15,909 in directors' fees is from a reduction 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 six
months ended December 2014 from the amount in the six months ended December 2013
due to fewer options remaining unvested.
The decrease of $49,909 in officer's salaries was due to a reduction in a
reduction in base salary for Theodore A. Greenberg, the Company's CFO from
$200,000 to $132,000 per year and a reduction in the charge for amortization of
stock option expense over the vesting period, for stock options previously
issued to Mr. Greenberg in the six months ended December 2014 from the amount in
the six months ended December 2013 due to fewer options remaining unvested.
Travel and Entertainment decreased by $43,035 due to a company-wide group
meeting and travel to an investor conference, both in November 2013 which did
not repeat during the six months ended December 2014.
-18-
During the six months ended December 31, 2014, the Company recognized a net loss
from continuing operations of $173,912 compared to net income from continuing
operations of $345,532 during the six months ended December 31, 2013. The
decrease in net income from continuing operations of $519,444 was due to the
decrease in revenue $1,273,836 offset by the decrease in operating expenses
$847,905 and forgiveness of debt income of $93,513 in the six months ended
December 2013.
LIQUIDITY AND CAPITAL RESOURCES
The Company had a cash balance of $123,102 at December 31, 2014 and the Company
had a working capital deficit of $1,688,377. 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.
The Company expects increased revenue from further sales of MagCast Publishing
Platform through its Digital Publishing Blueprint training course and by
marketing to customers outside its historical customer base with the goal of
recurring revenue through annual licenses. The Company also expects increased
revenue from further sales of Market Pro Max through its Ultimate Product System
training course and introduction of new products some of which will be
extensions of existing product lines. Additionally, the Company intends to
increase funds available by raising capital, though at this time 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 December 31, 2014 is
$53,550 in notes payable plus related accrued interest that are in default for
lack of repayment by their due date.
During the six month period ended December 31, 2014, operating activities
provided the Company with $33,376. During the six month period ended December
31, 2013, operating activities provided the Company with $117,173. The decrease
of $83,797 in funds provided by operating activities was a combination of the
decrease in net income from continuing operations of approximately $517,559, a
decrease of approximately $317,000 in the change in accrued expenses and refunds
due to payment of commissions which accrued on accounts receivable at June 30,
2013 and change in status of accrued contractor fees in the six months ended
December 31, 2013 from due to related parties because Clinton Carey was no
longer a member of the Company's board and a decrease in deferred revenue of
approximately $82,000. This was offset by a decrease in change in accounts
receivable of approximately $200,000 due to accounts receivable from the MagCast
relaunch in August 2013, an increase of approximately $116,000 in the change in
accounts payable due to affiliate commissions which were due at December 31,
2014 from the MagCast relaunch in July 2014 and payment of accounts payable due
June 30, 2013 with shares of the Company during the six months ended December
31, 2013, a decrease to the change in due to related parties of approximately
$340,000 because Clinton Carey was no longer a member of the Company's board, an
approximate decrease of $133,000 to change in the amount of restricted cash
which is the amount held in reserve by the Company's credit card processor which
was higher at December 31, 2013 due to the MagCast relaunch in August 2013 and a
decrease of approximately $93,000 in forgiveness of debt income which was
including in net income from continuing operations in the six months ended
December 2014 but did not generate cash.
GOING CONCERN
The condensed consolidated financial statements have been prepared using
accounting principles generally accepted in the United States of America
applicable for a going concern which assumes that the Company will realize its
assets and discharge its liabilities in the ordinary course of business. As of
December 31, 2014, the Company has a working capital deficit of approximately
$1,688,000 and has accumulated losses of approximately $3,271,000 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 the
past few years, the Company switched its focus to developing its own products.
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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
directly to customers and 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 April of 2014, the Company began offering the
Ultimate Product System which incorporates 30DC's digital marketing platform
Market Pro Max. Until the Company achieves sustained profitability it does not
have sufficient capital to meet its needs and continues to seek loans or equity
placements to cover such cash needs.
No commitments to provide additional funds have been made and there can be no
assurance that any additional funds will be available to cover expenses as they
may be incurred. If the Company is unable to raise additional capital or
encounters unforeseen circumstances, it may be required to take additional
measures to conserve liquidity, which could include, but not necessarily be
limited to, issuance of additional shares of the Company's stock to settle
operating liabilities which would dilute existing shareholders, curtailing its
operations, suspending the pursuit of its business plan and controlling overhead
expenses. The Company cannot provide any assurance that new financing will be
available to it on commercially acceptable terms, if at all. These conditions
raise substantial doubt about the Company's ability to continue as a going
concern.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
------------------------------------------------------------------
The Company earns the majority of its revenue in United States dollars ("USD")
and pays a significant amount of its expense in Australian dollars ("AUD").
Material fluctuations in the exchange rate between USD and AUD may have material
impact on the Company's results of operations.
ITEM 4. CONTROLS AND PROCEDURES
--------------------------------
DISCLOSURES CONTROLS AND PROCEDURES
We have adopted and maintain disclosure controls and procedures (as such term is
defined in Rules 13a 15(e) and 15d-15(e) under the Securities Exchange Act of
1934, as amended (the "Exchange Act")) that are designed to ensure that
information required to be disclosed in our reports under the Exchange Act, is
recorded, processed, summarized and reported within the time periods required
under the SEC's rules and forms and that the information is gathered and
communicated to our management, including our Chief Executive Officer (Principal
Executive Officer) and Principal Financial Officer, as appropriate, to allow for
timely decisions regarding required disclosure.
As required by SEC Rule 15d-15(b) for the quarter ended December 31, 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
-20-
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) Segregation of Duties: We do not currently have a sufficient complement of
technical accounting and external reporting personal commensurate to
support standalone external financial reporting under public company or SEC
requirements. Specifically, the Company did not effectively segregate
certain accounting duties due to the small size of its accounting staff,
and maintain a sufficient number of adequately trained personnel necessary
to anticipate and identify risks critical to financial reporting and the
closing process. In addition, there were inadequate reviews and approvals
by the Company's personnel of certain reconciliations and other processes
in day-to-day operations due to the lack of a full complement of accounting
staff.
(2) Financial Reporting Systems: We did not maintain a fully integrated
financial consolidation and reporting system throughout the period and as a
result, extensive manual analysis, reconciliation and adjustments were
required in order to produce financial statements for external reporting
purposes.
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. In
July 2014, the Company contracted an e-commerce accounting firm to automate a
number of our accounting processes and to provide outsourced bookkeeping
services that provide for segregation of some of the duties which previously had
not been.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
There was no change in our internal control over financial reporting that
occurred during the fiscal quarter ended December 31, 2014, that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
-------------------------
None.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
-------------------------------------------------------------------
During the period July 1, 2014 through December 31, 2014 the Company did not
issue any equity securities.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
---------------------------------------
Included in liabilities of discontinued operations at December 31, 2014 is
$53,550 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.
--------------------------------------------------------------------------------
-22-
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
30DC, INC.
------------------------------------
Registrant
Dated: February 12, 2015 By:/s/ Edward Dale
-------------------------------------
Edward Dale
Principal Executive Officer
Chief Executive Officer
President
Dated: February 12, 2015 By:/s/ Theodore A. Greenberg
-------------------------------------
Theodore A. Greenberg,
Principal Accounting Officer
Chief Financial Officer
-23-