|• 10-Q • EX-31.1 • EX-31.2 • EX-32|
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
þ Quarterly Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act Of 1934
For the quarterly period ended June 30, 2012
o Transition Report Under Section 13 or 15(d) of the Securities Exchange Act Of 1934
For the transition period from __________ to __________
Commission File Number: 000-52828
DIGITAL DEVELOPMENT PARTNERS, INC.
(Exact name of registrant as specified in its charter)
17800 Castleton St., Suite 300
City of Industry, CA 91748
(Address of principal executive offices, including Zip Code)
(Issuer’s telephone number, including area code)
(Former name or former address if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by section 13 or 15(d) of the Exchange Act during the past 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 þ No o
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 (§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). Yesþ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 86,402,665 shares of common stock as of August 14, 2012.
DIGITAL DEVELOPMENT PARTNERS INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2012
1. Basis of Presentation and Nature of Operations
These unaudited interim financial statements as of and for the period ended June 30, 2012 reflect all adjustments which, in the opinion of management, are necessary to fairly state the Company’s financial position and the results of it’s operations for the periods presented, in accordance with the accounting principles generally accepted in the United States of America. All adjustments are of a normal recurring nature.
These unaudited interim financial statements should be read in conjunction with the Company’s financial statements and notes thereto included in the Company’s December 31, 2011 report on Form 10-K. The Company assumes that the users of the interim financial information herein have read, or have access to, the audited financial statements for the preceding period, and that the adequacy of additional disclosure needed for a fair presentation may be determined in that context. The results of operations for the three and six month periods ended June 30, 2012 are not necessarily indicative of results for the entire year ending December 31, 2012.
The Company was incorporated as Cyprium Resources, Inc. under the laws of the State of Nevada December 22, 2006. The Company was originally formed for mineral exploration in the United States. On May 19, 2009 the Company’s name was changed to Digital Development Partners, Inc. The Company adopted December 31 as its fiscal year end.
Current Business of the Corporation
In January, 2007 the Company entered into a 20 year lease agreement with the owner of 10 mining claims situated in Utah, known as the King claims. The lease was maintained current through September 30, 2008, however mining activities were limited. The lease was terminated by mutual agreement in November 2008.
The Company gained control of two private companies in 2009 involved in related enterprises; 4gDeals Inc. (later Yu Deal Inc.), and Top Floor Studio.
A reassessment of the Company’s direction resulted in a reorganization plan on February 17, 2010 which included:
1. Acquisition of the worldwide distribution and servicing rights to a cell phone enterprise based in Hong Kong;
2. Change in management;
3. Sale of the Company’s option on Top Floor Studio;
4. Distribution of the Company’s shares in YuDeal, Inc. to the stockholders.
Pursuant to the plan, the Company’s interests in Top Floor Studio and YuDeal Inc. were disposed of in February, 2010. The Company’s option on Top Floor was sold to YuDeal, Inc. for YuDeal common stock, which in turn was exchanged for 20,095,000 shares of Company stock. These shares were returned to Treasury and cancelled. A residual of YuDeal stock was distributed to Company stockholders in March and April, 2010.
In connection with the reorganization, the management team of the Company resigned. The Company’s president, Isaac Roberts, was replaced by Jack Jie Quin, president of EFT Holdings Inc. (formerly named EFT Biotech Holdings, Inc.).
On February 17, 2010 an agreement was signed with , EFT Holdings, Inc., which markets its “EFT-Phone” through direct marketing in China and Hong Kong. Its distribution and servicing rights were acquired by the Company in exchange for 79,265,000 shares of the Company’s common stock. As a result, EFT Holdings Inc. became the Company’s majority stockholder.
2. Summary of Significant Accounting Policies
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 certain estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, and reported amounts of revenue and expenses during the reporting period. Actual results could differ materially from those estimates. Significant estimates made by management are, among others, reliability of long-lived assets and deferred taxes.
Cash and equivalents
Cash and equivalents include investments with initial maturities of six months or less.
Fair Value of Financial Instruments
The Financial Accounting Standards Board issued ASC No. 820, “Fair Value Measurements and Disclosures.” ASC No. 820 requires disclosure of fair value information about financial instruments when it is practicable to estimate that value. The carrying amounts of the Company’s financial instruments as of June 30, 2012 approximate their respective fair values because of the short-term nature of these instruments. Such instruments consist of cash, accounts payable and accrued expenses. The fair value of related party payables is not determinable.
The Company accounts for income taxes using the liability method prescribed by ASC 740, “Income Taxes.” Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the year in which the differences are expected to reverse. The Company records a valuation allowance to offset deferred tax assets if based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized as income or loss in the period that includes the enactment date.
The Company applied the provisions of ASC 740-10-50, “Accounting For Uncertainty In Income Taxes”, which provides clarification related to the process associated with accounting for uncertain tax positions recognized in its financial statements. Audit periods remain open for review until the statute of limitations has passed. The completion of review or the expiration of the statute of limitations for a given audit period could result in an adjustment to the Company’s liability for income taxes. Any such adjustment could be material to the Company’s results of operations for any given quarterly or annual period based, in part, upon the results of operations for the given period. As of December 31, 2010 and 2009, the Company had no uncertain tax positions, and will continue to evaluate for uncertain positions in the future.
The Company generated a deferred tax credit through net operating loss carryforward. However, a valuation allowance of 100% has been established.
Interest and penalties on tax deficiencies recognized in accordance with ASC accounting standards are classified as income taxes in accordance with ASC Topic 740-10-50-19.
Recent Accounting Pronouncements
The Company has reviewed issued and proposed accounting pronouncements and plans to adopt those that are applicable to it. The Company does not expect the adoption of any recently adopted or proposed pronouncements to have a material impact on its results of operations or financial position.
Basic and Diluted Net Loss Per Share
Net loss per share is calculated in accordance with ASC 260, Earnings Per Share, for the period presented. Basic net loss per share is based upon the weighted average number of common shares outstanding. Diluted net loss per share is based on the assumption that all dilative convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period.
As of June 30, 2012 the Company has potentially dilutive securities in outstanding warrants for the purchase of shares of common stock. Since the Company is in a loss position the warrants are anti-dilutive and not considered in the calculation.
The following is a reconciliation of the numerator and denominator of the basic and diluted earnings per share computations for the six months ended June 30, 2012 and 2011:
3. Loans Payable
A promissory note for $500,000 was issued May 13, 2010 to EFT Holdings Inc. A series of advances was received from EFT Holdings during the fiscal year ended December 31, 2011 totaling $300,000. The note bears annual interest of 5%, requires no monthly payments, and matured November 13, 2010. The note was extended indefinitely. The note was paid down to $300,000 in January, 2011.
4. Income Taxes
No provision was made for federal income tax since the Company had an operating loss and has accumulated net operating loss carry-forwards of approximately $8.6 million. The net operating loss carry-forwards may be used to reduce taxable income through the year 2025.
5. Capital Stock
No stock was issued in the six months ended June 30, 2012. As of June 30, 2012, the Company was authorized to issue 225,000,000 common shares, of which 86,402,665 shares were outstanding.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
The Company was incorporated in December 2006.
In January 2007 the Company leased ten mining claims from an unrelated third party. These claims were located in Piute County, Utah. The mining lease was for a twenty-year term and required the Company to pay a royalty to the lessor equal to 2.5% of the net smelter returns from the sale of any minerals extracted from the claims. Minimum royalty payments of $4,500 were also required each year during the term of the lease.
On November 1, 2008 the mining lease was terminated by the mutual agreement of the Company and the lessor.
Between November 2008 and August 2009 the Company was inactive.
On August 3, 2009 the Company acquired all of the outstanding shares of 4gDeals for 15,495,000 shares of the Company’s common stock.
On December 18, 2009 4gDeal’s articles of incorporation were amended to change the name of 4gDeals to YuDeal.
In February 2010 the Company determined that its existing capital structure would impair its ability to raise the capital required to further the development of YuDeal’s network. Accordingly, the Company adopted a reorganization plan which:
Consistent with its reorganization plan, on February 18, 2010 the Company’s directors approved an agreement between the Company and EFT Holdings, Inc., now named EFT Holdings, Inc., (“EFT”), whereby EFT agreed to assign its worldwide distribution and servicing rights to a product known as the “EFT-Phone” in exchange for 79,265,000 shares of the Company’s common stock.
EFT markets its products through a direct sales organization. Once a customer of EFT’s makes a minimum purchase of $600 (plus $60 for shipping and handling fees), the customer becomes an “affiliate”. As of June 30, 2012, EFT had approximately 1,246,000 affiliates, a majority of which are located in China and Hong Kong.
The EFT-Phone is a cell phone which uses the Android Operating System. The phone is manufactured by an unrelated third party. The EFT-Phone has an application that allows EFT’s affiliate base to access all of their back office sites including their Funds Management Account where the affiliate is able to deposit, withdraw and transfer money to another EFT account or to another EFT Affiliate at no cost for the transfer. The EFT-Phone has educational applications and PowerPoint presentation capability for training new affiliates anywhere in the world.
The worldwide distribution and servicing rights to the EFT-Phone include the right to sell the EFT-Phone to EFT’s affiliates and others. Servicing includes the collection of service fees for all EFT-Phones worldwide, including monthly fees, usage fees, as well as call forwarding, call waiting, text messaging and video fees. The Company also acquired the rights to distribute all EFT-Phone accessories.
Results of Operations
The Company has not received any orders for the EFT phone during the six months ended June 30, 2012. The Company has been advised by EFT that due to a significant drop in demand for the EFT phone, EFT has not placed any new orders with the Company. It is the Company’s understanding that EFT has inventory previously purchased from the Company and until sales increase, EFT will not be placing any new orders from the Company. The Company is very concerned regarding this news and is investigating other sources of revenue to mitigate the significant drop in revenue.
Other than the foregoing, the Company does not know of any trends, events or uncertainties that will have, or are reasonably expected to have, a material impact on sales, revenues, expenses or results of operations.
Liquidity and Capital Resources
The Company does not have any firm commitments from any person to provide the Company with any additional capital.
See Note 2 to the financial statements included as part of this report for a description of the Company’s accounting policies.
ITEM 4. CONTROLS AND PROCEDURES.
(a) The Company maintains a system of controls and procedures designed to ensure that information required to be disclosed in reports filed or submitted under the Securities Exchange Act of 1934, as amended (“1934 Act”), is recorded, processed, summarized and reported, within time periods specified in the SEC's rules and forms and to ensure that information required to be disclosed by the Company in the reports that it files or submits under the 1934 Act, is accumulated and communicated to the Company’s management, including its Principal Executive and Financial Officer, as appropriate to allow timely decisions regarding required disclosure. As of June 30, 2012, the Company’s Principal Executive and Financial Officer evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on that evaluation, the Principal Executive and Financial Officer concluded that the Company’s disclosure controls and procedures were effective.
(b) Changes in Internal Controls. There were no changes in the Company’s internal control over financial reporting during the quarter ended June 30, 2012, that materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.
ITEM 6. EXHIBITS
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.