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DIGITAL DEVELOPMENT GROUP CORP - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Edgar Glimpses Via Acquire Media NewsEdge) The following discussion should be read in conjunction with the information
contained in the financial statements of The Digital Development Group Corp.
("Digital" or the "Company") and the notes which form an integral part of the
financial statements which are attached hereto.
The financial statements mentioned above have been prepared in conformity with
accounting principles generally accepted in the United States of America and are
stated in United States dollars.
Overview of Business Prior to July 31, 2012
Digital was incorporated under the laws of the State of Nevada on December 11,
2006 under the name of Regency Resources Inc. ("Regency"). The Company amended
its Articles of Incorporation to change its name from Regency Resources, Inc. to
The Digital Development Group Corp. effective May 2, 2012. Our fiscal year end
is December 31. Our executive offices are located at 6630 Sunset Blvd. Los
Angeles, CA, 90028.
Regency Resources was a pre-exploration stage company engaged in the acquisition
and exploration of mineral properties. On February 15, 2007 l Regency Resources
purchased a 100% interest in the Mara Gold Claim (the "Mara Claim") from The
Mara Group LLC., an unrelated company, for $7,000. The Mara Claim consists of
one 8 unit claim block containing 122.5 hectares (approximately 307 acres)
located about 20 km North West of the city of Suva, in the Republic of Fiji. The
Mara Claim is a gold exploration project.
On July 1, 2008, Regency Resources acquired a 100% interest in the La Trinidad
Gold Claim (the "La Trinidad Claim") from an unrelated mineral exploration
company, Kalibo Resources Inc., for the sum of $5,000. The La Trinidad Claim, a
gold exploration project, covers approximately 94.5 hectares (233.5 acres)
located 45 kilometers North East of the city of Lingayen in the Republic of the
Philippines. The 'La Trinidad Claim' and the "Mara Claim" are sometimes referred
to herein collectively as the "Regency Claims"
We have not earned any revenues to date and we have incurred losses since
inception. Our auditors have issued a going concern opinion since we must raise
additional capital, through the sale of our securities, in order to fund our
operations. There can be no assurance we will be able to raise this capital. We
do not anticipate earning revenues until such time as we commercially launch our
digital distribution aspect of Digital Development. We are presently in the pre
distribution stage of our business and we can provide no assurance that we will
be able to commercially exploit our programming and if we do that we will be
successful,. Accordingly, we must raise cash from sources other than our
operations in order to implement our business and marketing plans.
However, to date, we have been unable to raise adequate l funds to implement our
operations, and we do not believe that we currently have sufficient resources to
do so without additional funding. As a result of the current difficult economic
environment and our lack of funding to implement our business plan, our Board of
Directors has begun to analyze strategic alternatives available to our Company
to continue as a going concern. Such alternatives include raising additional
debt or equity financing or consummating a merger or acquisition with a partner
that may involve a change in our business plan.
We had preliminary discussions with potential business combination partners, and
on July 31, 2012, we successfully completed our voluntary share exchange with
DDAC as further described below. . On April 10, 2012, the Company entered into
a binding letter of intent with Digitally Distributed Acquisition Corp., a
Delaware corporation ("DDAC"), in connection with a proposed reverse acquisition
transaction by and between the Company and DDAC whereby the Company was to
acquire all of the shares of outstanding capital stock of DDAC in exchange for
the issuance of a certain ownership interest in the Company to the shareholders
of DDAC, which was consummated July 31, 2012 and a Super 8K was filed.
Overview of Business Subsequent to July 31, 2012
On July 31, 2012 (the "Closing Date"), the Company closed a voluntary share
exchange transaction with DDAC and the shareholders of DDAC (the "Selling
Shareholders") pursuant to a Share Exchange Agreement dated July 31, 2012 (the
"Exchange Agreement") by and among the Company, DDAC, and the Selling
Shareholders. In accordance with the terms of Exchange Agreement, on the Closing
Date, the Company issued 20,000,000 shares of its common stock to the Selling
Shareholders in exchange for 100% of the issued and outstanding capital stock of
DDAC (the "Exchange Transaction"). As a result of the Exchange Transaction, the
Selling Shareholders acquired 21.93% of the Company's issued and outstanding
common stock, DDAC became a wholly-owned subsidiary of the Company, and the
Company acquired the business and operations of DDAC.
Our business is now based in Los Angeles, California where we develop
technologies that provide content owners distribution capabilities across
multiple platforms using existing internet protocol ("IP") services. DDAC's
technology and assets are focused on the opportunity presented by over-the-top
("OTT") home entertainment media, which targets DVD players, video game
consoles, Smart TVs and stand-alone internet connected devices which delivers
content such as Video-on-Demand services by connecting to users' IP services.
DDAC's technology will help content owners distribute and monetize their
products by delivery to OTT devices.
15
--------------------------------------------------------------------------------Comparison of Three Months Ended September 30, 2012 and September 30, 2011 and
from January 25, 2012 to September 30, 2012
Since the Company completed a reverse merger in July 31, 2012 and the accounting
acquirer (DDAC) inception date is January 25, 2012, there is no comparison for
the same period in prior year.
Net revenue for the three months ended September 30, 2012 was $0 since the
Company is still in development stage.
Operating expense for the three months ended September 30, 2012 were $1,459,517
and from January 25, 2012 (date of inception) to September 30, 2012 were
2,009,816. The expense from inception to September 30, 2012 is mainly consisted
of $435,000 share based compensation, $561,828 from interest expense derived
from beneficial conversion feature of new note, $136,085 interest expense in
contingencies, and the remaining from payroll expense and daily operating
expense for the Company.
LIQUIDITY AND CAPITAL RESOURCES
Since inception Regency Resources raised the capital through private placements
of common stock as follows:
Since inception, on April 15, 2007 the officers and directors of the Company
completed a private placement pursuant to Regulation S of the Securities Act of
1933, whereby 49,500,000 shares of common stock were sold at the price of $0.001
per share to raise $1,650. On October 31, 2008 Regency Resources completed a
further private placement pursuant to Regulation S of the Securities Act of
1933, whereby 24,000,000 common shares were sold at the price of $0.05 per share
to raise $40,000.
As of September 30, 2012, we had cash of $29.585 and working capital deficit of
$1,115,090. The Company issued a total of $1,192,026 from note payable from
January 25 (date of inception) to September 30, 2012.
Our future operations are dependent upon our ability to obtain third party
financing in the form of debt and equity and ultimately to generate future
profitable operations. As of the date of this Form 10-Q, we have not generated
revenues, and have experienced negative cash flow from operations. We may look
to secure additional funds through future debt, equity financings or advances
from our officers and directors. These sources of financing may not be available
or may not be available on reasonable terms.
From January 25, 2012 (date of inception) to September 30, 2012, net cash used
from operations was $921,243. The use was primarily due to net operating losses
of $2,009,816 and offset by non cash expense of $1,134,752.
From January 25, 2012 (date of inception) to September 30, 2012, net cash used
in investing activities was $241,198. The use was primarily due to purchase of
equipment of $34,004 and intangible assets of $207,194.
Off-balance Sheet Arrangements
We have no off-balance sheet arrangements.
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