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EX-32.1 - 30DC, INC.ex321.txt
EX-31.2 - 30DC, INC.ex312.txt
EX-31.1 - 30DC, INC.ex311.txt
EX-32.2 - 30DC, INC.ex322.txt

                                  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 March 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.
          ------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


              MARYLAND                                  16-1675285
------------------------------------      --------------------------------------
    (State or other jurisdiction           (I.R.S. Employer Identification No.)
  of incorporation or organization)


                 80 BROAD STREET, 5TH FLOOR, NEW YORK, NY 10004
          ------------------------------------------------------------
               (Address of principal executive offices) (Zip Code)

                                 (212) 962-4400
          ------------------------------------------------------------
               Registrant's telephone number, including area code

          ------------------------------------------------------------
              (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 May 14, 2014, 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 March 31, 2014 and June 30, 2013 3 Condensed Consolidated Statements of Operations (Unaudited) for the Nine Months and Three Months Ended March 31, 2014 and 2013 4 Condensed Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended March 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 13 Item 3. Quantitative and Qualitative Disclosures About Market Risk 19 Item 4. Controls and Procedures 19 PART II - OTHER INFORMATION Item 1. Legal Proceedings 21 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 21 Item 3. Defaults upon Senior Securities 21 Item 4. Mine Safety Disclosures 21 Item 5. Other Information 21 Item 6. Exhibits 21 Signatures 22 -1-
PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ---------------------------- -2-
30DC, INC. AND SUBSIDIARY Condensed Consolidated Balance Sheets Unaudited March June 31, 2014 30, 2013 ---------------- ------------------- Assets Current Assets Cash and Cash Equivalents $ 102,015 $ 116,372 Restricted Cash 117,234 47,984 Accrued Commissions Receivable 2,000 32,035 Accounts Receivable 61,479 26,114 Prepaid Expenses 3,616 - Assets of Discontinued Operations 97,521 76,384 ---------------- ------------------- Total Current Assets 383,865 298,889 Property and Equipment, Net 19,017 23,045 Intangible Assets, Net 236,500 286,000 Goodwill 2,027,564 2,027,564 Assets of Discontinued Operations - 225,285 ---------------- ------------------- Total Assets $ 2,666,946 $ 2,860,783 ================ =================== Liabilities and Stockholders' Equity Current Liabilities Accounts Payable $ 199,095 $ 511,234 Accrued Expenses and Refunds 625,389 367,752 Deferred Revenue 93,283 6,195 Due to Related Parties 768,125 924,057 Liabilities of Discontinued Operations 220,424 330,339 ---------------- ------------------- Total Current Liabilities 1,906,316 2,139,577 ---------------- ------------------- Total Liabilities 1,906,316 2,139,577 ---------------- ------------------- 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 and 86,986,939 issued and outstanding respectively 76,853 86,987 Paid in Capital 3,817,751 3,880,469 Accumulated Deficit (3,031,116) (3,143,392) Accumulated Other Comprehensive Loss (102,858) (102,858) ---------------- ------------------- Total Stockholders' Equity 760,630 721,206 ---------------- ------------------- Total Liabilities and Stockholders' Equity $ 2,666,946 $ 2,860,783 ================ =================== 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 Nine Months Ended March 31, March 31, 2014 2013 2014 2013 ---------------- ------------------ -------------- -------------- Revenue Commissions $ 26,912 $ 31,242 $ 58,642 $ 192,532 Subscription Revenue - 1,369 - 14,670 Products and Services 238,701 213,351 2,357,597 619,068 Seminars and Mentoring - 5,500 - 232,584 ---------------- ------------------ -------------- -------------- Total Revenue 265,613 251,462 2,416,239 1,058,854 Operating Expenses 495,263 464,151 2,393,869 1,531,961 ---------------- ------------------ -------------- -------------- Operating Income (Loss) (229,650) (212,689) 22,370 (473,107) Other Income Forgiveness of Debt - 4,715 93,513 13,461 ---------------- ------------------ -------------- -------------- Total Other Income - 4,715 93,513 13,461 ---------------- ------------------ -------------- -------------- Income (Loss) From Continuing Operations (229,650) (207,974) 115,883 (459,646) Income (Loss) From Discontinued Operations 11,380 68,878 (3,607) 87,314 ---------------- ------------------ -------------- -------------- Net Income (Loss) $ (218,270) $ (139,096) $ 112,276 $ (372,332) ================ ================== ============== ============== Weighted Average Common Shares Outstanding Basic 83,658,797 86,931,169 86,052,421 81,236,894 Diluted 83,658,797 86,931,169 86,985,754 81,236,894 Earnings Per Common Share (Basic) Continuing Operations $ (0.00) $ (0.00) $ 0.00 $ (0.01) 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 $ (0.01) 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 Nine Months Ended March 31 Unaudited 2014 2013 --------------- ---------------- Cash Flows from Operating Activities: Net Income (Loss) $ 112,276 $ (372,332) (Income) Loss From Discontinued Operations 3,607 (87,314) Adjustments to Reconcile Loss from Continuing Operations to Net Cash Provided By (Used) In Operations Depreciation and Amortization 60,965 46,891 Equity Based Payments To Non-Employees - 47,000 Equity Based Payments To Employees 58,383 128,864 Gain on Debt Forgiveness (93,513) (13,461) Changes in Operating Assets and Liabilities Restricted Cash (69,250) (41,501) Accrued Commissions Receivable 30,035 (10,692) Accounts Receivable (35,365) 124,741 Prepaid Expenses (3,616) - Accounts Payable (170,626) 26,880 Accrued Expenses and Refunds 257,637 (817,570) Deferred Revenue 106,008 (189,869) Due to Related Parties (155,932) 176,803 --------------- ---------------- Net Cash Provided By (Used in) Operating Activities 100,609 (981,560) --------------- ---------------- Cash Flows from Investing Activities Purchases of Property and Equipment (7,438) (11,505) --------------- ---------------- Net Cash Used in Investing Activitities (7,438) (11,505) --------------- ---------------- Cash Flows from Discontinued Operations Cash Flows From Operating Activities (106,559) 87,163 --------------- ---------------- Net Cash Used in Discontinued Operations (106,559) 87,163 --------------- ---------------- Increase (Decrease) in Cash and Cash Equivalents (13,388) (905,902) Cash Transferred In Divestiture (969) Cash and Cash Equivalents - Beginning of Period 116,372 1,030,967 --------------- ---------------- Cash and Cash Equivalents - End of Period $ 102,015 $ 125,065 =============== ================ Supplemental Disclosures of Non Cash Financing Activity Cash paid during the period for: Interest $ 33,868 $ 2,290 Income taxes 2,936 1,236 Common Stock Issued to Settle Liabilities $ 104,690 $ - Common Stock Redeemed For Divestiture $ 207,335 $ - Common Stock Issued for Asset Acquisition: Customer Lists $ - $ 75,000 Software - 255,000 Goodwill - 748,989 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 MARCH 31, 2014 (UNAUDITED) NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -------------------------------------------------- BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles ("GAAP") and with instructions to Form-10Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information required by GAAP for a complete set of financial statements. In the opinion of management, all adjustments, (including normal recurring accruals) considered necessary for a fair presentation have been included in the financial statements. Operating results for the interim period are not necessarily indicative of the results that may be expected for the fiscal year ended June 30, 2014 or any other period. In addition, the balance sheet data at June 30, 2013 was derived from the audited financial statements but does not include all disclosures required by GAAP and has been adjusted to reclassify the divested operations of the Immediate Edge (see note 4) in assets and liabilities of discontinued operations; such adjustment has not been audited. This Form 10-Q should be read in conjunction with the Audited Financial Statements for the year ended June 30, 2013 included in the Company's annual report on Form 10-K which was filed on December 23, 2013 and amended on March 26, 2014 and April 4, 2014. The unaudited condensed consolidated financial statements include the accounts of 30DC, Inc., (f/k/a Infinity Capital Group, Inc.) and its subsidiary 30DC, Inc., Delaware, ("30DC DE"). REVENUE RECOGNITION The Company offers customers the option to purchase its digital products for a single payment or for a higher price consisting of a down payment and additional payments over a period of time which can be as long as one year. Pursuant to ASC 605 the Company has determined that revenue is realizable and the earnings process is complete and the four criteria for revenue recognition stated in SAB Topic 13 are met at the time of the initial purchase. Accordingly, the Company deems the sale to have occurred at the time of initial purchase and records the full amount paid and/or due from a customer as revenue. Typically customers are offered a period to review the product and request a refund and if a refund is requested the company reverses the revenue which was recorded at the time of the sale. The Company records a liability for future refunds and reduces revenue by that amount. If a customer defaults on an additional payment, the customer loses access to the digital product. Based upon its past experience with extended payment plans, the Company has estimated the number of future defaulted payments and has reduced revenue and accounts receivable by that amount. For an additional charge, the Company offers customers ancillary services which are not required to be purchased with a product. These services include additional technical support and/or specific product services. The Company recognizes revenue when the service is completed; receipts for services which have not been completed are included in deferred revenue. NET INCOME OR LOSS PER SHARE The Company computes net income or loss per share in accordance with ASC 260 "Earnings per Share." Under ASC 260, basic net income or loss per share is computed by dividing net loss per share available to common stockholders by the weighted average number of shares outstanding for the period and excludes the effects of any potentially dilutive securities. Diluted earnings per share, includes the dilution that would occur upon the exercise or conversion of all potentially dilutive securities into common stock using the "treasury stock" and/or "if converted" methods as applicable. In computing diluted earnings per share for the nine month period ended March 31, 2014, the Company has included as outstanding 2,000,000 options which are exercisable and have an exercise price below the market price for the Company's shares. For all other periods presented, inclusion of additional shares would be anti-dilutive and no adjustment to outstanding shares has been made to compute diluted earnings per share. -6-
30DC, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2014 (UNAUDITED) NOTE 2. GOING CONCERN --------------------- The condensed consolidated financial statements have been prepared using accounting principles generally accepted in the United States of America applicable for a going concern which assumes that the Company will realize its assets and discharge its liabilities in the ordinary course of business. As of March 31, 2014, the Company had a working capital deficit of approximately $1,522,000 and had accumulated losses of approximately $3,031,000 since its inception. The Company's ability to continue as a going concern is dependent upon its ability to obtain the necessary financing or to earn profits from its business operations to meet its obligations and pay its liabilities arising from normal business operations when they come due. In May 2012, the Company launched MagCast which the Company expects to be an integral part of its businesses on an ongoing basis. MagCast is being sold through an affiliate network which expands the Company's selling capability and has a broad target market beyond the Company's traditional customer base. In August 2013, the Company relaunched MagCast with a large-scale promotion for which approximately 75% of sales were through marketing affiliates which are unrelated parties who earn commissions by referring customers to the Company. The Company does not expect to have a promotion of this scale more than once per year. Until the Company achieves sustained profitability it does not have sufficient capital to meet its needs and continues to seek loans or equity placements to cover such cash needs. No commitments to provide additional funds have been made and there can be no assurance that any additional funds will be available to cover expenses as they may be incurred. If the Company is unable to raise additional capital or encounters unforeseen circumstances, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, issuance of additional shares of the Company's stock to settle operating liabilities which would dilute existing shareholders, curtailing its operations, suspending the pursuit of its business plan and controlling overhead expenses. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all. These conditions raise substantial doubt about the Company's ability to continue as a going concern. These condensed consolidated financial statements do not include any adjustments to the amounts and classification of assets and liabilities that may be necessary should the Company be unable to continue as a going concern. NOTE 3. DIVESTITURE ------------------- Effective February 28, 2014, the Company divested assets and liabilities that made up its Immediate Edge subscription business ("Edge") to Raine Ventures, LLC ("Raine") in exchange for the 10,560,000 common shares of the Company which Raine had held. Included with the Edge business was cash of approximately $1,000 and intangible assets including goodwill of approximately $225,000. Raine assumed liability for deferred revenue of approximately $19,000. The Company recorded zero gain or loss on the divestiture. Operating results for the Edge have been reclassified as discontinued operations for each period presented in these financial statements (see note 5). Raine had been party to a contractor agreement with the Company which had expired in 2012 and was extended on a month to month basis and was terminated concurrent with the divestiture. NOTE 4. ACQUISITION AND PRO FORMA FINANCIAL INFORMATION ------------------------------------------------------- In October 2012 the Company reached an agreement for the Company to purchase Netbloo's 50% interest in the MagCast JV Agreement and Market Pro Max an online marketing platform that allows anyone to create digital products and quickly build a variety of eCommerce marketing websites for a purchase price of 13,487,363 shares of the Company's common stock. Netbloo received a three year contractor agreement with annual compensation of $300,000 which is payable in monthly installments of $25,000 and may be terminated after two years subject to a six month termination payment. The contractor agreement was effective October 1, 2012 and final documents were signed on December 31, 2012. -7-
30DC, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2014 (UNAUDITED) The following unaudited consolidated pro forma information gives effect to the Netbloo acquisition as if this transaction had occurred at the beginning of each period presented. The following unaudited pro forma information is presented for illustration purposes only and is not necessarily indicative of the results that would have been attained had the acquisition of this business been completed at the beginning of each period presented, nor are they indicative of results that may occur in any future periods. Nine Months Ended March 31, 2013 (Unaudited) ----------------------- Revenues $ 1,074,612 Operating Expenses 1,601,513 Other Income 13,461 ----------------------- Loss from Continuing Operations (513,440) Income from Discontinued Operations 87,314 ----------------------- Net Loss $ (426,126) ======================= Basic and Diluted Loss Per Share $ (0.00) Weighted Average Shares Outstanding - Basic & Diluted 86,987,648 NOTE 5. DISCONTINUED OPERATIONS ------------------------------- The Company has included two businesses in discontinued operations; the Immediate Edge business which was divested effective February 28, 2014 (see note 3) and the business of Infinity which was discontinued after the share exchange with 30DC DE on September 10, 2010. Prior to the share exchange, Infinity withdrew its election to operate as a Business Development Company ("BDC") under the Investment Company Act of 1940 ("1940 Act"). Infinity historically operated as a non-diversified, closed-end management investment company and prepared its financial statements as required by the 1940 Act. 30DC is no longer actively operating the BDC and the assets, liabilities and results of operations of Infinity's former business are shown as discontinued operations in the Company's financial statements subsequent to the share exchange with 30DC. Investment companies report assets at fair value and the Company has continued to report investment assets in discontinued operations on this basis. Results of Discontinued Operations for the NINE MONTHS ENDED MARCH 31, 2014 NINE MONTHS ENDED MARCH 31, 2013 IMMEDIATE EDGE INFINITY TOTAL IMMEDIATE EDGE INFINITY TOTAL ------------------------------------------ ------------------------------------------ Revenues $ 266,495 $ - $ 266,495 $ 371,472 $ - $ 371,472 Operating expenses 287,017 8,943 295,960 322,776 11,455 334,231 Income (Loss) from operations (20,522) (8,943) (29,465) 48,696 (11,455) 37,241 Forgiveness of debt - 796 796 - - - Realized gain on marketable securities - - - - 35,645 35,645 Unrealized gain on marketable securities - 25,062 25,062 - 14,428 14,428 ------------------------------------------ ------------------------------------------ Net Income (Loss) $ (20,522) $ 16,915 $ (3,607) $ 48,696 $ 38,618 $ 87,314 ========================================== ========================================== THREE MONTHS ENDED MARCH 31, 2014 THREE MONTHS ENDED MARCH 31, 2013 IMMEDIATE EDGE INFINITY TOTAL IMMEDIATE EDGE INFINITY TOTAL ------------------------------------------ ------------------------------------------ Revenues $ 72,360 $ - $ 72,360 $ 126,705 $ - $ 126,705 Operating expenses 65,921 2,746 68,667 105,419 3,314 108,733 Income (Loss) from operations 6,439 (2,746) 3,693 21,286 (3,314) 17,972 Realized gain on marketable securities - - - - 35,645 35,645 Unrealized gain on marketable securities - 7,687 7,687 - 15,261 15,261 ------------------------------------------ ------------------------------------------ Net Income (Loss) $ 6,439 $ 4,941 $ 11,380 $ 21,286 $ 47,592 $ 68,878 ========================================== ========================================== -8-
30DC, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2014 (UNAUDITED) Assets and Liabilities of Discontinued Operations as of MARCH 31, 2014 JUNE 30, 2013 IMMEDIATE EDGE INFINITY TOTAL IMMEDIATE EDGE INFINITY TOTAL -------------- -------- ----- -------------- -------- ----- Assets Cash $ - $ - $ - $ 278 $ - $ 278 Prepaid expenses - - - 3,648 - 3,648 Marketable securities - 97,521 97,521 - 72,458 72,458 ------------------------------------------ ----------------------------------------- Total Current Assets - 97,521 97,521 3,926 72,458 76,384 Goodwill - - - 225,285 - 225,285 ------------------------------------------ ----------------------------------------- Total Assets of Discontinued Operations $ - $ 97,521 $ 97,521 $ 229,211 $ 72,458 $ 301,669 ========================================== ========================================= LIABILITIES Accounts payable $ - $ 72,657 $ 72,657 $ 3,060 $ 80,028 $ 83,088 Accrued expenses - 60,717 60,717 6,467 67,375 73,842 Deferred revenue - - - 17,454 - 17,454 Notes payable - 66,050 66,050 - 102,020 102,020 Due to related parties - 21,000 21,000 - 53,935 53,935 ------------------------------------------ ----------------------------------------- Total Liabilities of Discontinued Operations $ - $ 220,424 $ 220,424 $ 26,981 $ 303,358 $ 330,339 ========================================== ========================================= Notes Payable Included in liabilities of discontinued operations at March 31, 2014 and June 30, 2013 are $66,050 and $102,051 respectively (including $-0- and $31 in due to related parties respectively) in notes payable plus related accrued interest of which are all in default for lack of repayment by their due date. For the nine months ended March 31, 2014 and March 31, 2013 the Company incurred interest expense on notes payable of $7,764 and $9,960 respectively which is included in the Statement of Operations under income (loss) from discontinued operations. NOTE 6. RELATED PARTY TRANSACTIONS ---------------------------------- At March 31, 2014, due to related parties totaled $768,125. This mainly consisted of $30,915 due to Netbloo for earnings from the collaborative arrangement prior to 30DC acquiring Netbloo's 50% interest in the MagCast JV (note 4), $25,000 due to Netbloo under their contractor agreement, $66,500 accrued for directors' fees for services of non-executive directors and $640,000 due to Theodore A. Greenberg, CFO and director, for compensation. NOTE 7. INCOME TAXES -------------------- As of June 30, 2013, the Company had net operating loss carryovers for United States income tax purposes of approximately $1,277,400, which begin to expire in 2030. For income tax purposes, net income for the nine month period ended March 31, 2014 is completely offset by the net operating loss carryovers; accordingly no income tax provision has been provided. For future periods, the U.S. net operating loss carryovers may be subject to limitation under Internal Revenue Code Section 382 should there be a greater than 50% change in ownership as determined under the regulations. -9-
30DC, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2014 (UNAUDITED) NOTE 8. STOCKHOLDERS' EQUITY ---------------------------- COMMON STOCK During the nine months ended March 31, 2014, the Company issued common stock as follows: 300,000 shares of common stock to Michael A. Littman as payment for $78,000 included in accounts payable. The Company recorded $30,000 of forgiveness of debt for this transaction which is included as other income in the Statement of Operations. Mr. Littman is an attorney who has provided services to the Company and who provided services to Infinity prior to the share exchange. The Company also recorded $57,253 of forgiveness of debt for reduced cash payment of $95,453 ($96,500 AUD) over a 10 month period to settle an outstanding liability of $152,706 to an Australian law firm which originated prior to 30DC's transaction with Infinity in 2010 and was previously included in accounts payable. The Company also recorded $6,260 of forgiveness of debt for reduced cash payment to settle final payment due the Company's prior independent auditing firm. The prior auditing firm also performed services to enable issuing an opinion for the June 30, 2012 comparative year included with the Company's June 30, 2013 Form 10K for which, as part of the settlement of the amount due, no fees were charged. 26,525 shares of common stock to a creditor as full payment for a note payable and accrued interest totaling $6,896. The Company recorded $796 of forgiveness of debt for this transaction which is included in the Discontinued Operations section of the Statement of Operations. 100,000 shares of common stock to a creditor as full payment for a note payable and accrued interest totaling $19,794. The Company recorded $2,206 in additional interest expense for this transaction which is included in the Discontinued Operations section of the Statement of Operations. During the nine months ended March 31, 2014, the Company redeemed common stock as follows: Effective February 28, 2014, the Company divested assets and liabilities that made up its Immediate Edge subscription business ("Edge") to Raine Ventures, LLC ("Raine") in exchange for the 10,560,000 common shares of the Company which Raine had held and which the Company has retired. The Company reported no gain or loss on the divestiture, accordingly the redeemed shares were valued at the $207,335 net book value of the divested assets and liabilities. WARRANTS Information relating to outstanding warrants is as follows: Weighted Weighted Average Number Average Remaining of Exercise Contract Shares Price Life (years) -------------------------------------------- Outstanding warrants at 06/30/13 3,401,522 $ 0.50 2.30 Granted - - - Exercised - - - Forfeited/expired - - - Outstanding warrants at 3/31/14 3,401,522 0.50 1.55 Exercisable on 3/31/14 3,401,522 0.50 1.55 -10-
30DC, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2014 (UNAUDITED) The aggregate intrinsic value of warrants outstanding and exercisable was $0 at March 31, 2014. Total intrinsic value of warrants exercised was $0 for the three months ended March 31, 2014 as no warrants were exercised during this period. NOTE 9. STOCK BASED COMPENSATION PLANS -------------------------------------- The Company follows FASB Accounting Standards Codification No. 718 - Compensation - Stock Compensation for share based payments to employees. The Company follows FASB Accounting Standards Codification No. 505 for share based payments to Non-Employees. The Company recognized expense in the amount of $58,383 and $128,864 for the nine months ended March 31, 2014 and March 31, 2013 respectively and $8,855 and $24,764 for the three months ended March 31, 2014 and March 31, 2013 respectively for options granted in prior periods the cost of which is being recorded on a straight-line basis over the vesting period. There was no impact on the Company's cash flow. Further information relating to stock options is as follows: Weighted Weighted Average Number Average Remaining of Exercise Contract Shares Price Life (Years) ------------------------------------------- Outstanding options at 06/30/13 3,600,000 $ 0.18 8.61 Granted - - - Exercised - - - Forfeited/expired - - - Outstanding options at 3/31/14 3,600,000 0.18 7.86 Exercisable on 3/31/14 2,600,000 0.22 7.60 The options have a contractual term of ten years. The aggregate intrinsic value of options outstanding and exercisable was $40,000 at March 31, 2014. Total intrinsic value of options exercised was $0 for the three months ended March 31, 2014 as no options were exercised during this period. At March 31, 2014, shares available for future stock option grants to employees and directors under the 2012 Stock Option Plan were 4,500,000. -11-
30DC, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2014 (UNAUDITED) NOTE 10. SUPPLEMENTAL SCHEDULE OF OPERATING EXPENSES ---------------------------------------------------- Nine Months Ended Nine Months Ended March 31, 2014 March 31, 2013 ------------------- ------------------- Related Party Contractor Fees (1) $ 488,813 $ 516,691 Officer's Salary 179,191 214,432 Directors' Fees 111,691 64,432 Independent Contractors 365,244 236,276 Commission Expense 771,862 147,975 Professional Fees 135,500 128,851 Credit Card Processing Fees 115,629 22,225 Telephone and Data Lines 26,475 47,480 Other Operating Costs 199,464 153,599 ------------------- ------------------- Total Operating Expenses $ 2,393,869 $ 1,531,961 =================== =================== --------------------------------------------------------------------- (1) Related party contractors include Marillion which provides services to the Company including for Edward Dale to act as Chief Executive Officer of the Company, GHL Group, Ltd., whose President, Gregory H. Laborde is a Director and Netbloo which was the joint developer of the MagCast Publishing Platform Three Months Ended Three Months Ended March 31, 2014 March 31, 2013 -------------------- -------------------- Related Party Contractor Fees (1) $ 163,147 $ 170,792 Officer's Salary 54,427 62,382 Directors' Fees 31,927 12,382 Independent Contractors 118,777 84,407 Commission Expense 16,945 30,300 Professional Fees 34,126 33,410 Credit Card Processing Fees 10,353 6,958 Telephone and Data Lines 9,656 12,286 Other Operating Costs 55,905 51,234 ------------------- -------------------- Total Operating Expenses $ 495,263 $ 464,151 =================== ==================== ----------------------------------- (1) Related party contractors include Marillion which provides services to the Company including for Edward Dale to act as Chief Executive Officer of the Company, GHL Group, Ltd., whose President, Gregory H. Laborde is a Director and Netbloo which was the joint developer of the MagCast Publishing Platform -12-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -------------------------------------------------------------------------------- THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH OUR UNAUDITED FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED HEREIN. IN CONNECTION WITH, AND BECAUSE WE DESIRE TO TAKE ADVANTAGE OF, THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995, WE CAUTION READERS REGARDING CERTAIN FORWARD LOOKING STATEMENTS IN THE FOLLOWING DISCUSSION AND ELSEWHERE IN THIS REPORT AND IN ANY OTHER STATEMENT MADE BY, OR ON OUR BEHALF, WHETHER OR NOT IN FUTURE FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION. FORWARD-LOOKING STATEMENTS ARE STATEMENTS NOT BASED ON HISTORICAL INFORMATION AND WHICH RELATE TO FUTURE OPERATIONS, STRATEGIES, FINANCIAL RESULTS OR OTHER DEVELOPMENTS. FORWARD LOOKING STATEMENTS ARE NECESSARILY BASED UPON ESTIMATES AND ASSUMPTIONS THAT ARE INHERENTLY SUBJECT TO SIGNIFICANT BUSINESS, ECONOMIC AND COMPETITIVE UNCERTAINTIES AND CONTINGENCIES, MANY OF WHICH ARE BEYOND OUR CONTROL AND MANY OF WHICH, WITH RESPECT TO FUTURE BUSINESS DECISIONS, ARE SUBJECT TO CHANGE. THESE UNCERTAINTIES AND CONTINGENCIES CAN AFFECT ACTUAL RESULTS AND COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED IN ANY FORWARD LOOKING STATEMENTS MADE BY, OR ON OUR BEHALF. WE DISCLAIM ANY OBLIGATION TO UPDATE FORWARD-LOOKING STATEMENTS. OVERVIEW 30DC Inc. (Delaware) ("30DC DE") was incorporated on October 17, 2008 in the state of Delaware and prior to July 15, 2009, 30DC DE had no active business operations. On July 15, 2009, 30DC acquired the business of the "30 Day Challenge" and "Immediate Edge" from two of 30DC's founding shareholders as part of a plan to consolidate their business operations. 30 Day Challenge began in 2005 by offering a free online ecommerce training program. Immediate Edge began in 2007 offering an online education program subscription service offering high-end internet marketing instruction and strategies for experienced online commerce practitioners. On September 10, 2010, Infinity Capital Group, Inc., a Maryland Corporation, ("Infinity") entered into a Plan and Agreement of Reorganization (the "Agreement") with 30DC DE, and the Shareholders of 30DC DE. ("30DC DE Shareholders"). In exchange for 100% of the issued and outstanding shares of 30DC DE, Infinity issued 60,984,000 shares of its restricted common stock. The shareholders of 30DC DE received 13.2 shares of common stock of Infinity for every one share of 30DC DE. Upon closing Edward Dale was appointed to the Infinity Board of Directors and named Chief Executive Officer of Infinity which was subsequently renamed 30DC, Inc. (Maryland) ("30DC"). Infinity, as a result of the transaction, became the sole outstanding shareholder of 100% of the outstanding common stock of 30DC DE. For purposes of accounting, 30DC DE was considered the accounting acquirer. As of the date of the transaction, Infinity discontinued its historical operations and the business of 30DC DE is now the business of 30DC. In May of 2012 the Company signed a Joint Venture Agreement ("JV Agreement") with Netbloo Media. Ltd. for the MagCast Publishing Platform ("MagCast") which was jointly developed. MagCast provides customers access to a cloud-based service to create an application ("App") to publish a digital magazine on Apple Corporation's online marketplace Apple Newsstand and includes executive training modules as well as a three-month trial subscription to the Company's Immediate Edge subscription product and other bonus products. Under the terms of the JV Agreement the Company was responsible for marketing, sales and administration and Netbloo was responsible for product development. MagCast was launched in May 2012 and a majority of sales were the result of affiliate marketing relationships which resulted in commissions of 50% of gross revenue for those sales to the affiliate responsible for the sale. All MagCast sales revenue was recorded gross by the Company and commission expense was recorded for the amount due to Netbloo which was 50% of revenue reduced by affiliate commissions and other allowable costs. -13-
In October 2012 the Company reached an agreement to purchase Netbloo's 50% interest in the MagCast JV Agreement and Market Pro Max, a product which helps companies run online information businesses for a purchase price of 13,487,368 shares of the Company's common stock. Netbloo received a three year contractor agreement with annual compensation of $300,000 which is payable in monthly installments of $25,000 and may be terminated after two years subject to a six month termination payment. The contractor agreement was effective October 1, 2012 and final documents were signed on December 31, 2012. The Company has continued to update the MagCast platform and released version 4 in the summer of 2013 which enabled customers to offer a version of their magazine tailored for the IPhone which significantly expanded the potential number of magazine readers. In February 2014, the Company released a version of MagCast which enabled customers to offer a version of their magazine for devices using an Android operating system further expanding the potential number of magazine readers. The Company now offers ancillary services to assist customers in creating their Apps and provides customers with training in developing and marketing their digital publications. Effective February 28, 2014, the Company divested assets and liabilities that made up its Immediate Edge subscription business ("Edge") to Raine Ventures, LLC ("Raine") in exchange for the 10,560,000 common shares of the Company which Raine had held. The Company recorded zero gain or loss on the divestiture. Raine had been party to a contractor agreement with the Company which had expired in 2012 and was extended on a month to month basis and was terminated concurrent with the divestiture. The Company has no plans at this time for purchases or sales of fixed assets which would occur in the next twelve months. The Company has no expectation or anticipation of significant changes in number of employees in the next twelve months. RESULTS OF OPERATIONS FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2014 COMPARED TO THE THREE MONTH PERIOD ENDED MARCH 31, 2013. During the three months ended March 31, 2014, 30DC, Inc. recognized revenues of $265,613 from continuing operations compared to $251,462 during the three months ended March 31, 2013. Revenues from continuing operations were from the following sources during the three months ended March 31, 2014 compared to March 31, 2013. Three Months Three Months Ended Ended Increase or March 31, 2014 March 31, 2013 (Decrease) ----------------- ------------------- --------------- Revenue Commissions $ 26,912 $ 31,242 $ (4,330) Subscription Revenue - 1,369 (1,369) Products and Services 238,701 213,351 25,350 Seminars and Mentoring - 5,500 (5,500) ----------------- ------------------- --------------- Total Revenues $ 265,613 $ 251,462 $ 14,151 The $25,350 increase in products and services revenue was mainly due to $14,927 in sales of new products and $14,955 in revenue recognized for technical services related to the MagCast Publishing Platform. -14-
During the three months ended March 31, 2014, the Company incurred $495,263 in operational expenses for continuing operations compared to $464,151 during the three months ended March 31, 2013. Operational expenses during the three months ended March 31, 2014 and 2013, include the following categories: THREE MONTHS ENDED THREE MONTHS ENDED INCREASE OR MARCH 31, 2014 MARCH 31, 2013 DECREASE ------------------ ------------------ ----------- Accounting Fees $ 22,805 $ 25,000 $ (2,195) Credit Card Processing Fees 10,353 6,958 3,395 Commissions 16,945 30,301 (13,356) Independent Contractors 118,777 84,407 34,370 Depreciation and Amortization 19,957 20,902 (945) Directors Fees 31,927 12,382 19,545 Internet Expenses 13,905 6,747 7,158 Legal Fees 11,321 8,410 2,911 Officer's Salaries 54,427 62,382 (7,955) Related Party Contractors 163,147 170,792 (7,645) Telephone and Data Lines 9,656 12,286 (2,630) Travel & Entertainment 2,814 4,140 (1,326) Other Operating Expenses 19,229 19,444 (215) ------------------ ------------------ ----------- Total Operating Expenses $ 495,263 $ 464,151 $ 31,112 ================== ================== =========== The decrease of $13,356 in commissions resulted from the fact that a higher percentage of sales in the March 2013 quarter were through marketing affiliate relationships. The increase of $34,370 in independent contractors is primarily due to the approximately $8,000 for a contractor who helped during the annual offering of the free Challenge program and was retained for part of the quarter to work on additional development projects, $18,000 for Clinton Carey, former Chief Operating Officer of the Company who is helping shape sales strategy to extend marketing of MagCast outside the Company's traditional customer base, and $5,000 for an analysis by a strategic marketing consultant. The increase of $19,545 in directors' fees results from $27,500 for directors fee resulting from the Company's board approval of directors' fees for non-executive directors in the total amount of $110,000 per year in September 2013 offset by a decrease of $7,955 in the charge for amortization of stock option expense over the vesting period, for stock options previously issued to Henry Pinskier, the Company's board chair, in the March 2014 quarter from the amount in the March 2013 quarter. During the three months ended March 31, 2014, the Company recognized a net loss from continuing operations of $229,650 compared to a net loss of $207,974 during the three months ended March 31, 2013. The increased loss of $21,676 was primarily due to the increase in operating expenses of $31,112 offset by the increase in revenues of $14,151. FOR THE NINE MONTH PERIOD ENDED MARCH 31, 2014 COMPARED TO THE NINE MONTH PERIOD ENDED MARCH 31, 2013. During the nine months ended March 31, 2014, 30DC, Inc. recognized revenues of $2,416,239 from continuing operations compared to $1,058,854 during the nine months ended March 31, 2013. Revenues from continuing operations were from the following sources during the nine months ended March 31, 2014 compared to March 31, 2013. -15-
Nine Months Ended Nine Months Ended Increase or March 31, 2014 March 31, 2013 (Decrease) ------------------- ------------------- -------------- Revenue Commissions $ 58,642 $ 192,532 $ (133,890) Subscription Revenue - 14,670 (14,670) Products and Services 2,357,597 619,068 1,738,529 Seminars and Mentoring - 232,584 (232,584) ------------------- ------------------- -------------- Total Revenues $ 2,416,239 $ 1,058,854 $ 1,357,385 ------------------- ------------------- -------------- The Company earns commissions for products sold by third parties to customers referred by the Company. The $133,890 decrease in commission revenue during the nine months ended March 31, 2014 compared to the nine months ending March 31, 2013 was the result of commissions earned from a successful third party product in the 2013 period which did not repeat in 2014 period. The $1,738,529 increase in products and services revenue was primarily due to the approximately $2,257,000 in sales of the MagCast Publishing Platform during the nine months ended March 31, 2014, compared to the approximately $588,000 in MagCast sales in the nine months ended March 31, 2013. The large increase in sales resulted from a relaunch promotion in August 2013 of which approximately 75% of sales where though marketing affiliates (unrelated entities) who earned affiliate commissions and affiliate bonuses. The Company has no future relaunches planned during the remainder of the fiscal year ending June 30, 2014. The $232,584 decrease in seminars and mentoring income resulted from phase out of the Company's historic mentoring program at the end of December 2012. The Company discontinued its historical mentoring program as of December 31, 2012 to redirect Company resources toward products and services sales growth which management believes has more potential for long-term growth than mentoring which is labor intensive and does have the ability to leverage and scale. During the nine months ended March 31, 2014, the Company incurred $2,393,869 in operational expenses from continuing operations compared to $1,531,961 during the nine months ended March 31, 2013. Operational expenses during the nine months ended March 31, 2014 and 2013, include the following categories: NINE MONTHS ENDED NINE MONTHS ENDED INCREASE OR MARCH 31, 2014 MARCH 31, 2013 DECREASE ----------------- ----------------- ----------- Accounting Fees $ 96,612 $ 92,285 $ 4,327 Credit Card Processing Fees 115,629 22,225 93,404 Commissions 771,862 147,975 623,887 Independent Contractors 365,244 236,276 128,968 Depreciation and Amortization 60,965 46,891 14,074 Directors Fees 111,691 64,432 47,259 Internet Expenses 30,386 23,602 6,784 Legal Fees 38,888 36,566 2,322 Officer's Salaries 179,191 214,432 (35,241) Related Party Contractors 488,813 516,691 (27,878) Telephone and Data Lines 26,475 47,480 (21,005) Travel & Entertainment 47,982 26,501 21,481 Other Operating Expenses 60,131 56,605 3,526 ----------------- ----------------- ----------- Total Operating Expenses $ 2,393,869 $ 1,531,961 $ 861,908 ================= ================= =========== -16-
The increase of $93,404 in credit card processing fees resulted from the increase in sales of products and services of approximately $1,739,000 during the nine months ended March 2014 compared to the nine months ended March 2013. Credit card fees on accounts receivable have been accrued to match the period the expense is recognized with the period the related income is recognized. The increase of $623,887 in commissions resulted from the increase in sales of products and services of approximately $1,739,000 during the nine months ended March 2014 compared to the nine months ended March 2013. Commissions on accounts receivable have been accrued to match the period the expense is recognized with the period the related income is recognized. Approximately 75% of sales during the August 2013 MagCast relaunch were subject to marketing affiliate commissions and approximately $126,000 in bonuses were earned by marketing affiliates for referral and sales contests during the relaunch. Marketing affiliates refer customers to the Company and earn commissions if the customer makes a purchase; marketing affiliates are not related to the Company. The increase of $128,968 in independent contractors is primarily due to the approximately $30,000 increased cost for contractors for maintenance and support of the MagCast Publishing Platform, approximately $13,000 cost for an affiliate manager who was contracted to help with the affiliate program related to the MagCast promotional relaunch, approximately $29,000 for a contractor who helped during the annual offering of the free Challenge program and was retained through the quarter to work on additional development projects, $54,000 for Clinton Carey, former Chief Operating Officer of the Company who is helping shape sales strategy to extend marketing of MagCast outside the Company's traditional customer base, approximately $6,000 for investor relations costs, $10,000 for an analysis by a strategic marketing consultant and a reduction of approximately $18,000 due to a favorable change in exchange rate reducing the cost pay foreign contractors. The increase of $14,074 in depreciation and amortization is due to $22,000 higher amortization of intangible assets from the asset acquisition in October 2012 in the nine month period ending March 31, 2014 offset by a decrease in depreciation of approximately $8,000 due to the end of depreciable life for some of the Company's fixed assets. The increase of $47,259 in directors' fees is due to $82,500 in director fees for the nine month period ended March 31, 2014 which resulted from the Company's board September 2013 approval of directors' fees for non-executive directors in the total amount of $110,000 per year, offset by a decrease from $64,432 to $29,191 in the amount of expense related to stock options previously issued to Henry Pinskier, a director and chairman of the Company which is being amortized on a straight-line basis over the vesting period. The decrease of $35,341 in officer's salaries results from a decrease of $64,432 to $29,191 in the amount of expense related to stock options previously issued to Theodore A. Greenberg, chief financial officer and a director of the Company which is being amortized on a straight-line basis over the vesting period. Related Party Contractor Fees consist of payments to Marillion Partnership under the contract for services which includes Edward Dale acting as 30DC's Chief Executive Officer, the consulting contract with GHL Group, Ltd. whose President, Gregory H. Laborde is a Director of the Company and a services contract with Netbloo Media, Ltd. which was the joint developer of the MagCast Publishing Platform. The $27,878 net decrease results primarily from a $40,000 one-time bonus awarded to the Marillion Partnership upon completion of the asset acquisition which included the remaining 50% of the MagCast Publishing Platform in the nine months ended March 31, 2013, approximately $36,000 less paid the Marillion Partnership which resulted from a change in the AU/USD exchange rate and approximately $27,000 decrease in the amount paid to GHL, Group, Ltd. which was due to $45,000 in stock issued to GHL in the nine months ended March 31, 2013 offset by additional cash payments to GHL of approximately $18,000 and $75,000 additional paid Netbloo which started in October 2012. The $21,005 decrease in telephone and date lines expense is primarily due to a decrease in the contracted amount with Telstra AU. -17-
Travel and Entertainment increased by $21,481 due to a company-wide group meeting and travel to an investor conference, both in November 2013 offset by a number of trips by Edward Dale in the nine month period ended March 31, 2013 to present and sell MagCast at conferences sponsored by affiliates. During the nine months ended March 31, 2014, the Company recognized net income from continuing operations of $115,883 compared to a net loss of ($459,646) during the nine months ended March 31, 2013. The increased net income of $575,529 was primarily due to the increase in revenues of $1,357,385 and $80,052 additional gain on forgiveness of debt offset by the increase in operating expenses of $861,908. LIQUIDITY AND CAPITAL RESOURCES The Company had a cash balance of $102,015 at March 31, 2014 and the Company had a working capital deficit of $1,522,451. To fund working capital for the next 12 months, the Company expects to raise capital and to improve the results of operations from increasing revenue as well as a reduction in operating costs. Increased revenue is expected to come from further sales of MagCast Publishing Platform, an increase in monthly license subscriptions for Market Pro Max which has not been extensively marketed and introduction of new products some of which will be extensions of existing product lines. The Company intends to raise capital, however, the Company has not commenced any offerings and cannot guarantee that they will be successful in its capital raising efforts. If the results of operations and capital raised, if any, are not sufficient to fund the company's expenses as they come due, the Company will defer amounts due to related parties and to the extent possible utilize shares of the Company to satisfy its liabilities. Included in liabilities of discontinued operations at March 31, 2014 is $66,050 in notes payable plus related accrued interest that are in default for lack of repayment by their due date. During the nine month period ended March 31, 2014, operating activities provided the Company with $100,609. During the nine month period ended March 31, 2013, Company used $981,560 in operations. The increase of $1,082,169 provided by operating activities was a combination of the increase of in net income from continuing operations of approximately $576,000, and payment of significant accrued commissions from the June 2012 MagCast launch in the March 2013 period. GOING CONCERN The condensed consolidated financial statements have been prepared using accounting principles generally accepted in the United States of America applicable for a going concern which assumes that the Company will realize its assets and discharge its liabilities in the ordinary course of business. As of March 31, 2014, the Company has a working capital deficit of approximately $1,522,000 and has accumulated losses of approximately $3,031,000 since its inception. The Company's ability to continue as a going concern is dependent upon the ability of the Company to obtain the necessary financing or to earn profits from its business operations to meet its obligations and pay its liabilities arising from normal business operations when they come due. In May 2012 the Company launched MagCast which has become an integral part of its businesses on an ongoing basis. MagCast is being sold through an affiliate network which expands the Company's selling capability and has a broad target market beyond the Company's traditional customer base. Until the Company achieves sustained profitability it does not have sufficient capital to meet its needs and continues to seek loans or equity placements to cover such cash needs. No commitments to provide additional funds have been made and there can be no assurance that any additional funds will be available to cover expenses as they may be incurred. If the Company is unable to raise additional capital or encounters unforeseen circumstances, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, issuance of additional shares of the Company's stock to settle operating liabilities which would dilute existing shareholders, curtailing its operations, suspending the pursuit of its business plan and controlling overhead expenses. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all. These conditions -18-
raise substantial doubt about the Company's ability to continue as a going concern. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ------------------------------------------------------------------ The Company earns the majority of its revenue in United States dollars ("USD") and pays a significant amount of its expense in Australian dollars ("AUD"). Material fluctuations in the exchange rate between USD and AUD may have material impact on the Company's results of operations. ITEM 4. CONTROLS AND PROCEDURES -------------------------------- DISCLOSURES CONTROLS AND PROCEDURES We have adopted and maintain disclosure controls and procedures (as such term is defined in Rules 13a 15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act, is recorded, processed, summarized and reported within the time periods required under the SEC's rules and forms and that the information is gathered and communicated to our management, including our Chief Executive Officer (Principal Executive Officer) and Principal Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. As required by SEC Rule 15d-15(b) for the quarter ended March 31, 2014, our Chief Executive Officer and Chief Financial Officer, carried out an evaluation under the supervision and with the participation of our management, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 15d-14 as of the end of the period covered by this report. Based on the foregoing evaluation, they have concluded that our disclosure controls and procedures are not effective in timely alerting them to material information required to be included in our periodic SEC filings and to ensure that information required to be disclosed in our periodic SEC filings is accumulated and communicated to our management, including our Chief Executive Officer, to allow timely decisions regarding required disclosure as a result of the deficiency in our internal control over financial reporting discussed below. MANAGEMENT'S QUARTERLY REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING. With the participation of our Chief Executive Officer and Chief Accounting Officer, we have evaluated the effectiveness of our "internal control over financial reporting" (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the " Exchange Act ")), as of the end of the period covered by this report. Based upon such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, our "internal control over financial reporting" is not effective due to the material weaknesses noted below, in ensuring that (i) information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms and (ii) information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. (1) Due to the small size of its staff, the Company did not have sufficient segregation of duties to support its internal control over financial reporting. (2) The Company has installed accounting software which is not comprehensive and which does not prevent erroneous or unauthorized changes to previous reporting periods and does not provide an adequate audit trail or entries made in the accounting software. -19-
REMEDIATION OF MATERIAL WEAKNESS As our current financial condition allows, we are in the process of analyzing and developing our processes for the establishment of formal policies and procedures with necessary segregation of duties, which will establish mitigating controls to compensate for the risk due to lack of segregation of duties. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. There was no change in our internal control over financial reporting that occurred during the fiscal quarter ended March 31, 2014, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. -20-
PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS ------------------------- None. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS ------------------------------------------------------------------- During the period January 1, 2014 through March 31, 2014 the Company did not issue any equity securities. Effective February 28, 2014 the Company redeemed 10,560,000 shares from Raine Ventures, Inc. as part of the divestiture of the Immediate Edge business. The Company recognized no gain or loss from the divestiture. ITEM 3. DEFAULTS UPON SENIOR SECURITIES --------------------------------------- Included in liabilities of discontinued operations at March 31, 2014 is $66,050 in notes payable plus related accrued interest that are in default for lack of repayment by their due date. ITEM 4. MINE SAFETY DISCLOSURES ------------------------------- Not Applicable. ITEM 5. OTHER INFORMATION ------------------------- None. ITEM 6. EXHIBITS ---------------- The following is a complete list of exhibits filed as part of this Form 10-Q. Exhibit numbers correspond to the numbers in the Exhibit Table of Item 601 of Regulation S-K. ----------------- -- ----------------------------------------------------------- EXHIBIT NO. DESCRIPTION ----------------- -- ----------------------------------------------------------- 31.1 Section 302 Certification - CEO 31.2 Section 302 Certification - CFO 32.1 Section 906 Certification - CEO 32.2 Section 906 Certification - CFO 101.INS XBRL Instance Document (1) 101.SCH XBRL Taxonomy Extension Schema Document (1) 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document (1) 101.DEF XBRL Taxonomy Extension Definition Linkbase Document (1) 101.LAB XBRL Taxonomy Extension Label Linkbase Document (1) 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document (1) ----------------- -- ----------------------------------------------------------- (1) Pursuant to Rule 406T of Regulation S-T, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections. -21-
SIGNATURES Pursuant to the requirements of Section 12 of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. 30DC, INC. ------------------------------------ Registrant Dated: May 14, 2014 By:/s/ Edward Dale ------------------------------------ Edward Dale Principal Executive Officer Chief Executive Officer President Dated: May 14, 2014 By:/s/ Theodore A. Greenberg ------------------------------------ Theodore A. Greenberg, Principal Accounting Officer Chief Financial Officer -22