Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended June 30, 2014
Or
[ ] TRANSITION REPORT PURSUANT TO 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
incorporation or organization Identification No.
80 Broad Street, 5th Floor, New York, New York 10004
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(212) 962-4400
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class registered on which registered
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Not Applicable Not Applicable
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $0.001
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(Title of class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes |_| No |X|
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. |_|
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 Website, if any, every Interactive Data file required to
be submitted and posted pursuant to Rule 405 of Regulation S-T (section 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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss. 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.
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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).
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Large accelerated filer [___] Accelerated filer [___]
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Non-accelerated filer [___] Smaller reporting company [_X_]
(Do not check if a smaller
reporting company)
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Indicate by check mark whether the Registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes |_| No |X|
The aggregate market value of voting stock held by non-affiliates of the
registrant was approximately $3,401,518 as of December 31, 2013.
There were 76,853,464 shares outstanding of the registrant's Common Stock as of
October 10, 2014.
TABLE OF CONTENTS
PART I
ITEM 1 Business 4
ITEM 1 A. Risk Factors 10
ITEM 1 B. Unresolved Staff Comments 16
ITEM 2 Properties 16
ITEM 3 Legal Proceedings 17
ITEM 4 Mine Safety Disclosures 17
PART II
ITEM 5 Market for Registrant's Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities 17
ITEM 6 Selected Financial Data 19
ITEM 7 Management's Discussion and Analysis of Financial Condition
and Results of Operations 19
ITEM 7 A. Quantitative and Qualitative Disclosures About Market Risk 26
ITEM 8 Financial Statements and Supplementary Data 26
ITEM 9 Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 27
ITEM 9 A. Controls and Procedures 27
ITEM 9 B Other Information 28
PART III
ITEM 10 Directors, Executive Officers, and Corporate Governance 29
ITEM 11 Executive Compensation 32
ITEM 12 Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters 39
ITEM 13 Certain Relationships and Related Transactions, and Director
Independence 40
ITEM 14 Principal Accounting Fees and Services 41
PART IV
ITEM 15 Exhibits, Financial Statement Schedules 42
SIGNATURES 43
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NOTE ABOUT FORWARD-LOOKING STATEMENTS
THIS FORM 10-K CONTAINS FORWARD-LOOKING STATEMENTS, SUCH AS STATEMENTS RELATING
TO OUR FINANCIAL CONDITION, RESULTS OF OPERATIONS, PLANS, OBJECTIVES, FUTURE
PERFORMANCE AND BUSINESS OPERATIONS. THESE STATEMENTS RELATE TO EXPECTATIONS
CONCERNING MATTERS THAT ARE NOT HISTORICAL FACTS. THESE FORWARD-LOOKING
STATEMENTS REFLECT OUR CURRENT VIEWS AND EXPECTATIONS BASED LARGELY UPON THE
INFORMATION CURRENTLY AVAILABLE TO US AND ARE SUBJECT TO INHERENT RISKS AND
UNCERTAINTIES. ALTHOUGH WE BELIEVE OUR EXPECTATIONS ARE BASED ON REASONABLE
ASSUMPTIONS, THEY ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND THERE ARE A
NUMBER OF IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY
FROM THOSE EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. BY MAKING
THESE FORWARD-LOOKING STATEMENTS, WE DO NOT UNDERTAKE TO UPDATE THEM IN ANY
MANNER EXCEPT AS MAY BE REQUIRED BY OUR DISCLOSURE OBLIGATIONS IN FILINGS WE
MAKE WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE FEDERAL SECURITIES
LAWS. OUR ACTUAL RESULTS MAY DIFFER MATERIALLY FROM OUR FORWARD-LOOKING
STATEMENTS.
PART I
ITEM 1. BUSINESS
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GENERAL
THE FOLLOWING IS A SUMMARY OF SOME OF THE INFORMATION CONTAINED IN THIS
DOCUMENT. UNLESS THE CONTEXT REQUIRES OTHERWISE, REFERENCES IN THIS DOCUMENT TO
"WE," "US," "OUR," "30DC," OR THE "COMPANY" ARE TO 30DC, INC. UNLESS OTHERWISE
INDICATED ALL AMOUNTS ARE UNITED STATES DOLLARS.
30DC, INC. F/K/A INFINITY CAPITAL GROUP, INC.
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 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 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 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
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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.
30DC offers internet marketing services and related training that help Internet
companies in marketing and operating their businesses. 30DC's core business
platforms are MagCast and Market Pro Max. Other revenue streams include sales of
instructional courses and from commissions on third party products sold via
introduction to the 30DC customer base of active online participants and
subscribers which are referred to as affiliate marketing commissions.
The Company has its principal office located at 80 Broad Street, 5th Floor, New
York, New York 10004, and its telephone number is (212) 962-4400. The Company
maintains a website at WWW.30DCINC.COM, such website is not incorporated into
this document.
BUSINESS MODEL
The Company's long-term strategy is to increase the number of products it sells
and services it offers while expanding the audience to which it markets those
products and services. Historically, 30DC's approach has been to build its
community of members through the Challenge, a free online internet marketing
program which has been taken by nearly 200,000 people and continues to be
available today. The course content in the Challenge is geared for anyone with
an interest in internet marketing; participants might be interested in starting
a brand new business, in extending an existing business to the online platform
or to make improvements to an existing online business.
Challenge participants become part of 30DC's base of customers to whom products
and services are marketed. Offerings include:
o MagCast and the Digital Publishing Blueprint training program o Market Pro Max
and the Ultimate Product System training program o Subscription products priced
around $50 per month, o Individual courses covering a range of topics such as
driving traffic using Facebook
30DC also generates revenue by promoting third party internet marketing products
and services to its base of customers during and after the Challenge.
To expand the market for its products 30DC began a more comprehensive program of
selling through affiliate marketing relationships during the year ended June 30,
2012. Approximately one-third of revenues were generated through affiliate sales
during the year ended June 30, 2012. During the year ended June 30, 2013 the
Company did not offer a full launch sale for the MagCast and affiliate sales
were approximately one-fifth of revenue. During the year ended June 30, 2014
affiliate sales were approximately 40% of revenue. Affiliates promote 30DC's
products to their own customer base and receive a commission from 30DC as a
percentage of gross revenue which varies by product and subscription from 30% to
50%.
To expand the number of products the Company sells and services it offers while
limiting its upfront investment, 30DC developed collaborative arrangement
product development relationships. In a typical collaborative arrangement, the
cost and human resources devoted to product development will be borne by the
collaborative arrangement partner and 30DC will provide marketing, sales,
customer training and support. For example, with MagCast Publishing Platform the
idea was jointly developed and Netbloo oversaw product development with input
from 30DC. Revenue generated from a collaborative arrangement is split 50-50
after allowed costs such as affiliate commissions and processing fees. In
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addition to marketing and the other responsibilities noted above, 30DC manages
the financial aspect of sales; managing merchant processor relationships,
collecting funds and issuing refunds. The Company records all sales proceeds as
gross revenue with payment to the collaborative arrangement partner reflected as
a cost in operating expenses. As noted above, in October 2012 30DC reached an
agreement for the Company to purchase Netbloo's 50% interest in the MagCast JV
Agreement and at that point in time, MagCast ceased to be a collaborative
arrangement. During the fiscal year ended June 30, 2014, the company expanded
its own development capabilities and now generates most of the products offered
for sale by utilizing internal resources.
HISTORY & PRODUCT OFFERINGS
The Company started 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 program is an interactive
education program which includes 30 days of instruction and incorporates weekly
breaks for participants to put into practice the concepts they learn from the
course. Participants are given the framework and guidance to design and develop
an Internet business with modules on a range of topics including researching
markets (including competition and opportunity), identifying and sustaining
niche markets, utilizing social media to build your business and many other
subjects pertinent to Internet marketing. There are no prerequisites to taking
the course and participants come from around the globe. The Challenge has
predominately grown through its own viral marketing campaign whereby members of
its existing community spread word of the 30 Day Challenge through email and
social media, including Twitter, Facebook, FriendFeed and blogs focused on
internet marketing.
The growth in participants has resulted in a targeted community to which the 30
Day markets products and services such as MagCast, Market Pro Max, an Internet
marketing forum which is sold on a subscription basis, individual content
specific courses as well as third party products. As a third party affiliate, 30
Day Challenge earns commissions ranging between 20% and 75% on sales of internet
marketing products and services.
MagCast resulted from the collaboration of 30DC and Netbloo and fits the model
of joint venture product development with limited cost and risk to the Company.
MagCast is also an example of a product which is relevant to the Company's
historical internet marketing customer base but is also of interest to a much
broader audience and thereby increases the potential number of customers. Since
the Challenge originated, 30DC has marketed third party products for a number of
other producers of information products for the internet marketing industry and
for service providers to internet-based businesses such as hosting companies.
30DC has developed a working relationship with a number of these companies that
they are now serving as affiliates for 30DC by marketing 30DC's products to
their own customer bases.
In May 2012, the Company signed a joint venture agreement ("JV Agreement") with
Netbloo for 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. 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.
MagCast has a dedicated development team which does a combination of software
maintenance and development of new product features. Initially Apps created
using MagCast were only available to our customer's readers in Apple iPad
devices. MagCast Version 4 released in June 2013 included a version designed to
be read on iPhones which increased the potential audience for our customers from
150 million to 650 million. MagCast version 6 released in July 2014 enables
customers to publish on Google Play where their digital magazine is available to
users of Android Devices.
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The Company provides extensive training with its products and believes its
history as an ecommerce education company separates it from competitors. Digital
Publishing Blueprint is a complete training program that includes MagCast and
provides instruction in developing and marketing a digital publication. Ultimate
Product System is complete training program which includes Market Pro Max and
provides instruction on operating a digital business.
TECHNOLOGY AND INTELLECTUAL PROPERTY
30 Day employs proprietary technologies to support the viral growth of the
community and membership numbers and to support sales of proprietary and third
party products. The platform includes a significant amount of self-designed and
developed content and software/code solutions for both internal and subscriber
use. The free Challenge program has been taped and the video content had been
distributed to a hosted platform (YouTube) to widen the awareness of the Company
and to increase the potential for search engine optimization (leading to better
search engine rankings) and ultimately increased website traffic.
The intellectual property of 30 Day includes the Challenge community database,
containing nearly 100,000 contacts with interests in internet marketing and
e-commerce topics, the content library developed over the past nine years and
multiple web sites including the principal web site of the Challenge which is
www.Challenge.co.
MagCast is a cloud-based service to create an application ("App") to publish a
digital magazine and includes executive training modules. Digital Publishing
Blueprint is a training program to publish and market a digital publication. The
software code, domain names and websites to operate MagCast, Digital Publishing
Blueprint and the executive training modules are all proprietary to 30DC. The
Company has trademarks for the names MagCast and MagCast App.
Market Pro Max is an online marketing platform to create digital products and
build a variety of eCommerce marketing websites. Ultimate Product System is a
training program to for Market Pro Max and operating a digital product business.
The software code, domain names and websites to operate Market Pro Max and the
Ultimate Product System are all proprietary to 30DC.
GROWTH OPPORTUNITIES
MagCast was launched in May 2012 and targeted our potential customers who want
to market to the growing base of Apple i-Pad users. MagCast Version 4 released
in June 2013 included a version designed to be read on iPhones which increased
the potential audience for our potential customers to reach from 150 million to
650 million potential customers. MagCast version 6 released in July 2014 enables
customers to publish on Google Play where their digital magazine is available to
users of Android Devices. MagCast was initially been sold to the Company's
historical and existing customer base. The Company believes there is strong
future growth to additional customers in the internet marketing industry as well
as to customers in new market segments. The Company has begun targeting
corporate customers (businesses and nonprofits) offline and believes MagCast
offers enhanced capabilities and a cost-effective alternative to existing print
publications.
Market Pro Max was acquired as part of the Netbloo asset acquisition in October
2012. During the year ended June 30, 2014, the Company launched the Ultimate
Product System training program which includes Market Pro Max. Taken together,
Market Pro Max and Ultimate Product System grew more than 500% in revenue during
the year ended June 30, 2014 compared to the year ended June 30, 2013. The
Company believes the increase in Market Pro Max users indicates a level of
market acceptance and has now begun marketing Market Pro Max and ultimate
Product System through advertising to reach a broader audience to continue sales
growth.
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THE MARKET
The worldwide demand for online information and products has grown with the
increasing availability of high speed internet, mobile communications and
general increase of computing across the globe. New online businesses are
starting every day and these entrepreneurs are potential customers for the
Company's offerings.
With the May 2012 launch of the MagCast Publishing Platform, the Company began
selling products which are applicable not only to its historical customer base
in the internet marketing industry but to a much wider audience of potential
customers. Anyone looking to market to the growing number of Apple iPad and
iPhone users is a potential customer for MagCast. Total unit sales of iPads and
iPhones now exceed 750 million. With the release of MagCast version 6 in July
2014 the Company can now target customer who want to market to Android users and
those who require both Apple and Android versions of their digital publication
such as member organizations. To penetrate this market, the Company initially
launched MagCast by selling through affiliate arrangements with other marketing
companies that have introduced MagCast to their customer bases through custom
webinars and bonus products specifically tailored to the target audience. The
majority of MagCast customers are self-publishers who have never previously
published a magazine. MagCast provides substantial training modules and offers
additional services to help new publishers succeed. The training and services
help a customer to publish their magazine and with marketing to attract
subscribers.
Other ways for the Company to expand its marketing include paying for traffic
generation to its web sites or for leads to promote its products through
targeted e-mails. The Company has begun test marketing online advertising which
has become more sophisticated and enables segmenting of target customers who are
more likely to be interested in the Company's products. The initial online
advertising testing has been focused on Market Pro Max and the related training
program Ultimate Product System.
COMPETITION
The Company's two major product offerings are MagCast which is sold on its own
and with the Digital Publishing blueprint training program and Market Pro Max
which is sold on its own and with the Ultimate Product System training program.
Until recently, MagCast has primarily been targeted to Internet marketers, who
wanted to not just publish content, but also build lists and sell products.
Though 30DC will continue to pursue this market, the company sees larger
opportunities in expanding MagCast's reach to broader markets, including small
content publishers who are mainly interested in content, corporations (primarily
small to medium size) who want to publish communications such as annual reports,
brochures and catalogues, and corporate resellers through its MagCast Certified
Professionals (MCP) program. The competition includes companies with focuses on
print to digital (for example Adobe Publishing Suite), corporate communications
(for example mag+), education (usually a secondary market), niche publications
(for example Page Suite), content creation to mobile (for example Joomag),
blogging (for example Glipho) and a new contender that enables companies to
create and share a mobile business library (Publ.com). Coming from the Internet
marketer space, one of MagCast's strengths is its ecommerce capabilities; though
there are many competitors with ecommerce capabilities, a number of these are
not as robust.
Beyond the MCP program, MagCast continues to be aimed primarily toward those who
know little about publishing or creating digital content, do not know code, HTML
or design programs, yet want to produce original content. MagCast recently made
Native the default method to produce original content right within the MagCast
platform, and this is already seen by industry watchers as a big step forward.
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Market Pro Max is a user friendly platform anyone can use to quickly develop
professional looking web sites and sell courses, products and information. It
provides users with marketing templates for squeeze pages, value pages and more,
and also enables them to build forums, blogs and members-only areas where their
customers can download and view paid courses and products. Users may also
integrate Market Pro Max elements with their current web site, as well as
building a complete web site with the product.
Market Pro Max is primarily being sold as part of the Ultimate Product System
course, which includes substantial training videos. Ultimate Product System
comes with a license for one Market Pro Max web site and customers can purchase
additional sites to market additional products.
Competitors include, Kajabi, which was first on the market. Kajabi is also known
for their training, though they bring outside experts and call it "Kajabi
University." Rainmaker is a new product from Copyblogger that is being marketed
as much like Market Pro Max and Kajabi. OptimizePress is a more limited
competitor. It's a WordPress theme that sells for a one-time fee and is
significantly less expensive than Market Pro Max, Kajabi or Rainmaker. It is not
nearly as feature rich as Market Pro Max. For example, it cannot form a password
protected member's only area and also does not have the number of options
available for squeeze pages as Kajabi or Market Pro Max.
MagCast and Market Pro Max are synergistic. A marketer could produce a MagCast
publication in order to gain readership and credibility and to develop niche
sales leads. Using Market Pro Max, the marketer could then direct a focused
campaign to those leads and point them to easily created landing pages offering
related online courses, affiliate offers, various products and even an online
community of like-minded enthusiasts. So for those who can benefit from both
ecommerce and publishing, there is a good reason to choose Market Pro Max over
other competitors.
INTELLECTUAL PROPERTY
The Company's assets consist primarily of property and equipment, goodwill and
internally developed intangible property such as domain names, websites,
customer lists, copyrights and trademarks. We do not hold any patents or patent
applications.
The Company holds the following Trademark Applications:
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TRADEMARK APPLICATION
FILED NUMBER TRADEMARK STATUS
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United States 85-647,512 MAGCAST APP Registered Application
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United States 85-724,908 MAGCAST Pending Registration
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EMPLOYEES
As of June 30, 2014, we had approximately 11 employees and contractors. Our
employees and contractors are located both in the United States and in our
offshore offices.
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ITEM 1A. RISK FACTORS
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RISKS RELATING TO OUR BUSINESS AND STRUCTURE
RISKS RELATED TO OUR BUSINESS AND INDUSTRY
THE COMPANY HAS A LIMITED OPERATIONAL HISTORY.
We have a limited history upon which an evaluation of our prospects and future
performance can be made. Our proposed operations are subject to all business
risks associated with new enterprises. The likelihood of our success must be
considered in light of the problems, expenses, difficulties, complications, and
delays frequently encountered in connection with the expansion of a business
operation in an emerging industry, and the continued development of advertising,
promotions, and a corresponding customer base. There is a possibility that we
could sustain losses in the future, and there are no assurances that we will
ever operate profitably.
GOING CONCERN
The consolidated financial statements included herein 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
June 30, 2014, the Company has a working capital deficit of approximately
$1,551,000 and has accumulated losses of approximately $3,085,000 since its
inception. Its ability to continue as a going concern is dependent upon the
ability of the Company to obtain the necessary financing 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
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 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.
To fund working capital for the next twelve months, the Company expects
operations to continue to improve through increased sales of MagCast and Market
Pro Max and their related training courses, to settle additional liabilities
using the Company's stock and to raise additional capital.
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THE COMPANY MAY NEED ADDITIONAL FINANCING FOR WHICH 30DC HAS NO COMMITMENTS, AND
THIS MAY JEOPARDIZE EXECUTION OF THE COMPANY'S BUSINESS PLAN.
30DC has limited funds, and such funds may not be adequate to carry out the
business plan. The Company's ultimate success depends upon its ability to raise
additional capital. The Company has not investigated the availability, source,
or terms that might govern the acquisition of additional capital and will not do
so until it determines a need for additional financing. If the Company needs
additional capital, it has no assurance that funds will be available from any
source or, if available, that they can be obtained on terms acceptable to the
Company. If not available, 30DC's operations will be limited to those that can
be financed with its modest capital.
WE WILL INCUR EXPENSES IN CONNECTION WITH OUR SEC FILING REQUIREMENTS AND WE MAY
NOT BE ABLE TO MEET SUCH COSTS, WHICH COULD JEOPARDIZE OUR FILING STATUS WITH
THE SEC.
As a public reporting company we are required to meet the filing requirements of
the SEC. We estimate accounting and legal expenses on an annualized basis to be
approximately $150,000, which includes both the annual audit and the review of
the quarterly reports by our auditors. These costs can increase significantly if
the Company is subject to comment from the SEC on its filings and/or we are
required to file supplemental filings for transactions and activities. During
the last two years, we have been unable to meet our filing requirements on a
timely basis. If we continue to be unable to meet our filing requirements or are
not compliant in meeting the filing requirements of the SEC, we could lose our
status as a 1934 Act Company, which could compromise our ability to raise funds.
WE ARE HIGHLY DEPENDENT ON THE SERVICES OF KEY PERSONNEL.
Our success depends and will depend on the efforts and abilities of Edward Dale,
our President, Chief Executive Officer and a Director, and Netbloo Media, Ltd.,
a contractor that co-developed MagCast. The loss of either of them would have a
material adverse effect on us. Our success also depends upon our ability to
attract and retain qualified personnel required to fully implement our business
plan. There can be no assurance that we will be successful in these efforts.
30DC'S OFFICERS AND DIRECTORS MAY HAVE CONFLICTS OF INTEREST WHICH MAY NOT BE
RESOLVED FAVORABLY TO THE COMPANY.
Certain conflicts of interest may exist between 30DC and its officers and
directors. The Company's Officers and Directors have other business interests to
which they devote their attention and may be expected to continue to do so
although management time should be devoted to 30DC business. As a result,
conflicts of interest may arise that can be resolved only through exercise of
such judgment as is consistent with fiduciary duties to 30DC. See "Directors and
Executive Officers".
WE MAY NOT BE ABLE TO MANAGE OUR GROWTH EFFECTIVELY.
We must continually implement and improve our products and/or services,
operations, operating procedures and quality controls on a timely basis, as well
as expand, train, motivate and manage our work force in order to accommodate
anticipated growth and compete effectively in our market segment. Successful
implementation of our strategy also requires that we establish and manage a
competent, dedicated work force and employ additional key employees in corporate
management, product design, client service and sales. We can give no assurance
that our personnel, systems, procedures and controls will be adequate to support
our existing and future operations. If we fail to implement and improve these
operations, there could be a material, adverse effect on our business, operating
results and financial condition.
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IF WE DO NOT CONTINUALLY UPDATE OUR PRODUCTS, THEY MAY BECOME OBSOLETE AND WE
MAY NOT BE ABLE TO COMPETE WITH OTHER COMPANIES.
The Internet and online commerce industries are characterized by rapid
technological change, changing market conditions and customer demands, and the
emergence of new industry standards and practices that could render our existing
Web site and proprietary technology obsolete. Our future success will
substantially depend on our ability to enhance our existing services, develop
new services and proprietary technology and respond to technological advances in
a timely and cost-effective manner. The development of other proprietary
technology entails significant technical and business risk. There can be no
assurance that we will be successful in developing and using new technologies or
adapt our proprietary technology and systems to meet emerging industry standards
and customer requirements. If we are unable, for technical, legal, financial, or
other reasons, to adapt in a timely manner in response to changing market
conditions or customer requirements, or if our new products and electronic
commerce services do not achieve market acceptance, our business, prospects,
results of operations and financial condition would be materially adversely
affected.
We cannot assure you that we will be able to keep pace with technological
advances or that our products will not become obsolete. We cannot assure you
that competitors will not develop related or similar products and bring them to
market before we do, or do so more successfully, or that they will not develop
technologies and products more effective than any that we have or are
developing. If that happens, our business, prospects, results of operations and
financial condition will be materially adversely affected.
WE RELY ON PROPRIETARY RIGHTS.
We regard substantial elements of our web sites and underlying technology as
proprietary. Despite our precautionary measures, third parties may copy or
otherwise obtain and use our proprietary information without authorization, or
develop similar technology independently. Any legal action that we might bring
or other steps we might take to protect this property could be unsuccessful,
expensive and distract management from day-to-day operations.
Legal standards relating to the validity, enforceability and scope of protection
of proprietary rights in Internet-related businesses are uncertain and evolving,
and we can give no assurance regarding the future viability or value of any of
these proprietary rights.
SYSTEMS FAILURES COULD HARM OUR BUSINESS.
Temporary or permanent outages of our computers or software equipment could have
an adverse effect on our business. Although we have not experienced any
catastrophic outages to date, we currently do not have fully redundant systems
for our web sites and other services at an alternate site. Therefore, our
systems are vulnerable to damage from break-ins, unauthorized access, vandalism,
fire, earthquakes, power loss, telecommunications failures and similar events.
Experienced computer programmers seeking to intrude or cause harm, or hackers,
may attempt to penetrate our network security from time to time. Although we
have not experienced any catastrophic security breaches to date, if a hacker
were to penetrate our network security, they could misappropriate proprietary
information, cause interruptions in our services, dilute the value of our
offerings to customers and damage customer relationships. We might be required
to expend significant capital and resources to protect against, or to alleviate,
problems caused by hackers. We also may not have a timely remedy against a
hacker who is able to penetrate our network security. In addition to purposeful
security breaches, the inadvertent transmission of computer viruses could expose
us to system damage, operational disruption, loss of data, litigation and other
risks of loss or harm.
-12-
WE DEPEND ON CONTINUED PERFORMANCE OF AND IMPROVEMENTS TO OUR COMPUTER NETWORK.
Any failure of our computer systems that causes interruption or slower response
time of our web sites or services could result in a smaller number of users of
our web sites. If sustained or repeated, these performance issues could reduce
the attractiveness of our web sites to consumers and our subscription products
and services. Increases in the volume of our web site traffic could also strain
the capacity of our existing computer systems, which could lead to slower
response times or system failures. We may not be able to project accurately the
rate, timing or cost of any increases in our business, or to expand and upgrade
our systems and infrastructure to accommodate any increases in a timely manner.
INTERNET COMMERCE SECURITY THREATS COULD POSE A RISK TO OUR ONLINE SALES AND
OVERALL FINANCIAL PERFORMANCE.
A significant barrier to online commerce is the secure transmission of
confidential information over public networks. We and our partners rely on
encryption and authentication technology to provide the security and
authentication necessary to effect secure transmission of confidential
information. There can be no assurance that advances in computer capabilities;
new discoveries in the field of cryptography or other developments will not
result in a compromise or breach of the algorithms used by us and our partners
to protect consumer's transaction data. If any such compromise of security were
to occur, it could have a materially adverse effect on our business, prospects,
financial condition and results of operations. A party who is able to circumvent
our security measures could misappropriate proprietary information or cause
interruptions in our operations. We may be required to expend significant
capital and other resources to protect against such security breaches or to
alleviate problems caused by such breaches. Concerns over the security of
transactions conducted on the Internet and the privacy of users may also hinder
the growth of online services generally, especially as a means of conducting
commercial transactions. To the extent that our activities, our partners or
third-party contractors involve the storage and transmission of proprietary
information, such as credit card numbers, security breaches could damage our
reputation and expose us to a risk of loss or litigation and possible liability.
There can be no assurance that our security measures will not prevent security
breaches or that failure to prevent such security breaches will not have a
materially adverse effect on our business, prospects, financial condition and
results of operations.
RISK OF CAPACITY CONSTRAINTS; RELIANCE ON INTERNALLY DEVELOPED SYSTEMS; SYSTEM
DEVELOPMENT RISKS.
A key element of our strategy is to generate a high volume of traffic on, and
use of, our services across our network infrastructure and systems. Accordingly,
the satisfactory performance, reliability and availability of our software
systems, transaction-processing systems and network infrastructure are critical
to our reputation and our ability to attract and retain customers, as well as
maintain adequate customer service levels. Our revenues depend on the number of
visitors who sign up for our services. Any systems interruptions that result in
the unavailability of our software systems or network infrastructure would
reduce the volume of sign ups and the attractiveness of our service offerings.
We may experience periodic systems interruptions from time to time. Any
substantial increase in the volume of traffic on our software systems or network
infrastructure will require us to expand and upgrade further our technology,
transaction-processing systems and network infrastructure. There can be no
assurance that we will be able to accurately project the rate or timing of
increases, if any, in the use of our Web site or timely expand and upgrade our
systems and infrastructure to accommodate such increases. We will use a
combination of industry supplied software and internally developed software and
systems for our search engine, distribution network, and substantially all
aspects of transaction processing, including order management, cash and credit
card processing, and accounting and financial systems. Any substantial
disruptions or delays in any of our systems would have a materially adverse
effect on our business, prospects, financial condition and results of
operations.
-13-
THERE ARE RISKS ASSOCIATED WITH OUR DOMAIN NAMES.
We currently hold various Web domain names relating to our brand. The
acquisition and maintenance of domain names is generally regulated by
governmental agencies and their designees. The regulation of domain names in the
United States and in foreign countries is subject to change. Governing bodies
may establish additional top-level domains, appoint additional domain name
registrars or modify the requirements for holding domain names. As a result,
there can be no assurance that we will be able to acquire or maintain relevant
domain names in all of the countries in which it conducts business. Furthermore,
the relationship between regulations governing domain names and laws protecting
trademarks and similar proprietary rights is unclear. We, therefore, may be
unable to prevent third parties from acquiring domain names that are similar to,
infringe upon or otherwise decrease the value of our proprietary rights. Any
such inability could have a materially adverse effect on our business,
prospects, financial condition and results of operations.
STORAGE OF PERSONAL INFORMATION ABOUT OUR CUSTOMERS COULD POSE A SECURITY
THREAT.
Our policy is not to willfully disclose any individually identifiable
information about any user to a third party without the user's consent. This
policy is accessible to users of our services when they initially register.
Despite this policy, however, if third persons were able to penetrate our
network security or otherwise misappropriate our users' personal information or
credit card information, we could be subject to liability. These could include
claims for unauthorized purchases with credit card information, impersonation or
other similar fraud claims. They could also include claims for other misuses of
personal information, such as for unauthorized marketing purposes. These claims
could result in litigation. In addition, the Federal Trade Commission and other
states have been investigating certain Internet companies regarding their use of
personal information. We could incur additional expenses if new regulations
regarding the use of personal information are introduced or if they chose to
investigate our privacy practices.
WE FACE POSSIBLE LIABILITY FOR INFORMATION DISPLAYED ON OUR WEB SITES.
We may be subjected to claims for defamation, negligence, copyright or trademark
infringement or based on other theories relating to the information we publish
on our Web site and across our distribution network. These types of claims have
been brought, sometimes successfully, against online services as well as other
print publications in the past. We could also be subjected to claims based upon
the content that is accessible from our Web sites and distribution network
through links to other Web sites.
WE HAVE AGREED TO INDEMNIFY OUR OFFICERS AND DIRECTORS AGAINST LAWSUITS.
Our operating subsidiary is a Delaware corporation. Delaware law permits the
indemnification of officers and directors against expenses incurred in
successfully defending against a claim. Delaware law also authorizes Delaware
corporations to indemnify their officers and directors against expenses and
liabilities incurred because of their being or having been an officer or
director. Our organizational documents provide for this indemnification to the
fullest extent permitted by law.
We currently do not maintain any insurance coverage. In the event that we are
found liable for damage or other losses, we would incur substantial and
protracted losses in paying any such claims or judgments. We have not maintained
liability insurance in the past, but intend to acquire such coverage immediately
upon resources becoming available. There is no guarantee that we can secure such
coverage or that any insurance coverage would protect us from any damages or
loss claims filed against it.
-14-
IF WE ENGAGE IN ANY ACQUISITION, WE WILL INCUR A VARIETY OF COSTS AND MAY NEVER
REALIZE THE ANTICIPATED BENEFITS OF THE ACQUISITION.
We intend to acquire businesses, technologies, services or products or license
technologies that we believe are a strategic fit with our business, though none
have been identified at the time of this filing, other than the Netbloo
transaction. We have limited experience in identifying acquisition targets, and
successfully completing and integrating any acquired businesses, technologies,
services or products into our current infrastructure. The process of integrating
any acquired business, technology, service or product may result in unforeseen
operating difficulties and expenditures and may divert significant management
attention from our ongoing business operations. As a result, we will incur a
variety of costs in connection with an acquisition and may never realize our
anticipated benefits.
WE MAY ENGAGE IN TRANSACTIONS THAT PRESENT CONFLICTS OF INTEREST.
The Company and officers and directors may enter into agreements with the
Company from time to time which may not be equivalent to similar transactions
entered into with an independent third party. A conflict of interest arises
whenever a person has an interest on both sides of a transaction. While we
believe that it will take prudent steps to ensure that all transactions between
the Company and any officer or director is fair, reasonable, and no more than
the amount it would otherwise pay to a third party in an "arms-length"
transaction, there can be no assurance that any transaction will meet these
requirements in every instance.
THE COMPANY MAY IN THE FUTURE ISSUE MORE SHARES WHICH COULD CAUSE A LOSS OF
CONTROL BY ITS PRESENT MANAGEMENT AND CURRENT STOCKHOLDERS.
30DC may issue further shares as consideration for the cash or assets or
services out of its authorized but unissued common stock that would, upon
issuance, represent a majority of the voting power and equity of the Company.
The result of such an issuance would be those new stockholders and management
would control the Company, and persons unknown could replace the Company's
management at this time. Such an occurrence would result in a greatly reduced
percentage of ownership of 30DC by its current shareholders, which could present
significant risks to investors.
THE REGULATION OF PENNY STOCKS BY SEC AND FINRA MAY DISCOURAGE THE TRADABILITY
OF OUR SECURITIES.
The Company is a "penny stock" company. Our securities currently trade over the
counter ("OTC") on the OTC Pink market operated by OTC Market Group, Inc and are
subject to a Securities and Exchange Commission rule that imposes special sales
practice requirements upon broker-dealers who sell such securities to persons
other than established customers or accredited investors. For purposes of the
rule, the phrase "accredited investors" means, in general terms, institutions
with assets in excess of $5,000,000, or individuals having a net worth in excess
of $1,000,000 or having an annual income that exceeds $200,000 (or that, when
combined with a spouse's income, exceeds $300,000). For transactions covered by
the rule, the broker-dealer must make a special suitability determination for
the purchaser and receive the purchaser's written agreement to the transaction
prior to the sale. Effectively, this discourages broker-dealers from executing
trades in penny stocks. Consequently, the rule will affect the ability of
shareholders to sell their securities in any market that might develop therefore
because it imposes additional regulatory burdens on penny stock transactions.
In addition, the Securities and Exchange Commission has adopted a number of
rules to regulate "penny stocks". Such rules include Rules 3a51-1, 15g-1, 15g-2,
15g-3, 15g-4, 15g-5, 15g-6, 15g-7, and 15g-9 under the Securities and Exchange
Act of 1934, as amended. Because our securities constitute "penny stocks" within
the meaning of the rules, the rules would apply to us and to our securities. The
rules will further affect the ability of owners of shares to sell our securities
-15-
in any market that might develop for them because it imposes additional
regulatory burdens on penny stock transactions.
Shareholders should be aware that, according to Securities and Exchange
Commission, the market for penny stocks has suffered in recent years from
patterns of fraud and abuse. Such patterns include (i) control of the market for
the security by one or a few broker-dealers that are often related to the
promoter or issuer; (ii) manipulation of prices through prearranged matching of
purchases and sales and false and misleading press releases; (iii) "boiler room"
practices involving high-pressure sales tactics and unrealistic price
projections by inexperienced sales persons; (iv) excessive and undisclosed
bid-ask differentials and markups by selling broker-dealers; and (v) the
wholesale dumping of the same securities by promoters and broker-dealers after
prices have been manipulated to a desired consequent investor losses. Our
management is aware of the abuses that have occurred historically in the penny
stock market. Although we do not expect to be in a position to dictate the
behavior of the market or of broker-dealers who participate in the market,
management will strive within the confines of practical limitations to prevent
the described patterns from being established with respect to our securities.
THE COMPANY WILL PAY NO FORESEEABLE DIVIDENDS IN THE FUTURE.
The Company has not paid dividends on our common stock and does not anticipate
paying such dividends in the foreseeable future.
OUR INVESTORS MAY SUFFER FUTURE DILUTION DUE TO ISSUANCES OF SHARES FOR VARIOUS
CONSIDERATIONS IN THE FUTURE.
There may be substantial dilution to our shareholders a result of future
decisions of the Board to issue shares without shareholder approval for cash,
services, or acquisitions.
ITEM 1B. UNRESOLVED STAFF COMMENTS
----------------------------------
Not Applicable.
ITEM 2. PROPERTIES
------------------
FACILITIES
The current corporate address is 80 Broad Street, 5th Floor, New York, New York
10004. The telephone number is 212-962-4400. The Company entered into a new
lease effective March 2011 for twelve months which was renewed in March 2014 for
twelve months. The lease is non-cancellable with a minimum monthly payment of
$99 and provision for additional charges for use of facilities and services
utilized on an as-needed basis. Rent expense incurred under the lease in the
years ended June 30, 2014 and 2013 was approximately $1,521 and $1,188,
respectively.
REAL PROPERTY
None.
MINERAL PROPERTIES
None.
-16-
ITEM 3. LEGAL PROCEEDINGS
-------------------------
30DC anticipates that it (including any future subsidiaries) will from time to
time become subject to claims and legal proceedings arising in the ordinary
course of business. It is not feasible to predict the outcome of any such
proceedings and 30DC cannot assure that their ultimate disposition will not have
a materially adverse effect on the Company's business, financial condition, cash
flows or results of operations. The Company is not a party to any pending legal
proceedings, nor is the Company aware of any civil proceeding or government
authority contemplating any legal proceeding as of the date of this filing.
ITEM 4. MINE AND SAFETY DISCLOSURES
-----------------------------------
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
--------------------------------------------------------------------------------
The Company's common stock is presently traded over the counter ("OTC") on the
OTC Pink market operated by OTC Market Group, Inc. Our trading symbol is "TDCH."
The following table sets forth the range of high and low closing prices for the
common stock of each full quarterly period during the years ended June 30, 2014
and 2013. The quotations were obtained from information published by the FINRA
and reflect inter-dealer prices, without retail mark-up, mark-down or commission
and may not necessarily represent actual transactions.
MARKET INFORMATION
FISCAL YEAR ENDED JUNE 30, 2014: HIGH LOW
----------- -------------
Quarter Ended September 30, 2013 $0.23 $0.05
Quarter Ended December 31, 2013 $0.32 $0.08
Quarter ended March 31, 2014 $0.15 $0.08
Quarter ended June 30, 2014 $0.14 $0.08
HIGH LOW
FISCAL YEAR ENDED JUNE 30, 2013:
------------ -------------
Quarter Ended September 30, 2012 $0.10 $0.05
Quarter Ended December 31, 2012 $0.15 $0.06
Quarter Ended March 31, 2013 $0.15 $0.05
Quarter Ended June 30, 2013 $0.09 $0.01
HOLDERS
As of June 30, 2014, the Company had approximately 133 holders of record of the
Common Stock. Since a portion of the Company's common stock may be held in
"street" or nominee name, the Company is unable to determine the exact number of
beneficial holders.
DIVIDEND POLICY
The Company currently anticipates that it will retain all of its earnings to
finance the operation and expansion of its business, and therefore does not
intend to pay dividends on its Common Stock in the foreseeable future. Since its
inception, the Company has never declared or paid any cash dividends on its
Common Stock. Any determination to pay dividends in the future is at the
-17-
discretion of the Company's Board of Directors and will depend upon the
Company's financial condition, results of operations, capital requirements,
limitations contained in loan agreements and such other factors as the Board of
Directors deems relevant.
RECENT SALES OF UNREGISTERED SECURITIES
We made unregistered sales and issuances of our securities during the years
ended June 30, 2014 and 2013 as follows.
During the year ended June 30, 2014, the Company issued common stock and stock
options as follows:
TITLE OF NO. OF CLASS OF
DATE OF PURCHASE SECURITIES SHARES CONSIDERATION PURCHASER
----------------- ------------- --------- ------------- ----------
September 9, 2013 Common Stock 300,000 $48,000 Vendor
August 24, 2013 Common Stock 26,525 $6,101 Creditor
November 4, 2013 Common Stock 100,000 $22,000 Creditor
During the year ended June 30, 2013, the Company issued common stock and stock
options as follows:
TITLE OF NO. OF CLASS OF
DATE OF PURCHASE SECURITIES SHARES CONSIDERATION PURCHASER
----------------- ------------- --------- ------------- ----------
July 15, 2012 Common Stock 500,000 $45,000 Director*
October 11, 2012 Stock Options 1,500,000 $-0- Director
October 11, 2012 Stock Options 1,500,000 $-0- Officer/
Director
October 24, 2012 Common Stock 13,487,363 $1,078,989 Affiliate
November 20, 2012 Common Stock 15,385 $2,000 Vendor
June 26, 2013 Common Stock 55,770 $14,500 Vendor
*Issued to GHL, Ltd. whose President, Gregory Laborde, is a director of the
Company.
ISSUER PURCHASES OF EQUITY SECURITIES
30DC, Inc. did not repurchase any shares of its common stock during the years
ended June 30, 2014 and 2013
During the year ended June 30, 2014, the Company divested the Immediate Edge
business for which the consideration was 10,560,000 of the Company's commons
shares returned to the Company by Raine Ventures, LLC such shares have been
canceled.
-18-
TITLE OF NO. OF CLASS OF
DATE OF PURCHASE SECURITIES SHARES CONSIDERATION PURCHASER
----------------- ------------- ------------ ------------- ----------
February 28, 2014 Common Stock 10,560,000 $207,335 (1) Affiliate
-----------------
(1) Book value of the Immediate Edge business
ITEM 6. SELECTED FINANCIAL DATA
-------------------------------
Not applicable.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
--------------------------------------------------------------------------------
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL
STATEMENTS AND NOTES THERETO AND THE OTHER FINANCIAL INFORMATION INCLUDED
ELSEWHERE IN THIS REPORT. THIS DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS
THAT INVOLVE RISKS AND UNCERTAINTIES. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY
FROM THOSE ANTICIPATED IN THESE FORWARD LOOKING STATEMENTS AS A RESULT OF ANY
NUMBER OF FACTORS, INCLUDING THOSE SET FORTH UNDER "RISK FACTORS" ON PAGE 10 AND
ELSEWHERE IN THIS REPORT.
OVERVIEW
30DC offers internet marketing services and related training that help Internet
companies in marketing and operating their businesses. 30DC's core business
platforms are the MagCast Publishing Platform ("MagCast") and Market Pro Max.
Other revenue streams include sales of instructional courses and from
commissions on third party products sold via introduction to the 30DC customer
base of active online participants and subscribers which are referred to as
affiliate marketing commissions. The Company's assets consist primarily of
property and equipment, goodwill and internally developed intangible property
such as domain names, websites, customer lists and copyrights.
In May of 2012 the Company signed a joint venture agreement ("JV Agreement")
with Netbloo Media, Ltd. ("Netbloo") for the 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 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 the Immediate Edge, which had been the Company's primary subscription
program, to Raine Ventures, LLC ("Raine") in exchange for the 10,560,000 common
shares of the Company which Raine had held.
The Company expects future growth to come from new products which are developed
internally or through joint venture arrangements. There can be no assurance new
products will be developed and if developed there can be no assurance that new
products will produce significant revenue.
-19-
During the year ended June 30, 2014, the Company released new versions of
existing products, developed new products and continued to identify potential
others. In July 2014, the Company released MagCast version 6 which among other
new features allows customers to publish their digital magazines on Google Play
which enables them to reach users of Android devices in addition to users of
Apple iPads and iPhones. In April 2014, the Company began offering access to an
Internet marketing forum on a subscription basis and is looking to build
additional recurring revenue streams.
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.
LIQUIDITY AND CAPITAL RESOURCES
The Company had a cash balance of $186,414 at June 30, 2014 and the Company had
a working capital deficit of $1,550,503. For the year ended June 30, 2014, the
Company generated sufficient cash from operations to fund current year operating
and administrative expenses. The Company made some debt service payments and
settled a number of outstanding payables by issuing common shares of the
Company. However, the Company had not generated consistent profits and has
significant outstanding liabilities. 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. 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 June 30, 2014 is $61,050
notes payable plus related accrued interest that are in default for lack of
repayment by their due date.
During the year ended June 30, 2014, operating activities provided the Company
with $110,067. During the year ended June 30, 2013, the Company used $988,778 in
operating activities. The increase of $1,098,045 in funds provided from
operating activities was due to a number of factors. For the year ended June 30,
2014 the Company had net income of $58,918 compared to a loss of $407,642 during
the year ended June 30, 2013. During the year ended June 30, 2014, the Company
had an increase in accrued expenses and refunds of $257,813 while during the
year ended June 30, 2013 the Company had a decrease in accrued expenses and
refunds of $820,102 which was due to a large balance in accrued affiliate
commissions at the beginning of that year. During the year ended June 30, 2014
deferred revenue increased by 103,441 due to the introduction of a new Done For
You service which is sold as an additional service for MagCast customers while
during the year ended June 30, 2013 deferred revenue decreased by $218,239 which
was primarily due to the discontinuation of the Company's historic mentoring
program. Offsetting factors include $93,513 in forgiveness of debt income during
the year ended June 30, 2014 which is non-cash income and pay down of $179,493
in accounts payable during the year ended June 30, 2014 compared to $42,580
during the year ended June 30, 2013.
-20-
During the years ended June 30, 2014 and June 30, 2013 no funds were provided by
or used for financing activities.
During the year ended June 30, 2014 the Company used $112,020 for discontinued
operations which included payments to creditors of approximately $59,000
compared to the year ended June 30, 2013 when discontinued operations provided
$86,408 which was primarily due to sale of $105,000 in marketable securities
which had been held by Infinity prior to the 30DC share transaction.
GOING CONCERN
The 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 June 30,
2014 the Company had a working capital deficit of approximately $1,550,500 and
had accumulated losses of approximately $3,084,500. 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.
RESULTS OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 2014 COMPARED TO THE YEAR ENDED JUNE 30, 2013
During the year ended June 30, 2014, the Company recognized revenues of
$2,795,633 from its operations compared to $1,467,817 during the year ended June
30, 2013. Revenues of the Company were from the following sources during the
year ended June 30, 2014 compared to June 30, 2013.
Year Ended Year Ended Increase or
June 30, 2014 June 30, 2013 (Decrease)
----------------- ----------------- ------------------
Revenue
Commissions $ 79,594 $ 251,106 $ (171,152)
Subscription Revenue 25,794 16,121 9,673
Products and Services 2,689,885 940,506 1,749,379
Seminars and Mentoring - 260,084 (260,084)
----------------- ----------------- ------------------
Total Revenues $ 2,795,633 $ 1,467,817 $ 1,327,816
----------------- ----------------- ------------------
-21-
The Company has made a strategic decision to be more product and less services
focused. While profitable, the Company's historic mentoring program was labor
intensive and the Company did not believe this could be scaled much further.
Commission revenue is opportunistic based upon product promotions by third
parties the Company has a relationship with. During the year ended June 30,
2013, approximately 70% of affiliate commissions were earned from one third
party whose products were sold to the Company's customers which produced
commissions at a much lower level during the year ended June 30, 2014 which was
responsible for majority of the decrease of $171,152 in commission income.
The $1,749,379 increase in products and services revenue was primarily due to
the timing of the re-launch promotion of the MagCast Publishing Platform in
August 2013 which had sales exceeding $1.5 million. The prior MagCast launch was
in June 2012 just before the start of the year ended June 30, 2013 and there was
no launch in that year.
The $260,084 decrease in seminars and mentoring income resulted primarily from
the 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 year ended June 30, 2014, the Company incurred $2,843,828 in
operational expenses compared to $2,036,404 during the year ended June 30, 2013.
Operational expenses during the years ended June 30, 2014 and 2013, include the
following categories:
Year Ended Year Ended Increase or
June 30, 2014 June 30, 2013 Decrease
------------- ------------- -------------
Accounting Fees $ 107,612 $ 129,785 $ (22,173)
Credit Card Processing Fees 128,339 33,497 94,842
Commissions 754,866 208,858 546,008
Independent Contractors 480,307 313,756 166,551
Depreciation and Amortization 80,745 67,280 13,465
Directors Fees 143,618 76,814 66,804
Internet Expenses 39,991 31,595 8,396
Legal Fees 46,346 53,832 (7,486)
Officer's Salaries 233,619 276,814 (43,195)
Related Party Contractors 654,653 684,909 (30,256)
Telephone and Data Lines 37,109 57,276 (20,167)
Travel & Entertainment 56,603 32,214 24,389
Other Operating Expenses 80,020 69,774 10,246
------------- ------------- -------------
Total Operating Expenses $ 2,843,828 $ 2,036,404 $ 807,424
============= ============= =============
The decrease of $22,173 in accounting fees was due to an increase in fees due to
multiple filings during the year ended June 30, 2013 which included a late
filing.
The $94,842 increase in credit card processing fees is due to the $1,749,379
increase in products and services revenue. Credit card processing fees vary
based upon the card used by a customer and are higher for sales to customers
outside the United States.
The $546,008 increase in commissions is due to the $1,749,379 increase in
products and services revenue. Commissions are paid to affiliates for sales
referrals which led directly to a sale.
-22-
The increase of $166,551 in independent contractors is primarily due to the
approximately $43,000 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 additional
development projects, $72,000 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 and $10,000 for an analysis by a strategic
marketing consultant offset by approximately $6,000 for a contractor who helped
during the free Challenge program during the year ended June 30, 2013 who was
not contracted during the year ended June 30, 2014.
The increase of $13,465 in depreciation and amortization is due to a $22,000
increase in amortization of intangible assets from the asset acquisition in
October 2012 offset by a decrease in depreciation of approximately $9,000 due to
the end of depreciable life for some of the Company's fixed assets.
The increase of $66,804 in directors' fees is due to $110,000 in director fees
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 $76,814 to $33,618 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 $43,195 in officer's salaries results from a decrease of $76,814
to $33,619 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 managing marketing and development for
the Company and providing the services of Edward Dale 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 $30,256 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 during in the year
ended June 30, 2013, approximately $44,000 less paid the Marillion Partnership
which resulted from a change in the AU/USD exchange rate and approximately
$21,000 decrease in the amount paid to GHL, Group, Ltd. which was due to $45,000
in stock issued to GHL during the year ended June 30, 2013 offset by additional
cash payments to GHL of approximately $24,000 and $75,000 additional paid
Netbloo which started in October 2012.
The $20,167 decrease in telephone and date lines expense is primarily due to a
decrease in the contracted amount with Telstra AU.
Travel and Entertainment increased by $24,389 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 during the year ended June 30, 2013 to present
and sell MagCast at conferences sponsored by affiliates.
During the year ended June 30, 2014, the Company recognized net income from
continuing operations of $45,318 compared to a net loss of $555,126 during the
year ended June 30, 2013. The increase of $600,444 was primarily the result of
the $1,327,816 increase in revenues offset by the $807,424 increase in
operational expenses during the period shown above.
-23-
CRITICAL ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS
GOODWILL AND INTANGIBLE ASSETS
The Company accounts for goodwill and intangible assets in accordance with ASC
350 "Intangibles-Goodwill and Other" ("ASC 350"). ASC 350 requires that goodwill
and other intangibles with indefinite lives be tested for impairment annually or
on an interim basis if events or circumstances indicate that the fair value of
an asset has decreased below its carrying value. The Company completed an
evaluation of goodwill at June 30, 2014 and determined that there was no
impairment.
Goodwill represents the excess of the purchase price over the fair value of net
assets acquired in the Company's share exchange with Infinity which occurred on
September 10, 2010 and the excess of the purchase price over the fair value of
net assets acquired in the Company's purchase of Netbloo's 50% interest in the
MagCast JV Agreement and Market Pro Max on October 24, 2012. Goodwill associated
with the Immediate Edge business was one of the assets divested on February 28,
2014. Since the Company is one reporting unit for goodwill purposes, ASC
350-20-40, which requires a calculation of the relative fair values of the
disposed business and retained business, was followed to determine the amount of
goodwill allocated to the Immediate Edge. ASC 350 requires that goodwill be
tested for impairment at the reporting unit level (operating segment or one
level below an operating segment) on an annual basis and between annual tests
when circumstances indicate that the recoverability of the carrying amount of
goodwill may be in doubt. Application of the goodwill impairment test requires
judgment, including the identification of reporting units; assigning assets and
liabilities to reporting units, assigning goodwill to reporting units, and
determining the fair value.
Significant judgments required to estimate the fair value of reporting units
include estimating future cash flows, determining appropriate discount rates and
other assumptions. Changes in these estimates and assumptions or the occurrence
of one or more confirming events in future periods could cause the actual
results or outcomes to materially differ from such estimates and could also
affect the determination of fair value and/or goodwill impairment at future
reporting dates.
REVENUE RECOGNITION
The Company generally applies revenue recognition principles in accordance with
ASC 605, "Revenue Recognition". Accordingly, revenue is generally recognized
when persuasive evidence of an agreement exists, services have been rendered or
product delivery has occurred, the selling price to the customer is fixed or
determinable and collectability is reasonably assured.
The Company generates revenues in four categories, (i) commissions, (ii)
seminars and mentoring (iii) subscriptions and (iv) products and services.
Commissions are all affiliate marketing commissions generated when a customer is
referred to a third-party via the Internet and the customer makes a purchase,
which is paid for at the time of purchase. Revenue from commissions is
recognized when the customer purchase is made from the third-party. Seminars and
mentoring are educational in nature. Seminars are live events held in different
cities throughout the world where customers will pay a fee to attend what is
typically a three-day event. Seminar fees are paid in advance and classified as
deferred revenue until the seminar is held. Mentoring services are offered over
a period of time, typically a one-year period. Fees for mentoring are paid in
advance and mentoring revenue is recognized ratably over the period of service.
The Company chose to discontinue its historical mentoring program with the final
mentoring students completing the program in December 2012. Subscription revenue
is primarily from monthly online subscriptions for information on Internet
marketing. All subscriptions are paid in advance and subscription revenue is
-24-
recognized ratably over the term of the subscription. Products and services
revenues are from sales of online educational courses and productivity tools
which customers use in their Internet marketing businesses. Revenue from
products and services is recognized in accordance with the specific guidance for
recognizing software revenue, where applicable, the Company recognizes revenue
from perpetual software licenses at the inception of the license term, assuming
all revenue recognition criteria have been met. Term-based software license
revenue is recognized on a subscription basis over the term of the license
entitlement. The Company recognizes revenue for software hosting or
software-as-a-service (SaaS) arrangements as the service is delivered, generally
on a straight-line basis, over the contractual period of performance. In
software hosting arrangements where software licenses are sold, the associated
software revenue is recognized according to whether perpetual licenses or term
licenses are sold, subject to the above guidance. In SaaS arrangements where
software licenses are not sold, the entire arrangement is recognized on a
subscription basis over the term of the arrangement. Deferred revenue consists
of the unearned portion of subscription payments, seminar fees and mentoring
revenue as of the financial statement date.
Pursuant to ASC 808-10, the JV Agreement with Netbloo was classified as a
collaborative arrangement. The Company was deemed to be the principal
participant and recorded all transactions under the JV Agreement on a gross
basis. The JV Agreement ended when 30DC acquired the remaining 50% in October
2012 and there was no longer a collaborative arrangement.
DISCONTINUED OPERATIONS
The Company accounts for discontinued operations in accordance with the
provisions of ASC 205-20-45-1. 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.
EQUITY-BASED PAYMENTS
The Company accounts for equity instruments issued to non-employees in
accordance with the provisions of ASC 505-50, "Equity-Based Payments to
Non-Employees", which requires that such equity instruments are recorded at
their fair value on the measurement date, with the measurement of such
compensation being subject to periodic adjustment as the underlying equity
instruments vest.
The Company account for equity instruments issued to employees in accordance
with ASC 718 "Stock Compensation". Under this guidance, stock compensation
expense is measured at the grant date, based on the fair value of the award, and
is recognized as an expense over the estimated service period (generally the
vesting period) on the straight-line attribute method.
FOREIGN CURRENCY TRANSLATION AND REMEASUREMENT
The functional currency of the Company's 30 Day Challenge division switched to
the United States dollar from the Australian dollar on July 1, 2012. All other
Company operations have and continue to use the United States dollar as their
functional currency. For all accounting periods prior to July 1, 2012, the
Company followed ASC 830 "Foreign Currency Matters", under which functional
currency assets and liabilities are translated into the reporting currency, US
Dollars, using period end rates of exchange and the related translation
adjustments are recorded as a separate component of accumulated other
comprehensive income. Functional statements of operations amounts expressed in
functional currencies are translated using average exchange rates for the
respective periods. Re-measurement adjustments and gains or losses resulting
from foreign currency transactions are recorded as foreign exchange gains or
losses in the Statement of Operations. The historical foreign currency
translation loss remains on the Balance Sheet at $(102,858) which was the
balance at June 30, 2012.
-25-
FORGIVENESS OF DEBT
The company has settled some debts for cash and/or payment in stock for less
than the full amount due to the creditor. The Company records the difference
between the amount that was owed and the amount which was paid as other income.
During the year ended June 30, 2014, the Company settled three amounts owed to
vendors from prior years for a total amount of $93,513 less than the full amount
owed. During the year ended June 30, 2013, the Company settled two amounts owed
to vendors from prior years for a total amount of $13,461 less than the full
amount owed. During the year ended June 30, 2014, discontinued operations
includes $796 for the amount a note payable was settled for less than the amount
due, inclusive of accrued interest.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
-------------------------------------------------------------------
Our Company's business activities contain elements of risk. Neither our
investments nor an investment in us is intended to constitute a balanced
investment program.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
---------------------------------------------------
The audited financial statements of 30DC, Inc. for the years ended June 30, 2014
and 2013 appear as pages F-1 through F-24.
-26-
30DC, INC. AND SUBSIDIARY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2014 AND 2013
F-1
INDEX
Page F-3 Report of Independent Registered Public Accounting Firm
Page F-4 Consolidated Balance Sheets
Page F-5 Consolidated Statements of Operations
Page F-6 Consolidated Statements of Changes in Stockholders' Equity
(Deficiency)
Page F-7 Consolidated Statements of Cash Flows
Page F-8 Notes to Consolidated Financial Statements
F-2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors
30DC, Inc.
New York, New York
We have audited the accompanying consolidated balance sheets of 30DC, Inc. and
its subsidiaries (collectively the "Company") as of June 30, 2014 and 2013, and
the related consolidated statements of operations, changes in stockholders'
equity (deficiency) and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatements. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audit included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of 30DC, Inc. and its
subsidiaries as of June 30, 2014 and 2013 and the results of their consolidated
operations and cash flows for the years then ended in conformity with accounting
principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has accumulated losses from operations since
inception and has a working capital deficit as of June 30, 2014. These
conditions raise substantial doubt about the Company's ability to continue as a
going concern. Management's plans in regard to these matters are also described
in Note 1. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ MaloneBailey, LLP
www.malone-bailey.com
Houston, Texas
October 10, 2014
F-3
30DC, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
June June
30, 2014 30, 2013
---------------- -------------------
Assets
Current Assets
Cash and Cash Equivalents $ 102,684 $ 116,372
Restricted Cash 83,730 47,984
Accrued Commissions Receivable 12,706 32,035
Accounts Receivable 38,313 26,114
Prepaid Expenses 24,291 -
Assets of Discontinued Operations 116,313 76,384
---------------- -------------------
Total Current Assets 378,037 298,889
Property and Equipment, Net 19,066 23,045
Intangible Assets, Net 220,000 286,000
Goodwill 2,027,564 2,027,564
Assets of Discontinued Operations - 225,285
---------------- -------------------
Total Assets $ 2,644,667 $ 2,860,783
================ ===================
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable $ 190,228 $ 511,234
Accrued Expenses and Refunds 625,565 367,752
Deferred Revenue 90,716 6,195
Due to Related Parties 805,483 924,057
Liabilities of Discontinued Operations 216,548 330,339
---------------- -------------------
Total Current Liabilities 1,928,540 2,139,577
---------------- -------------------
Total Liabilities 1,928,540 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 3,826,606 3,880,469
Accumulated Deficit (3,084,474) (3,143,392)
Accumulated Other Comprehensive Loss (102,858) (102,858)
---------------- -------------------
Total Stockholders' Equity 716,127 721,206
---------------- -------------------
Total Liabilities and Stockholders' Equity $ 2,644,667 $ 2,860,783
================ ===================
The accompanying notes are an integral part of the
consolidated financial statements.
F-4
30DC, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
YEARS ENDED JUNE 30,
2014 2013
--------------- -----------------
Revenue
Commissions $ $ 79,954 $ 251,106
Subscription Revenue 25,794 16,121
Products and Services 2,689,885 940,506
Seminars and Mentoring - 260,084
--------------- -----------------
Total Revenue 2,795,633 1,467,817
Operating Expenses 2,843,828 2,036,404
--------------- -----------------
Operating Loss (48,195) (568,587)
Other Income (Expense)
Forgiveness of Debt 93,513 13,461
--------------- -----------------
Total Other Income (Expense) 93,513 13,461
--------------- -----------------
Income (Loss) From Continuing Operations 45,318 (555,126)
Income (Loss) From Discontinued Operations 13,600 147,484
--------------- -----------------
Net Income (Loss) $ 58,918 $ (407,642)
=============== =================
Weighted Average Common Shares Outstanding
Basic 83,758,982 82,657,326
Diluted 84,616,125 82,657,326
Income (Loss) Per Common Share (Basic and Diluted)
Continuing Operations $ 0.00 $ $ (0.01)
Discontinued Operations 0.00 0.00
Net Income (Loss) Per Common Share $ 0.00 $ (0.00)
The accompanying notes are an integral part of the
consolidated financial statements.
F-5
30DC, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
ACCUMULATED TOTAL
OTHER STOCKHOLDERS'
COMMON STOCK ADDITIONAL COMPREHENSIVE ACCUMULATED EQUITY
SHARES PAR VALUE PAID IN CAPITAL INCOME (LOSS) DEFICIT (DEFICIENCY)
---------- --------- --------------- -------------- ----------- ------------
Balance - June 30, 2012 72,928,421 $ 72,928 $ 2,600,410 $ (102,858) $(2,735,750) $(165,270)
Net Loss - - - - (407,642) (407,642)
Netbloo Asset Acquisition 13,487,363 13,487 1,065,502 1,078,989
Issuance of Common Stock to Non-Employees 515,385 516 46,484 - - 47,000
Issuance of Stock Options to Employees 153,629 - - 153,629
Issuance of Common Stock to Settle Liabilities 55,770 56 14,444 - - 14,500
---------- --------- --------------- -------------- ----------- ------------
Balance - June 30, 2013 86,986,939 $ 86,987 $ 3,880,469 $ (102,858) $(3,143,392)$ 721,206
========== ========= =============== ============== =========== ============
Net Income - - - - 58,918 58,918
Immediate Edge Divestiture (10,560,000) (10,560) (196,775) (207,335)
Issuance of Stock Options to Employees 67,237 - - 67,237
Issuance of Common Stock to Settle Liabilities 426,525 426 75,675 - - 76,101
---------- --------- --------------- -------------- ----------- ------------
Balance - June 30, 2014 76,853,464 $ 76,853 $ 3,826,606 $ (102,858) $(3,084,474)$ 716,127
========== ========= =============== ============== =========== ============
The accompanying notes are an integral part of the
consolidated financial statements.
F-6
30DC, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended
June 30, June 30,
2014 2013
-------------- -----------------
Cash Flows from Operating Activities:
Net Income (Loss) $ 58,918 $ (407,642)
Gain From Discontinued Operations (13,600) (147,484)
Adjustments to Reconcile Income (Loss) from Continuing Operations
to Net Cash Provided By (Used In) Operating Activities
Depreciation and Amortization 80,745 67,280
Equity Based Payments To Non-Employees - 47,000
Equity Based Payments To Employees 67,237 153,629
Gain on Debt Forgiveness (93,513) (13,461)
Changes in Operating Assets and Liabilities
Restricted Cash (35,746) (47,984)
Accrued Commissions Receivable 19,329 (16,230)
Accounts Receivable (12,199) 129,990
Prepaid Expenses (24,291) -
Accounts Payable (179,493) (42,580)
Accrued Expenses and Refunds 257,813 (120,510)
Accrued Commissions Payable - (699,592)
Deferred Revenue 103,441 (218,239)
Due to Related Parties (118,574) 327,045
-------------- -----------------
Net Cash Provided by (Used in) Operating Activities 110,067 (988,778)
-------------- -----------------
Cash Flows from Investing Activities
Purchases of Property and Equipment (10,766) (12,225)
-------------- -----------------
Net Cash Used in Investing Activitities (10,766) (12,225)
-------------- -----------------
Cash Flows from Discontinued Operations
Cash Flows From Operating Activities (112,020) 86,408
-------------- -----------------
Net Cash Provided by (Used in) Discontinued Operations (112,020) 86,408
-------------- -----------------
Decrease in Cash and Cash Equivalents (12,719) (914,595)
Cash Transferred In Divestiture (969)
Cash and Cash Equivalents - Beginning of Period 116,372 1,030,967
-------------- -----------------
Cash and Cash Equivalents - End of Period $ 102,684 $ 116,372
============== =================
Supplemental Disclosures of Non Cash Financing Activity
Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for:
Interest $ 36,924 $ 3,666
Income taxes 2,936 1,236
Common Stock Issued to Settle Liabilities $ 104,690 $ 14,500
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
consolidated financial statements.
F-7
30DC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014
NOTE 1. DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION AND LIQUIDITY
--------------------------------------------------------------------
30DC, Inc., Delaware, ("30DC DE") was incorporated on October 17, 2008 in the
state of Delaware, as a holding company, for the purpose of building, acquiring
and managing international web-based sales and marketing companies. On July 15,
2009, 30DC DE completed the acquisitions of the business and assets of 30 Day
Challenge ("30 Day") and Immediate Edge ("Immediate").
On September 10, 2010, shareholders of 30DC DE exchanged 100% of their 30DC DE
shares for 60,984,000 shares of Infinity Capital Group, Inc. ("Infinity"), a
publicly traded company which trades over the counter ("OTC") on the OTC Pink
market operated by OTC Market Group, Inc. 30DC DE became a wholly owned
subsidiary of Infinity Capital Group, Inc. which subsequently changed its name
to 30DC, Inc. ("30DC" and together with its subsidiary "the Company"). 30DC DE
was the accounting acquirer in the transaction and its historical financial
statements became the historical financial statements of 30DC.
In May of 2012 the Company signed a joint venture agreement ("JV Agreement")
with Netbloo Media, Ltd. ("Netbloo") 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 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. Please see Note 4 for further details on the
acquisition.
Effective February 28, 2014, the Company divested assets and liabilities that
made up the Immediate Edge 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.
30DC offers internet marketing services and related training that help Internet
companies in marketing and operating their businesses. 30DC's core business
platforms are MagCast and Market Pro Max. Other revenue streams include sales of
instructional courses and from commissions on third party products sold via
introduction to the 30DC customer base of active online participants and
subscribers which are referred to as affiliate marketing commissions. The
Company's assets consist primarily of property and equipment, goodwill and
internally developed intangible property such as domain names, websites,
customer lists and copyrights.
BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared in
accordance with United States generally accepted accounting principles ("GAAP")
and include the accounts of 30DC, Inc., (f/k/a Infinity Capital Group, Inc.) and
its subsidiary 30DC DE.
The Company has determined that the acquisition date for the Netbloo asset
acquisition (see Note 4) was October 24, 2012. All operating activity starting
October 1, 2012 is included in these financial statements, the Company believes
the operating activity for the period October 1 through October 23, 2012 does
not have a material impact on these financial statements.
F-8
30DC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014
GOING CONCERN
The 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 June 30,
2014 and 2013, the Company has a working capital deficit of approximately
$1,550,500 and $1,841,000, respectively, and has accumulated losses of
approximately $3,084,500 and $3,143,400, respectively, 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 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 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
--------------------------------------------------
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original maturity of
three months or less as cash equivalents.
The Company maintains its cash in bank deposit accounts which, at times, may
exceed federally insured limits. The Company has not experienced any losses in
such accounts. The Company believes it is not exposed to any significant credit
risk related to cash and cash equivalents.
The vendor which processes the Company's credit card sales requires that 10% of
sales be maintained in a reserve account on a rolling six month basis. The
$83,730 and $47,984 held in the reserve account at June 30, 2014 and June 30,
2013 respectively has been classified as restricted cash.
ACCOUNTS RECEIVABLE
Accounts receivable are recognized and carried at original invoice amount less
an allowance for any uncollectible amounts. An estimate for doubtful accounts is
made when collection of the full amount becomes questionable. For products which
customers will lose functionality if they miss a payment, the estimated amount
F-9
30DC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014
for which collectability is in question has been adjusted to accounts receivable
and revenue.
The allowance for doubtful accounts was based on a review of all outstanding
amounts. We analyze the aging of receivable balances, historical bad debts,
customer concentrations, customer credit-worthiness, current economic trends and
changes in our customer payment terms. Significant changes in customer
concentration or payment terms, deterioration of customer creditworthiness or
weakening in economics trends could have a significant impact on the
collectability of receivables and the allowance. If the financial condition of
our customers were to deteriorate, resulting in an impairment of their ability
to make payments, additional allowances will be made.
Allowances are applied to accounts receivable where events or changes in
circumstance indicate that the balances may not be collectible. The
identification of doubtful debts requires the use of judgment and estimates as
mentioned above. Where the expectation on or the actual recoverability of
commissions and other receivables is different from the original estimate, such
difference will impact the carrying value of commissions and other receivables
and doubtful debts expenses in the periods in which such estimate is changed or
the receivable are collected.
PROPERTY AND EQUIPMENT
Equipment is recorded at cost less accumulated depreciation and amortization.
Maintenance and repairs are charged to operations as incurred. Asset and related
accumulated depreciation amounts are relieved from the accounts for retirements
or dispositions. Depreciation on equipment is computed using the straight-line
method. Estimated useful lives of three to ten years are used for equipment,
while leasehold improvements are amortized, using the straight line method, over
the shorter of either their economic useful lives or the term of the leases.
GOODWILL AND INTANGIBLE ASSETS
The Company accounts for goodwill and intangible assets in accordance with ASC
350 "Intangibles-Goodwill and Other" ("ASC 350"). ASC 350 requires that goodwill
and other intangibles with indefinite lives be tested for impairment annually or
on an interim basis if events or circumstances indicate that the fair value of
an asset has decreased below its carrying value. The Company completed an
evaluation of goodwill at June 30, 2014 and determined that there was no
impairment.
Goodwill represents the excess of the purchase price over the fair value of net
assets acquired in the Company's share exchange with Infinity which occurred on
September 10, 2010 and the excess of the purchase price over the fair value of
net assets acquired in the Company's purchase of Netbloo's 50% interest in the
MagCast JV Agreement and Market Pro Max on October 24, 2012. Goodwill associated
with the Immediate Edge business was one of the assets divested February 28,
2014. Since the Company is one reporting unit for goodwill purposes, ASC
350-20-40, which requires a calculation of the relative fair values of the
disposed business and retained business, was followed to determine the amount of
goodwill allocated to the Immediate Edge. ASC 350 requires that goodwill be
tested for impairment at the reporting unit level (operating segment or one
level below an operating segment) on an annual basis and between annual tests
when circumstances indicate that the recoverability of the carrying amount of
goodwill may be in doubt. Application of the goodwill impairment test requires
judgment, including the identification of reporting units; assigning assets and
liabilities to reporting units, assigning goodwill to reporting units, and
determining the fair value.
Significant judgments required to estimate the fair value of reporting units
include estimating future cash flows, determining appropriate discount rates and
other assumptions. Changes in these estimates and assumptions or the occurrence
of one or more confirming events in future periods could cause the actual
F-10
30DC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014
results or outcomes to materially differ from such estimates and could also
affect the determination of fair value and/or goodwill impairment at future
reporting dates.
LONG LIVED ASSETS
In accordance with ASC 360 "Property Plant and Equipment," the Company reviews
the carrying value of intangibles subject to amortization and long-lived assets
for impairment at least annually or whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
Recoverability of long-lived assets is measured by comparison of its carrying
amount to the undiscounted cash flows that the asset or asset group is expected
to generate. If such assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amount of the
property, if any, exceeds its fair market value.
ACCUMULATED OTHER COMPREHENSIVE LOSS
Accumulated Other Comprehensive Loss consists of cumulative adjustments of
foreign currency translation which is further discussed in the foreign currency
translation and measurement below.
DISCONTINUED OPERATIONS
The Company accounts for discontinued operations in accordance with ASC
205-20-45-1. 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.
REVENUE RECOGNITION
The Company generally applies revenue recognition principles in accordance with
ASC 605, "Revenue Recognition". Accordingly, revenue is generally recognized
when persuasive evidence of an agreement exists, services have been rendered or
product delivery has occurred, the selling price to the customer is fixed or
determinable and collectability is reasonably assured.
The Company generates revenues in four categories, (i) commissions, (ii)
seminars and mentoring (iii) subscriptions and (iv) products and services.
Commissions are all affiliate marketing commissions generated when a customer is
referred to a third-party via the Internet and the customer makes a purchase,
which is paid for at the time of purchase. Revenue from commissions is
recognized when the customer purchase is made from the third-party. Seminars and
mentoring are educational in nature. Seminars are live events held in different
cities throughout the world where customers will pay a fee to attend what is
typically a three-day event. Seminar fees are paid in advance and classified as
deferred revenue until the seminar is held. Mentoring services are offered over
a period of time, typically a one-year period. Fees for mentoring are paid in
advance and mentoring revenue is recognized ratably over the period of service.
The Company chose to discontinue its historical mentoring program with the final
mentoring students completing the program in December 2012. Subscription revenue
is primarily from monthly online subscriptions for information on Internet
marketing. All subscriptions are paid in advance and subscription revenue is
recognized ratably over the term of the subscription. Products and services
revenues are from sales of online educational courses and productivity tools
which customers use in their Internet marketing businesses. Revenue from
products and services is recognized in accordance with the specific guidance for
recognizing software revenue, where applicable, the Company recognizes revenue
from perpetual software licenses at the inception of the license term, assuming
all revenue recognition criteria have been met. Term-based software license
revenue is recognized on a subscription basis over the term of the license
F-11
30DC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014
entitlement. The Company recognizes revenue for software hosting or
software-as-a-service (SaaS) arrangements as the service is delivered, generally
on a straight-line basis, over the contractual period of performance. In
software hosting arrangements where software licenses are sold, the associated
software revenue is recognized according to whether perpetual licenses or term
licenses are sold, subject to the above guidance. In SaaS arrangements where
software licenses are not sold, the entire arrangement is recognized on a
subscription basis over the term of the arrangement. Deferred revenue consists
of the unearned portion of subscription payments, seminar fees and mentoring
revenue as of the financial statement date.
Pursuant to ASC 808-10, the JV Agreement with Netbloo was classified as a
collaborative arrangement. The Company was deemed to be the principal
participant and recorded all transactions under the JV Agreement on a gross
basis. The JV Agreement ended when 30DC acquired the remaining 50% in October
2012 and there was no longer a collaborative arrangement.
EQUITY-BASED PAYMENTS
The Company accounts for equity instruments issued to non-employees in
accordance with the provisions of ASC 505-50, "Equity-Based Payments to
Non-Employees", which requires that such equity instruments are recorded at
their fair value on the measurement date, with the measurement of such
compensation being subject to periodic adjustment as the underlying equity
instruments vest.
The Company account for equity instruments issued to employees in accordance
with ASC 718 "Stock Compensation". Under this guidance, stock compensation
expense is measured at the grant date, based on the fair value of the award, and
is recognized as an expense over the estimated service period (generally the
vesting period) on the straight-line attribute method.
FOREIGN CURRENCY TRANSLATION AND REMEASUREMENT
The functional currency of the Company's 30 Day Challenge division switched to
the United States dollar from the Australian dollar on July 1, 2012. All other
Company operations have and continue to use the United States dollar as their
functional currency. For all accounting periods prior to July 1, 2012, the
Company followed ASC 830 "Foreign Currency Matters", under which functional
currency assets and liabilities are translated into the reporting currency, US
Dollars, using period end rates of exchange and the related translation
adjustments are recorded as a separate component of accumulated other
comprehensive income. Functional statements of operations amounts expressed in
functional currencies are translated using average exchange rates for the
respective periods. Re-measurement adjustments and gains or losses resulting
from foreign currency transactions are recorded as foreign exchange gains or
losses in the Statement of Operations. The historical foreign currency
translation loss remains on the Balance Sheet at $(102,858) which was the
balance at June 30, 2012.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and use assumptions that affect certain reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of income and expenses
during the reporting period. Significant estimates in these financial statements
are the bad debt allowance charged against accounts receivable, estimated useful
lives used to calculate depreciation of property and equipment and the estimate
of the Company's future taxable income used to calculate the Company's deferred
tax valuation allowance. The Company evaluates all of its estimates on an
on-going basis.
F-12
30DC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014
FORGIVENESS OF DEBT
The company has settled some debts for cash and/or payment in stock for less
than the full amount due to the creditor. The Company records the difference
between the amount that was owed and the amount which was paid as other income.
During the year ended June 30, 2014, the Company settled three amounts owed to
vendors from prior years for a total amount of $93,513 less than the full amount
owed. During the year ended June 30, 2013, the Company settled two amounts owed
to vendors from prior years for a total amount of $13,461 less than the full
amount owed. During the year ended June 30, 2014, discontinued operations
includes $796 for the amount a note payable was settled for less than the amount
due, inclusive of accrued interest.
NET INCOME OR LOSS PER SHARE
The Company computes net loss per share in accordance with ASC 260 "Earnings per
Share." Under ASC 260, basic net loss per share is computed by dividing net loss
per share available to common stockholders by the weighted average number of
shares outstanding for the period and excludes the effects of any potentially
dilutive securities. Diluted earnings per share, if presented, would include the
dilution that would occur upon the exercise or conversion of all potentially
dilutive securities into common stock using the "treasury stock" and/or "if
converted" methods as applicable. In computing diluted earnings per share for
the year ended June 30, 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 the year ended June 30, 2013, inclusion of
additional shares would be anti-dilutive and no adjustment to outstanding shares
has been made to compute diluted earnings per share.
RELATED PARTIES
A party is considered to be related to the Company if the party directly or
indirectly or through one or more intermediaries, controls, is controlled by, or
is under common control with the Company. Related parties also include principal
owners of the Company, its management, members of the immediate families of
principal owners of the Company and its management and other parties with which
the Company may deal if one party controls or can significantly influence the
management or operating policies of the other to an extent that one of the
transacting parties might be prevented from fully pursuing its own separate
interests. A party which can significantly influence the management or operating
policies of the transacting parties or if it has an ownership interest in one of
the transacting parties and can significantly influence the other to an extent
that one or more of the transacting parties might be prevented from fully
pursuing its own separate interests is also a related party.
RECENT ACCOUNTING PRONOUNCEMENTS
Management does not believe that any recently issued, but not effective,
accounting standards, if currently adopted, would have a material effect on the
Company's financial statements.
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. To determine
the amount goodwill for the Edge, the Company followed ASC 350-20-40-3 which
states that goodwill allocated to a business to be disposed of is to be
allocated based on the relative goodwill of the business to be disposed of and
the portion of the reporting unit that will be retained. The Company prepared a
discounted cash flow analysis for the Edge and for the business retained by 30DC
F-13
30DC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014
to determine the $225,000 in goodwill allocated to the Edge. 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 6). 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. The Company has
determined that control of the acquired assets changed hands on October 24,
2012, in accordance with ASC 805-10-25-6 the 13,487,363 shares were valued using
the $0.08 per share closing price on that date for total purchase price
consideration of $1,078,989. In accordance with purchase acquisition accounting,
the company initially allocated the consideration to the net tangible and
identifiable intangible assets, based on their estimated fair values as of the
date of acquisition. Goodwill represents the excess of the purchase price over
the fair value of the underlying net tangible and identifiable intangible
assets.
The following table summarizes the estimated fair values of the assets acquired
and liabilities assumed at the acquisition date. The company has finalized its
purchase price allocation.
Tangible Assets $ -
Customer Lists 75,000
Software 255,000
Goodwill 748,989
-------------
Total purchase price $ 1,078,989
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.
Year Ended
June 30, 2013
(Unaudited)
-----------------
Revenues $ 1,483,575
Operating Expenses 2,105,956
Other Income 13,461
-----------------
Loss from Continuing Operations (609,920)
Income from Discontinued Operations 147,484
-----------------
Net Loss $ (461,436)
=================
Basic and Diluted Loss Per Share $ (0.01)
Weighted Average Shares Outstanding -
Basic & Diluted 86,934,233
F-14
30DC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014
NOTE 5. COLLABORATIVE ARRANGEMENT
---------------------------------
Pursuant to ASC 808-10, prior to the Company's purchase of Netbloo's 50%
interest in the MagCast JV Agreement (discussed in Note 4) the joint operating
activity was considered a collaborative arrangement.
In May of 2012 the Company signed a joint venture agreement ("JV Agreement")
with Netbloo 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 result in commission of 50% of gross revenue for those sales
to the affiliate responsible for the sale. Pursuant to ASC 808-10 the joint
operating activity with Netbloo was considered a collaborative arrangement. The
Company was deemed the principal participant and recorded all transactions under
the JV Agreement on a gross basis with the 50% amount net of affiliate
commissions and other allowable costs due Netbloo recorded as commission
expense.
The following revenue and expense amounts from transactions under the JV
Agreement are included in the Statement of Operations for the Year ended June
30, 2013;
Year Ended
June 30, 2013
-----------------
Sales of MagCast Publishing Platform $ 76,457
Affiliate Commission Expense 4,291
Transaction Fees 5,956
Independent Contractors 5,449
Internet Expenses 2,895
Netbloo Commissions 28,933
-----------------
Net Profit $ 28,933
=================
The Company has acquired Netbloo's 50% share of the MagCast JV (see Note 4),
accordingly there is no longer a collaborative arrangement to report on
subsequent to September 30, 2012.
NOTE 6. 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.
F-15
30DC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014
Results of Discontinued Operations for the
YEAR ENDED JUNE 30, 2014 YEAR ENDED JUNE 30, 2013
------------------------------------------ -----------------------------------------
IMMEDIATE EDGE INFINITY TOTAL IMMEDIATE EDGE INFINITY TOTAL
-------------- --------- ---------- -------------- --------- ----------
Revenues $ $ 266,495 $ - $ 266,495 $ 505,255 $ - $ 505,255
Operating expenses 287,017 10,528 297,545 425,204 13,900 439,104
Income (Loss) from operations (20,522) (10,528) (31,050) 80,051 (13,900) 66,151
Forgiveness of debt - 796 796 - - -
Realized gain on marketable securities - - - - 35,645 35,645
Unrealized gain on marketable securities - 43,854 43,854 - 45,688 45,688
------------------------------------------ -----------------------------------------
Net Income (Loss) $ (20,522) $ 34,122 $ 13,600 $ 80,051 $ 67,433 $ 147,484
========================================== =========================================
Assets and Liabilities of Discontinued Operations as of
June 30, 2014 June 30, 2013
------------------------------------------ -------------------------------------------
IMMEDIATE EDGE INFINITY TOTAL IMMEDIATE EDGE INFINITY TOTAL
---------------- ---------- ----------- ---------------- ---------- -----------
Assets
Cash $ - $ - $ - $ 278 $ - $ 278
Prepaid expenses - - - 3,648 - 3,648
Marketable securities - 116,313 116,313 - 72,458 72,458
---------------- ---------- ----------- ---------------- ---------- -----------
Total Current Assets - 116,313 116,313 3,926 72,458 76,384
Goodwill - - - 225,285 - 225,285
---------------- ---------- ----------- ---------------- ---------- -----------
Total Assets of Discontinued Operations $ - $ 116,313 $ 116,313 $ 229,211 $ 72,458 $ 301,669
================ ========== =========== ================ ========== ===========
LIABILITIES
Accounts payable $ - $ 72,201 $ 72,201 $ 3,060 $ 80,028 $ 83,088
Accrued expenses - 62,297 62,297 6,467 67,375 73,842
Deferred revenue - - - 17,454 - 17,454
Notes payable - 61,050 61,050 - 102,020 102,020
Due to related parties - 21,000 21,000 - 53,935 53,935
---------------- ---------- ----------- ---------------- ---------- -----------
Total Liabilities of Discontinued Operations $ - $ 216,548 $ 216,548 $ 26,981 $ 303,358 $ 330,339
================ ========== =========== ================ ========== ===========
Notes Payable
Included in liabilities of discontinued operations at June 30, 2014 and June 30,
2013 are $61,050 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 year ended June 30, 2014 and June 30, 2013 the Company incurred interest
expense on notes payable of $9,344 and $12,251 respectively which is included in
the Statement of Operations under income (loss) from discontinued operations.
Marketable Securities
At June 30, 2014 the fair value of marketable securities held for sale was
$116,313 which included cumulative net unrealized gains of $49,873. At June 30,
2013 the fair value of marketable securities held for sale was $72,458 which
included cumulative net unrealized gains of $6,048.
F-16
30DC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014
NOTE 7. RELATED PARTY TRANSACTIONS
-----------------------------------
The Company entered into a three-year Contract for Services Agreement commencing
July 2009 ("Commencement Date") with the Marillion Partnership ("Marillion") for
services which includes managing marketing and development for the Company and
provides the services of Mr. Edward Dale as the Company's Chief Executive
Officer. The Marillion contract expired June 30, 2012 and has continued on a
month to month basis under the same terms. Cash remuneration under the Marillion
agreement is $317,825 Australian Dollars ("AUD"). If in any year starting from
the Commencement Date, revenues of 30DC, Inc. doubles then a bonus equal to 50%
of cash remuneration will be due in shares of 30DC, Inc. as additional
compensation. The bonus was not earned in the fiscal years ended June 30, 2014
and June 30, 2013. During the term of the agreements Marillion is prohibited
from engaging in any other business activity that competes with 30DC, Inc.
without written consent of the 30DC, Inc. Board of Directors. Marillion was
awarded a $40,000 bonus upon completion of the asset acquisition of the 50% of
the MagCast JV which had been owned by Netbloo and Market Pro Max.
The Company pays Marillion $2,500 AUD ($2,296 USD) per month to cover office
related expenses which is included in operating expenses.
Effective July 15, 2012, the Company entered into a Consulting Services
Agreement with GHL Group, Ltd., whose President, Gregory H. Laborde is a
Director for services including but not limited to evaluation of financial
forecasts, assisting in the development of business and financial plans and
assisting in the identification of potential acquisitions and financial sources.
The contract has expired but has continued under the same service terms at a
monthly amount of $5,000.
Effective October 1, 2012, the Company entered into a three year contractor
agreement with Netbloo Media, Ltd., joint developer of the MagCast Publishing
Platform, with annual compensation of $300,000 which is payable in monthly
installments of $25,000 and which may be terminated after two years subject to a
six-month termination payment.
On October 11, 2012, Henry Pinskier, a Director of the Company received an
option to purchase 1,500,000 of the Company's common shares details of which are
in Note 12. During the years ended June 30, 2014 and June 30, 2013, the Company
recorded $33,619 and $76,814 respectively in expense for the option which is
reflected as Directors' Fees in the supplemental schedule of operating expenses
(see Note 13).
On October 11, 2012, Theodore A. Greenberg, Chief Financial Officer and a
Director of the Company received an option to purchase 1,500,000 of the
Company's common shares details of which are in Note 12. During the years ended
June 30, 2014 and June 30, 2013, the Company recorded $33,619 and $76,814
respectively in expense for the option which is included in Officer's Salary in
the supplemental schedule of operating expenses (see Note 13).
At June 30, 2013, due to related parties totaled $924,057. This mainly includes
$265,220 due to Jesselton (previously a related party), which consists of
$157,220 for contractor fees and $108,000 for fees related to the share exchange
between 30DC DE and Infinity, $14,617 due to Marillion Partnership under its
contractor agreement, $115,915 due to Netbloo, Ltd. which consists of $25,000
due under its contractor agreement and $90,915 remaining to be paid for
Netbloo's earnings from the collaborative arrangement (see note 5) and $521,000
due to Theodore A. Greenberg for compensation.
At June 30, 2014, due to related parties totaled $805,483. This consisted of
$6,843 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
F-17
30DC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014
Netbloo under their contractor agreement, $94,000 accrued for directors' fees
for services of non-executive directors, $5,640 due to GHL under their
contractor agreement and $674,000 due to Theodore A. Greenberg, CFO and
director, for compensation.
NOTE 8. PROPERTY AND EQUIPMENT
-------------------------------
PROPERTY AND EQUIPMENT CONSISTS OF THE FOLLOWING:
June 30, 2014 June 30, 2013
--------------- ---------------
Computer and Audio Visual Equipment $ 459,341 $ 449,884
Office equipment and Improvements 70,167 68,859
--------------- ---------------
529,508 518,743
Less accumulated depreciation and amortization (510,442) (495,698)
--------------- ---------------
$ 19,066 $ 23,045
=============== ===============
Depreciation expense was $14,745 for the year ended June 30, 2014 and $23,280
for the year ended June 30, 2013.
NOTE 9. INTANGIBLE ASSETS
--------------------------
INTANGIBLE ASSETS CONSISTS OF THE FOLLOWING:
June 30, 2014 June 30, 2013
-------------------- -------------------
Customer Lists $ 75,000 $ 75,000
Software 255,000 255,000
-------------------- -------------------
330,000 330,000
Less accumulated amortization (110,000) (44,000)
-------------------- -------------------
$ 220,000 $ 286,000
==================== ===================
Customer lists and software were acquired as part of the MagCast and Market Pro
Max asset acquisitions in October 2012 and are being amortized over their
estimated useful lives of five years. Amortization expense was $66,000 and
$44,000 for the years ended June 30, 2014 and June 30, 2013 respectively.
NOTE 10. INCOME TAXES
---------------------
The Company's income tax provision (benefit) consists of the following:
Year Ended Year Ended
June 30, 2014 June 30, 2013
----------------- ----------------
Federal
Current $ - $ -
Deferred 30,450 (110,800)
State and Local
Current $ - $ -
Deferred 1,950 (6,600)
Change in valuation allowance (32,400) 117,400
----------------- ----------------
Income tax provision (benefit) $ - $ -
================= ================
F-18
30DC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014
Deferred taxes are provided for the tax effects of temporary differences between
the financial reporting basis and the tax basis of assets and liabilities.
Significant temporary differences at June 30, 2014 and June 30, 2013 are as
follows:
Year Ended Year Ended
June 30, 2014 June 30, 2013
----------------- ---------------
Deferred tax asset
Net operating loss carryforward - Federal $ 314,600 $ 434,300
Net operating loss carryforward - State 2,400 9,600
Intangible Asset Amortization 24,900 9,400
Fixed asset depreciation 4,100 12,400
Accrued expenses 309,700 222,400
----------------- ---------------
Total deferred tax asset 655,700 688,100
Less valuation allowance (655,700) (688,100)
----------------- ---------------
Total net deferred tax asset $ - $ -
================= ===============
The following is a reconciliation of the U.S. tax statutory income tax rate to
the effective tax rate from continuing operations:
Year Ended Year Ended
June 30, 2014 June 30, 2013
----------------- ---------------
U.S. statutory rate 34.0% (34.0%)
State and local taxes net of federal benefit 1.3 (1.3)
Change in valuation allowance (71.5) 24.7
Stock option expense 52.4 11.4
Other permanent differences (16.2) (0.8)
----------------- ---------------
Effective income tax rate (0.0%) (0.0%)
================= ===============
The Company applies the provisions of ASC 740, which prescribes the recognition
and measurement criteria related to tax positions taken or expected to be taken
in a tax return. For those benefits to be recognized, a tax position must be
more-likely-than-not to be sustained upon examination by taxing authorities. The
ultimate realization of deferred tax assets is dependent upon the generation of
future taxable income during the periods in which those temporary differences
become deductible. Management considers projected future taxable income and tax
planning strategies in making this assessment. Management has concluded that it
is more likely than not that the Company will not be able to realize all of its
tax benefits and therefore a valuation allowance of approximately $655,700 has
been established. For the years ended June 30, 2014 and June 30, 2013, the
change in valuation allowance was a decrease of $32,400 and an increase of
$117,400 respectively.
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized
in an enterprise's financial statements and prescribes a recognition threshold
and measurement process for financial statement recognition and measurement of a
tax position taken or expected to be taken in a tax return. For those benefits
to be recognized, a tax position must be more-likely-than-not to be sustained
upon examination by taxing authorities. ASC 740 also provides guidance on
derecognition, classification, interest and penalties, accounting in interim
period, disclosure and transition. The Company is required to file income tax
returns in the United States (federal) and in various state and local and
F-19
30DC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014
foreign jurisdictions. Based on the Company's evaluation, it has been concluded
that there are no significant uncertain tax positions requiring recognition in
the Company's financial statements. The Company does not expect any significant
changes in its unrecognized tax benefits in the next year.
The Company's policy for recording interest and penalties associated with
uncertain tax positions is to record such expense as a component of income tax
expense. There were no amounts accrued for penalties or interest as of or years
ended June 30, 2014 and 2013.
As a corporation formed in the United States, the Company is subject to the
United States corporation income tax on worldwide net income. Since majority
ownership of the Company's shares are held by Australian residents, the Company
is deemed to be an Australian resident corporation and is subject to Australian
corporate income tax on worldwide net income. Corporate income taxes paid to
Australia will generally be available as a credit against United States
corporation income tax. The 30DC DE did not have nexus to any individual state
in the United States prior to the share exchange with Infinity on September 10,
2010 and accordingly no deferred tax asset was recognized for state taxes prior
to that date. Australia does not have any state corporation income tax. Future
changes in Company operations might impact the geographic mix which could affect
the Company's overall effective tax rate.
As of June 30, 2014 and June 30, 2013, the Company had approximately $925,300
and $1,277,400 of U.S. federal net operating loss carryovers, respectively which
expire starting in 2030. 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 in the future as determined under the regulations.
In addition to the net operating losses since the 30DC share transaction on
September 10, 2010, Infinity had net operation losses that predate the share
transaction. At the time of the share transaction, Infinity had approximately
$936,300 in U.S. federal net operating loss carryovers and $170,500 U.S. capital
loss carryovers which expire beginning in 2023 and are not included in the net
operating loss carryover above. The business of Infinity is included in
discontinued operations, pursuant to limitations under Internal Revenue Code
Section 382 these carryovers cannot be utilized to offset future taxable income
from continuing operations. The Company had realized gains of $35,645 from
discontinued operations during the year ended June 30, 2013 which was offset by
Infinity's carryovers.
NOTE 11. STOCKHOLDERS' EQUITY
-----------------------------
COMMON STOCK
During the year ended June 30, 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 fair value of these shares was $48,000 and 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
F-20
30DC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014
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 fair value of these shares was $6,100
and 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 fair value of these shares was
$22,000 and 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 year ended June 30, 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.
During the year ended June 30, 2013, the Company issued common stock as follows:
500,000 shares of common stock with a fair value of $45,000 to GHL Group, Ltd.
for consulting services,
15,385 shares of common stock to a consultant as partial payment for services of
$2,000,
13,487,363 shares of common stock with a fair value of $1,078,989 to Netbloo
Media, Ltd. as consideration for purchase of 50% of the MagCast JV and Market
Pro Max (see Note 4),
55,770 shares of common stock to Michael A. Littman as payment for $14,500
included in accounts payable. Mr. Littman is an attorney who has provided
services to the Company and who provided services to Infinity prior to the share
exchange.
WARRANTS AND OPTIONS
At June 30, 2012, the Company had 600,000 fully vested options outstanding as
follows:
404,000 options exercisable at 80 cents per share expiring August 7, 2018,
156,000 of these options are held by Pierce McNally a director of the Company,
196,000 options exercisable at 50 cents per share expiring January 5, 2019,
36,500 of these options are held by Pierce McNally a director of the Company,
The balance of these options were held by a former employee and former directors
of Infinity.
161,163 warrants (net of forfeitures) are due to Imperial Consulting Network
under an agreement signed in June 2010 at an exercise price of $0.0001 per
share. Such warrants are yet to be issued.
Pursuant to a private placement memorandum ("PPM") issued in August 2010 the
Company offered units consisting of one share of common stock, one warrant at 37
cents per share exercisable until March 15, 2011 ("37-Cent Warrant") and one
warrant at 50 cents per share exercisable five years from the date of issuance
("50-Cent Warrant") for a price of 26 cents per unit. A first closing was held
F-21
30DC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014
on September 22, 2010 under which 2,554,205 37-Cent Warrants were issued along
with 2,554,205 50-Cent Warrants expiring September 22, 2015. From November 2010
through March 2011, an additional 847,317 37-Cent Warrants were issued and
847,317 50-Cent Warrants were issued. All of the 37-Cent Warrants expired March
15, 2011 unexercised.
Further information relating to warrants is as follows:
WEIGHTED
WEIGHTED AVERAGE
NUMBER AVERAGE REMAINING
OF EXERCISE CONTRACT
SHARES PRICE LIFE (YEARS)
-------------------------------------------
Outstanding warrants at 6/30/12 3,401,522 $0.50 3.30
Granted - - -
Exercised - - -
Forfeited/expired - - -
Outstanding warrants at 06/30/13 3,401,522 $ 0.50 2.30
Granted - - -
Exercised - - -
Forfeited/expired - - -
Outstanding warrants at 6/30/14 3,401,522 0.50 1.30
Exercisable on 6/30/13 3,401,522 0.50 2.30
Exercisable on 6/30/14 3,401,522 0.50 1.30
On October 11, 2012, the Company's board of directors approved the Company's
2012 stock option plan (see Note 12) and grants of 3,000,000 options to purchase
the Company's common stock with an exercise price of $0.08 per share expiring on
October 10, 2022. 1,500,000 of these options were granted to Theodore A.
Greenberg, the Company's Chief Financial Officer and a Director of the Company
and 1,500,000 of these options were granted to Henry Pinskier who joined the
Company as a Director in October 2012 and became Chairman in January 2013.
NOTE 12 - 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 $67,237 and $153,629
respectively for the years ended June 30 30, 2014 and June 30, 2013. 3,000,000
options were granted on October 11, 2012 of which 1,000,000 vested January 1,
2013, 1,000,000 vested January 1, 2014 and 1,000,000 vest on January 1, 2015.
The cost of options vesting January 1, 2013 was recorded in the year ended June
30, 2013 and the cost of options vesting in 2014 and 2015 are being recorded on
a straight-line basis over the vesting period. There was no impact on the
Company's cash flow.
The Company's stock incentive plan is the 30DC, Inc. 2012 Stock Option and Award
Plan (the "Plan"). The Plan provides for the grant of non-qualified stock
options to selected employees and directors. The Plan is administered by the
Board and authorizes the grant of options 7,500,000. The Board determines which
eligible individuals are to receive options or other awards under the Plan, the
F-22
30DC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014
terms and conditions of those awards, the applicable vesting schedule, the
option price and term for any granted options, and all other terms and
conditions governing the option grants and other awards made under the Plans.
The fair value of each option award was estimated on the date of grant using the
Black-Scholes option valuation model using the assumptions noted as follows:
expected volatility was based on historical trading in the company's stock from
the September 10, 2010 date of the Infinity/30DC transaction through the October
11, 2012 date the options were issued. The expected term of options granted was
determined using the simplified method under SAB 107 and represents one-half the
exercise period. The risk-free rate is calculated using the U.S. Treasury yield
curve, and is based on the expected term of the option. The Company has
estimated there will be no forfeitures.
During the year ended June 30, 2013, Henry Pinskier, Chairman of the Company was
issued an option exercisable for 1,500,000 shares of the Company's common stock
and Theodore A. Greenberg, the Company's Chief Financial Officer and a Director,
was issued an option exercisable for 1,500,000 shares of the Company's common
stock. The Black-Scholes option pricing model was used with the following
weighted-average assumptions for options granted during the year ended June 30,
2013:
Risk-free interest rate 0.67-0.88 %
Expected option life 5.1-6.1 years
Expected volatility 526.82-576.16 %
Expected dividend yield 0.0 %
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 06/30/12 600,000 $0.70 6.24
Granted 3,000,000 $0.08 9.28
Exercised - - -
Forfeited/expired - - -
Outstanding options at 06/30/13 3,600,000 $ 0.18 8.61
Granted - - -
Exercised - - -
Forfeited/expired - - -
Outstanding options at 6/30/14 3,600,000 0.18 7.61
Exercisable on 6/30/13 1,600,000 0.31 7.77
Exercisable on 6/30/14 2,600,000 0. 22 7.35
The options have a contractual term of ten years. The aggregate intrinsic value
of shares outstanding and exercisable was $100,000 at June 30, 2014. Total
intrinsic value of options exercised was $0 for the year ended June 30, 2014 as
no options were exercised during this period.
At June 30, 2014, shares available for future stock option grants to employees
and directors under the 2012 Stock Option Plan were 4,500,000.
F-23
30DC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014
NOTE 13. SUPPLEMENTAL SCHEDULE OF OPERATING EXPENSES
----------------------------------------------------
Year Ended Year Ended
June 30, 2014 June 30, 2013
------------------- -------------------
Related Party Contractor Fees (1) $ 654,653 $ 684,909
Officer's Salary 233,619 276,814
Directors' Fees 143,618 76,814
Independent Contractors 480,307 313,756
Commissions 754,866 208,858
Professional Fees 153,958 183,617
Credit Card Processing Fees 128,339 33,497
Telephone and Data Lines 37,109 57,276
Other Operating Costs 257,359 200,863
------------------- -------------------
Total Operating Expenses $ 2,843,828 $ 2,036,404
=================== ===================
--------------------------------
(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
F-24
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
--------------------------------------------------------------------------------
Not applicable.
ITEM 9A. CONTROLS AND PROCEDURES
--------------------------------
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Disclosure controls and procedures are controls and other procedures that are
designed to ensure that information required to be disclosed by our Company is
recorded, processed, summarized and reported, within the time periods specified
in the rules and forms of the SEC. Our Chief Executive Officer and Chief
Financial Officer are responsible for establishing and maintaining disclosure
controls and procedures for our Company.
Management, consisting of the Company's Chief Executive Officer and Chief
Financial Officer, after evaluating the effectiveness of the Company's
disclosure controls and procedures as defined in Exchange Act Rules 13a-14(c) as
of June 30, 2014 (the "Evaluation Date") concluded that as of the Evaluation
Date, the Company's disclosure controls and procedures were ineffective to
ensure that material information relating to the Company would be made known to
them by individuals within those entities, particularly during the period in
which this annual report was being prepared and that information required to be
disclosed in the Company's SEC reports has not been recorded, processed,
summarized, and reported within the time periods specified in the SEC's rules
and forms. As further detailed in the financial reporting controls section
below, the Company has limited resources and staff which impacts timeliness and
effective of disclosure controls.
REPORT OF MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management, with the participation of our Chief Executive Officer and Chief
Financial Officer, carried out an evaluation of the effectiveness of our
"internal control over financial reporting" (as defined in the Securities
Exchange Act of 1934 (the "Exchange Act") Rules 13a-15(e) and 15d-15(e)) as of
the end of the period covered by this annual report on Form 10-K (the
"Evaluation Date"). Based upon that evaluation, our Chief Executive Officer and
Chief Financial Officer concluded that, as of the Evaluation Date, our "internal
control over financial reporting" is not effective to ensure that information
required to be disclosed by us in the reports that we file or submit under the
Exchange Act (i) is recorded, processed, summarized and reported, within the
time periods specified in the SEC rules and forms and (ii) is accumulated and
communicated to our management, including our Chief Executive Officer and Chief
Financial Officer, as appropriate to allow timely decisions regarding required
disclosure. Specifically, management's evaluation was based on the following
material weaknesses, which existed as of June 30, 2014:
(1) 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.
(2) 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.
-27-
We believe that our weaknesses in internal control over financial reporting and
our disclosure controls relate in part to the fact that we are an emerging
business with limited personnel. Management and the Board of Directors believe
that the Company must allocate additional human and financial resources to
address these matters. Throughout the year, the Company has been continuously
improving its monitoring of current reporting systems and its personnel. The
Company intends to continue to make improvements in its internal controls over
financial reporting and disclosure controls until its material weaknesses are
remediated.
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 duties which previously had not been.
DISCLOSURE CONTROLS AND PROCEDURES
Our management, including our Chief Executive Officer and Chief Financial
Officer, does not expect that our disclosure controls and procedures or our
internal controls will prevent all errors and all fraud. A control system, no
matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are met. Further,
the design of a control system must reflect the fact that there are resource
constraints and the benefits of controls must be considered relative to their
costs. Because of the inherent limitations in all control systems, no evaluation
of controls can provide absolute assurance that all control issues and instances
of fraud, if any, within the Company have been detected, at this time.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There was no change in the Company's internal control over financial reporting
that occurred during the fiscal quarter ended June 30, 2014, that has materially
affected, or is reasonably likely to materially affect, its internal control
over financial reporting.
The Company is not an "accelerated filer" for the fiscal year ended June 30,
2014 because it is qualified as a "small business issuer". Hence, under current
law, the internal controls certification and attestation requirements of Section
404 of the Sarbanes-Oxley act will not apply to the Company. This Annual report
on Form 10-K does not include an attestation report of our registered public
accounting firm regarding internal control over financial reporting.
Management's report was not subject to attestation by our registered public
accounting firm pursuant to temporary rules of the Securities and Exchange
Commission that permit us to provide only management's report in this Annual
Report on Form 10-K.
ITEM 9B. OTHER INFORMATION
--------------------------
Not applicable.
-28-
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
---------------------------------------------------------------
The following table sets forth information as to persons who currently serve as
30DC, Inc., directors or executive officers, including their ages as of June 30,
2014.
NAME AGE POSITION
------------------------- ------------------- ----------------------------------
Edward Dale 44 President, CEO and Director (1)
Theodore A. Greenberg 54 CFO, Secretary and Director
Henry Pinskier 54 Chairman of the Board (2)
Gregory H. Laborde 49 Director
Pierce McNally 65 Director
-------------------------
30DC's directors are elected by the Company's shareholders and hold office until
their successors are duly elected and qualified under 30DC's bylaws.
Unless otherwise indicated, the directors named above will serve until the next
annual meeting of 30DC stockholders. Thereafter, directors will be elected for
one-year terms at the annual stockholders' meeting.
BIOGRAPHICAL INFORMATION
The following is a brief account of the business experience during at least the
past five years of the directors and Officers of 30DC, indicating the principal
occupation and employment during that period by each, and the name and principal
business of the organizations by which they were employed.
EDWARD DALE, DIRECTOR AND CHIEF EXECUTIVE OFFICER
Mr. Dale, age 44, has served as a Director and President and CEO of 30DC since
the transaction between Infinity and 30DC DE on September 10, 2010. Mr. Dale was
a founding shareholder of 30DC DE and served as its President, Chief Executive
Officer and a director from October 2008 until September 10, 2010. From 2005 to
2008, Mr. Dale developed the 30 Day Challenge business, which he ran for 4 years
as part of the Marillion Partnership and was sold to 30DC DE in July 2009.
HENRY PINSKIER, CHAIRMAN OF THE BOARD
Mr. Pinskier, age 54, joined the Company's board of directors on October 11,
2012 and was elected Chairman of the Board on January 31, 2013. Mr. Pinskier
serves as Chair and Joint Owner (1993- current) of Medi7 Pty Ltd., a General
Practice medical services company with 70 Doctors and staff across multiple
clinics in Melbourne Australia. Mr. Pinskier also currently serves as Chair for
Spondo P/L an unlisted Public Company, which provides syndicated, secure easy to
use video on demand system utilizing Pay Per View with a multi-level payment
distribution process. He has previously served on the boards of 3 publicly
listed companies in Australia related to Health technology in the area of
Medical devices and services as well as having served as a Director of a Private
US company with an Australian subsidiary delivering safety surveillance
services. Mr. Pinskier has been involved in the Health Sector and IT /IM sector
as well as having served as a Director in the past on a number of Victorian
-29-
public sector organizations, VMIA the State Government of Victoria's Insurance
Company from 2005-2011, Yarra Valley Water from 2008-2011 and The Alfred Group
of Hospitals from 2000-2009. From 1985 until 2000, he practiced medicine. Across
the different organizations he Chaired Strategy subcommittees, Risk and Audit
Committees, Nomination Committees and been part of Finance Committees. Mr.
Pinskier attended and graduated MBBS from Monash University in 1984.
THEODORE A. GREENBERG, DIRECTOR AND CHIEF FINANCIAL OFFICER
Mr. Greenberg, age 54, has served as a Director, Chief Financial Officer and
Secretary of 30DC and Infinity since November 15, 2005. Mr. Greenberg is a
senior financial executive with more than 30 years experience in private equity,
consulting, industry and public accounting. He was a General Partner and
co-founder of Park Avenue Equity Partners, LP, a $110 million private equity
fund focused on the middle market. In his five years with Park Avenue, Mr.
Greenberg, sourced, evaluated and negotiated deals and worked extensively with
portfolio companies post acquisition. Prior to founding Park Avenue, he worked
with Development Capital, LLC on direct equity investments and served as
consulting CFO to one of Development Capital's portfolio companies. Previously,
Ted directed the financial services practice at Marcum & Kliegman, LLP, a New
York Metropolitan area accounting and consulting firm where he advised on merger
and acquisition transactions, as well as operations and taxation. Mr. Greenberg
graduated with a BS in Accounting, Cum Laude, from the State University of New
York at Albany in 1980 and received an MBA in Finance & Business Policy from the
University of Chicago in 1987. Mr. Greenberg earned certification as a Certified
Public Accountant in New York State.
GREGORY H. LABORDE, DIRECTOR
Mr. Laborde, age 49, has served as a Director of 30DC since September 10, 2010.
Prior to the transaction between Infinity and 30DC DE, Mr. Laborde served as
President, Chief Executive Officer and Chairman of the Board of Infinity. Mr.
Laborde currently serves as President and Chief Executive Officer of 21st
Century Investor Relations and has over 22 years experience on Wall Street in
the areas of investment banking, trading, sales and financial consulting. From
1986 to 1997, Mr. Laborde worked in corporate finance at a number of prestigious
NYC based investment banks, including: Drexel Burnham Lambert, Lehman Brothers,
Gruntal & Co., and Whale Securities. During his Wall Street tenure, Mr. Laborde
was involved in over 20 public and private financing transactions totaling over
100 million dollars. In 1999 he founded and took public Origin Investment Group,
a business development company that was involved in investing in IT related
businesses. Mr. Laborde earned a Bachelor of Science degree in Engineering from
Lafayette College in 1986.
PIERCE MCNALLY, DIRECTOR
Mr. McNally, age 65, has served as a Director of 30DC and Infinity since 2006.
Mr. McNally, serves of counsel to Gray Plant Mooty, (Minneapolis, St. Cloud, MN
and Washington, D.C.) practicing in the areas of business law and
entrepreneurial services. He also serves as Chief Strategy Officer and General
Counsel of Cielostar, Inc. a healthcare and benefits technology payments
solutions company located in Minneapolis, MN. He has served as Chairman and
Director of Lockermate Corporation of Minnetonka, Minnesota, a company that
provides locker organizing systems and fashion accessories to the retail trade.
He served as Minnesota American's Chairman of the Board, Chief Executive Officer
and Secretary from October 1994 until January 2000, when Minnesota American
merged with CorVu Corporation (OTC: CRVU). He served as Chairman and Director of
Corporate Development of Nicollet Process Engineering, Inc. from May 1995 until
April 1999, when he retired from the board. He also served on the board of
directors of Digital Town (OTC:BB DGTW) and Outsell, LLC. In December, 1983,
Pierce was elected to the board of directors of his family company, Midwest
Communications, Inc., owner of numerous broadcast properties including WCCO-TV,
WCCO-AM and WLTE in the Twin Cities. In 1989, he was subsequently also elected
an officer of the company and he served in both capacities until the company
-30-
merged with CBS, Inc. (NYSE:CBS) in 1992. Mr. McNally completed his
undergraduate studies at Stanford University. He received his law degree from
the University of Wisconsin Law School in 1978. He is a member of Order of the
Coif.
No appointee for a director position has been found guilty of any civil
regulatory or criminal offense or is currently the subject of any civil
regulatory proceeding or any criminal proceeding.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires that the Company's officers and directors, and persons who own more
than ten percent of a registered class of the Company's equity securities, file
reports of ownership and changes in ownership with the Securities and Exchange
Commission. Officers, directors and greater than ten percent stockholders are
required by regulation to furnish to the Company copies of all Section 16(s)
forms they file.
The following persons failed to file forms during the past two fiscal years as
required under Section 16(a) as follows:
None.
CONFLICTS OF INTEREST
Members of the Company's management are associated with other firms involved in
a range of business activities. Consequently, there are potential inherent
conflicts of interest in their acting as officers and directors of the Company.
Insofar as the officers and directors are engaged in other business activities,
management anticipates it will devote only a minor amount of time to the
Company's affairs.
The Company's Board of Directors has adopted a policy that the Company will not
seek a merger with, or acquisition of, any entity in which any officer or
director serves as an officer or director or in which they or their family
members own or hold a controlling ownership interest. Although the Board of
Directors could elect to change this policy, the Board of Directors has no
present intention to do so.
There can be no assurance that management will resolve all conflicts of interest
in favor of the Company.
COMMITTEES OF THE BOARD OF DIRECTORS
30DC is managed under the direction of its board of directors.
EXECUTIVE COMMITTEE
30DC does not have an Executive Committee at this time.
AUDIT COMMITTEE
30DC does not have an Audit Committee, at this time but plans to
institute an audit committee in the future.
COMPENSATION COMMITTEE
30DC does not have a Compensation Committee at this time but plans to
institute a Compensation Committee in the future.
-31-
CONFLICTS OF INTEREST - GENERAL
The Company's directors and officers are, or may become, in their individual
capacities, officers, directors, controlling shareholder and/or partners of
other entities engaged in a variety of businesses. Thus, there exist potential
conflicts of interest including, among other things, time, efforts and
corporation opportunity, involved in participation with such other business
entities. While each officer and director of the Company's business is engaged
in business activities outside of its business, the amount of time they devote
to Infinity's business will be up to approximately 40 hours per week.
CONFLICTS OF INTEREST - CORPORATE OPPORTUNITIES
Presently no requirement contained in the Company's Articles of Incorporation,
Bylaws, or minutes which requires officers and directors of the Company's
business to disclose to 30DC business opportunities which come to their
attention. The Company's officers and directors do, however, have a fiduciary
duty of loyalty to 30DC to disclose to it any business opportunities which come
to their attention, in their capacity as an officer and/or director or
otherwise. Excluded from this duty would be opportunities which the person
learns about through his involvement as an officer and director of another
company. The Company has no intention of merging with or acquiring an affiliate,
associate person or business opportunity from any affiliate or any client of any
such person.
ITEM 11. EXECUTIVE COMPENSATION
-------------------------------
The following table sets forth the compensation paid and accrued to officers
during the fiscal years ended June 30, 2014, 2013 and 2012. The table sets forth
this information for 30DC and Infinity Capital Group, Inc., including salary,
bonus, and certain other compensation to the named executive officers for the
past three fiscal years and includes all Officers as of June 30, 2014.
SUMMARY EXECUTIVES COMPENSATION TABLE
-------------------- ------ ---------- -------- -------- -------- ------------ ------------- -------------- ----------
NON-EQUITY NON-QUALIFIED
INCENTIVE DEFERRED
STOCK OPTION PLAN COMPENSATION ALL OTHER
SALARY BONUS AWARDS AWARDS COMPENSATION EARNINGS COMPENSATION TOTAL
NAME & POSITION YEAR ($) ($) ($) ($) ($) ($) ($) ($)
-------------------- ------ ---------- -------- -------- -------- ------------ ------------- -------------- ----------
Edward Dale, CEO 2014 294,653 0 0 0 0 0 0 294,653
(1) 2013 338,596 40,000 0 0 0 0 0 378,596
2012 328,376 0 0 0 0 0 0 328,376
-------------------- ------ ---------- -------- -------- -------- ------------ -------------- -------------- ----------
Theodore A. 2014 200,000 0 0 33,619 233,619
Greenberg, CFO and 2013 200,000 0 0 76,814 0 0 0 276,814
Secretary (2) 2012 200,000 0 0 0 0 0 0 200,000
-------------------- ------ ---------- -------- -------- -------- ------------ -------------- -------------- ----------
Dan Raine, 2014 166,667 0 0 0 0 0 0 166,667
Former VP Business 2013 251,785 0 0 0 0 0 0 251,785
Development (3) 2012 250,000 0 0 0 0 0 0 250,000
-------------------- ------ ---------- -------- -------- -------- ------------ -------------- -------------- ----------
Clinton Carey, 2014 0 0 0 0 0 0 0 0
Former COO (4) 2013 0 0 0 0 0 0 0 0
2012 175,052 0 0 0 0 0 0 175,052
-------------------- ------ ---------- -------- -------- -------- ------------ -------------- -------------- ----------
(1) Marillion Partnership ("Marillion"), an affiliate of the Company that
manages marketing and development for the Company and provides the services of
Edward Dale as CEO of the Company.
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By contract Marillion receives annual contractor fees of $317,825 AUD Dollars
which is paid periodically throughout the year. The Company converts US Dollars
to AUD on the date of each payment and records the USD amount as related party
contractor fees. The USD amount for the year is dependent on the fluctuation in
the USD/AUD exchange rate.
During the year ended June 30, 2013 the board awarded Marillion a one-time bonus
of $40,000 upon completion of the asset acquisition which included the remaining
50% of the MagCast Publishing Platform.
(2) Theodore A. Greenberg earned an annual salary of $200,000 for his services
as an officer of the Company which was included in officers' salaries. During
the years ended June 30, 2012 and June 30, 2013 this was accrued but not paid
and during the year ended June 30, 2014, only $47,000 was paid . The unpaid
amount for each of these years is included in due to related parties.
(3) During the year ended June 30, 2012 Raine Ventures, LLC., a company
affiliated with Dan Raine earned $250,000 which was included in related party
contractor fees. During the year ended June 30, 2013 Raine Ventures earned
$251,785. On February 28, 2014, in connection with the Immediate Edge
divestiture, Mr. Raine resigned as the Company's VP of Business Development and
Rained Ventures resigned from its contract. Raine Ventures earned $166,667
during the eight months ended February 28, 2014. All amounts earned by Raine
Ventures in the years ended June 30, 2013 and 2014 are included in results from
discontinued operations.
(4) By contract, Jesselton was due $254,260 AUD per year but on March 1, 2012,
Mr. Carey resigned as the Company's Chief Operating Officer and Jesselton
voluntarily resigned from its contract. During the year ended June 30, 2012,
Jesselton, earned $175,052 in contractor fees. Clinton Carey was engaged by the
Company as a contractor in July 2013 but is no longer an officer of the Company.
OPTION/SAR GRANTS IN THE LAST FISCAL YEAR
COMPENSATION PURSUANT TO STOCK OPTION PLAN
No options were issued under the Company's 2008 stock option plan.
No options were issued under the Company's 2012 stock option plan however
options issued in a previous year continued to vest.
On October 11, 2012 our directors approved the Company's 2012 Stock Option Plan
(the "Plan") authorizing the plan to grant options to purchase up to 7,500,000
shares of our common stock.
The board's responsibility will include the selection of option recipients, as
well as, the type of option granted and the number of shares covered by the
option and the exercise price.
Plan options may either qualify as non-qualified options or incentive stock
options under Section 422 of the Internal Revenue Code. Any incentive stock
option granted under the plan must provide for an exercise price of at least
100% of the fair market value on the date of such grant and a maximum term of
ten years.
All of our officers, directors, key employees and consultants will be eligible
to receive non-qualified options under the plan. Only officers, directors and
employees who are formally employed by the Company are eligible to receive
incentive options.
All incentive options are non-assignable and non-transferable, except by will or
by the laws of descent and distribution. If an optionee's employment is
terminated for any reason other than death, disability or termination for cause,
the stock option will lapse on the earlier of the expiration date or three
months following the date of termination. If the optionee dies during the term
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of employment, the stock option will lapse on the earlier of the expiration date
of the option or the date one-year following the date of death. If the optionee
is permanently and totally disabled within the meaning of Section 22(e)(3) of
the Internal Revenue Code, the plan option will lapse on the earlier of the
expiration date of the option or one year following the date of such disability.
On October 11, 2012, 1,500,000 options to purchase shares of the Company's
common stock were issued to Theodore A. Greenberg the Company's Chief Financial
Officer and a Director and 1,500,000 options to purchase shares of the Company's
common stock were issued to Henry Pinskier who is a Director and who
subsequently became Chairman of the Board.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END
---------------- ------------------------------------------------------------------ ---------------------------------------
OPTION AWARDS STOCK AWARDS
---------------- ------------------------------------------------------------------ ---------------------------------------
EQUITY EQUITY
INCENTIVE INCENTIVE
MARKET PLAN PLAN
VALUE AWARDS: AWARDS:
NO. OF OF NUMBER MARKET OR
EQUITY SHARES SHARES OF PAYOUT
INCENTIVE OR OR UNEARNED VALUE OF
PLAN UNITS UNITS SHARES, UNEARNED
AWARDS: OF OF UNITS OR SHARES,
NO. OF NO. OF NUMBER OF STOCK STOCK OTHER UNITS OR
SECURITIES SECURITIES SECURITIES THAT THAT RIGHTS OTHER
UNDERLYING UNDERLYING UNDERLYING HAVE HAVE THAT RIGHTS
UNEXERCISED UNEXERCISED UNEXERCISED OPTION OPTION NOT NOT HAVE NOT THAT HAVE
OPTIONS (#) OPTIONS (#) UNEARNED EXERCISE EXPIRATION VESTED VESTED VESTED NOT
NAME EXERCISABLE UNEXERCISABLE OPTIONS (#) PRICE ($) DATE (#) (#) (#) VESTED ($)
---------------- ------------- --------------- ------------- ---------- ----------- ------- -------- ---------- -----------
Theodore A. 1,000,000 500,000 $0.08 10/10/22
Greenberg (1)
---------------- ------------- --------------- ------------- ---------- ----------- ------- -------- ---------- -----------
Henry Pinskier 1,000,000 500,000 $0.08 10/10/22
(1)
---------------- ------------- --------------- ------------- ---------- ----------- ------- -------- ---------- -----------
(1) Options awarded under 2012 stock option plan.
CONTRACTOR AGREEMENTS AND TERMINATION OF CONTRACTOR AND CHANGE-IN-CONTROL
ARRANGEMENTS
MARILLION PARTNERSHIP
The Company entered into a three-year Contract for Services Agreement commencing
July 2009 with Marillion an affiliate of the Company that manages marketing and
development for the Company and provides the services of Edward Dale as CEO of
the Company for among other things, the payment of $250,000 in cash remuneration
per year.
On December 12, 2011 cash remuneration under the Marillion contractor agreement
was amended for the year ended June 30, 2012 to the Australian Dollar equivalent
of the originally contracted amount at the exchange rate on the contract start
date of July 15, 2009. The original annual contract amount of $250,000 was
amended to $317,825 AUD Dollars Effective July 1, 2012 the United States Dollar
equivalent amount varies with the exchange rate.
The Marillion contractor agreement expired June 30, 2012 and has continued on a
month to month basis under the terms of the expired agreement. During the years
ended June 30, 2014 and June 30, 2013, Marillion received annual contractor fees
of $294,653 and $338,596 respectively.
-34-
RAINE VENTURES, LLC
The Company entered into a three-year Contract For Services Agreement commencing
July 2009 with 23V Industries, Ltd. ("23V") for services which include Mr. Dan
Raine acting as the Company's Vice President of Business Development providing
for among other things, the payment of $250,000 in cash remuneration per year.
Effective April 1, 2010, Raine Ventures, LLC ("Raine Ventures") replaced 23V
Industries, Ltd in providing consulting services to the Company including Mr.
Raine acting as the Company's Vice President of Business Development.
The Raine Ventures contractor agreement expired June 30, 2012 and continued on a
month to month basis under similar terms through February 28, 2014 when the
Company divested the Immediate Edge and Mr. Raine resigned as the Company's VP
of Business Development and Rained Ventures resigned from its contract.
If in any year starting from the commencement date of the Marillion and Raine
Ventures contractor agreements, revenues of 30DC, Inc. doubles, compared to the
preceding year, then a bonus equal to 50% of cash remuneration will be due in
shares of 30DC, Inc. as additional compensation. This threshold was not achieved
for the fiscal years ending June 30, 2014 and 2013.
DESCRIPTION OF 30 DC DE CONTRACTOR AGREEMENTS
The Marillion and Raine Ventures contractor agreements were with 30DC DE, a
subsidiary of 30DC. The agreements provided the following terms:
BONUSES: Performance bonuses and milestones for such bonus are to be determined
by the Board of Directors.
SALARY: Annual reviews of compensation are to be performed by the Board of
Directors. At such review the Board of 30DC shall consider: the responsibilities
of the contractor, the performance of the company, the performance of the
contractor's division, the performance of the contractor, the remuneration
available in the workforce outside the 30DC for persons with responsibilities
and experience equivalent to those of the contractor and the benefits which have
accrued and will accrue under the agreement.
TAKEOVER EVENT: If, a Trade Sale or a Takeover Event occurs and the Executive
providing services through one of the contractor agreements is required to
resign as Officer of the Company, and the Agreement is effectively terminated,
then in addition to any other entitlements due to the contractor in accordance
with the terms of this Agreement, the contractor will be entitled to:
- be paid a lump sum equal to at least the total of all amounts that, if
the contract had continued until the end of the term, 30DC would have
become liable to pay to the contractor during that period; and
- be issued with that number of shares in 30DC comprising 50% of the
cash remuneration.
None of the Executives providing services through the contractor agreements were
required to resign their positions with 30DC as a result of the transaction with
Infinity so this provision did not apply. When the Company divested Immediate
Edge, on February 28, 2014, Raine Ventures resigned its contractor agreement and
is due no further compensation under its contract.
-35-
NETBLOO MEDIA, LTD.
Effective October 1, 2012, 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.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In August 2008, the Board of Directors approved and created a compensation
committee. The committee consisted of the independent directors of the Company.
Contemporaneous with the Infinity/30DC transaction, two of the independent
directors resigned and the compensation committee ceased to exist. The Company
plans to form a new compensation committee when new independent directors join
the board.
DIRECTOR COMPENSATION
Historically, the Company had not paid any Directors fees for meeting
attendance. In September 2013, the Company approved annual fees to non-executive
directors of $30,000 per year and $50,000 per year for the board chairman. At
the Company's option, director's fees may be paid in stock.
(REMAINDER OF PAGE LEFT BLANK INTENTIONALLY)
-36-
DIRECTORS COMPENSATION
The following table sets forth certain information concerning compensation paid
to the Company's directors during the year ended June 30, 2014:
FEES NON-QUALIFIED
EARNED OR NON-EQUITY DEFERRED
NAME PAID IN STOCK OPTION INCENTIVE PLAN COMPENSATION ALL OTHER
CASH AWARDS AWARDS COMPENSATION EARNINGS COMPENSATION TOTAL
($) ($) ($) ($) ($) ($) ($)
---------------- ------------ ------- -------- --------------- ------------- ------------- ----------
Edward Dale (1) $ -0- $ -0- $ -0- $ -0- $ -0- $-0- $-0-
Theodore A. $ -0- $ -0- $ -0- $ -0- $ -0- $-0- $-0-
Greenberg (2)
Gregory H. $30,000 $ -0- $ -0- $ -0- $ -0- $-0- $30,000
Laborde (3)
Pierce McNally $30,000 $ -0- $-0- $ -0- $-0- $ -0- $30,000
(4)
Henry
Pinskier (5) $50,000 $-0- $33,618 $ -0- $-0- $ -0- $83,618
----------------
(1) During the year ended June 30, 2014, Marillion Partnership, an
affiliate of the Company that manages marketing and development for
the Company and provides the services of Edward Dale as CEO of the
Company was paid $294,653 which was included in related party
contractor fees.
(2) During the year ended June 30, 2014, Theodore A. Greenberg earned
salary of $200,000 and received a stock option award for which $33,619
was charged to officers' salaries for his services as an officer of
the Company, the $153,000 was accrued but not actually paid.
(3) During the year ended June 30, 2014, GHL Group, whose President,
Gregory H. Laborde is a Director, earned $60,000 which was included in
related party contractor fees. $25,000 of the director fees due Mr.
Laborde remain unpaid and the Company has the option to pay this in
stock.
(4) $27,000 of the director fees due Pierce McNally remain unpaid and the
Company has the option to pay this in stock.
(5) $42,000 of the director fees due Henry Pinskier remain unpaid and the
Company has the option to pay this in stock.
All of the Company's officers and/or directors will continue to be active in
other companies. All officers and directors have retained the right to conduct
their own independent business interests.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
30DC's officers and directors are indemnified as provided by the Maryland
Revised Statutes and the bylaws.
Under the Maryland Revised Statutes, director immunity from liability to a
company or its shareholders for monetary liabilities applies automatically
unless it is specifically limited by a company's Articles of Incorporation. The
Company's Articles of Incorporation do not specifically limit the directors'
immunity. Excepted from that immunity are: (a) a willful failure to deal fairly
-37-
with Infinity or its shareholders in connection with a matter in which the
director has a material conflict of interest; (b) a violation of criminal law,
unless the director had reasonable cause to believe that his or her conduct was
lawful or no reasonable cause to believe that his or her conduct was unlawful;
(c) a transaction from which the director derived an improper personal profit;
and (d) willful misconduct.
The Company's bylaws provide that it will indemnify the directors to the fullest
extent not prohibited by Maryland law; provided, however, that it may modify the
extent of such indemnification by individual contracts with the directors and
officers; and, provided, further, that the Company shall not be required to
indemnify any director or officer in connection with any proceeding, or part
thereof, initiated by such person unless such indemnification: (a) is expressly
required to be made by law, (b) the proceeding was authorized by the board of
directors, (c) is provided by the Company, in sole discretion, pursuant to the
powers vested under Maryland law or (d) is required to be made pursuant to the
bylaws.
The Company's bylaws provide that it will advance to any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director or officer of
the Company, or is or was serving at the request of Infinity as a director or
executive officer of another company, partnership, joint venture, trust or other
enterprise, prior to the final disposition of the proceeding, promptly following
request therefore, all expenses incurred by any director or officer in
connection with such proceeding upon receipt of an undertaking by or on behalf
of such person to repay said amounts if it should be determined ultimately that
such person is not entitled to be indemnified under the bylaws or otherwise.
The Company's bylaws provide that no advance shall be made by the Company to an
officer except by reason of the fact that such officer is or was the Company's
director in which event this paragraph shall not apply, in any action, suit or
proceeding, whether civil, criminal, administrative or investigative, if a
determination is reasonably and promptly made: (a) by the board of directors by
a majority vote of a quorum consisting of directors who were not parties to the
proceeding, or (b) if such quorum is not obtainable, or, even if obtainable, a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, that the facts known to the decision-making party at the time
such determination is made demonstrate clearly and convincingly that such person
acted in bad faith or in a manner that such person did not believe to be in or
not opposed to the best interests of 30DC, Inc.
EQUITY COMPENSATION PLAN INFORMATION
STOCK OPTION PLAN
The Company has two stock Option Plans. As of June 30, 2014, 600,000 options are
outstanding under the 2008 Option Plan of which all 600,000 are exercisable.
During the year ended June 30, 2014, we did not issue any shares under the
option plan. We have reserved a total of 970,934 shares of common stock for
issuance under the 2008 Option Plan.
On October 11, 2012 our directors approved the Company's 2012 Stock Option Plan
(the "Plan") authorizing the plan to grant options to purchase up to 7,500,000
shares of our common stock. On October 11, 2012, 1,500,000 options to purchase
shares of the Company's common stock were issued to Theodore A. Greenberg the
Company's Chief Financial Officer and a Director and 1,500,000 options to
purchase shares of the Company's common stock were issued to Henry Pinskier who
is a Director and who subsequently became Chairman of the Board. At June 30,
2014, 1,000,000 of the options issued to Mr. Greenberg and 1,000,000 of the
options issued to Mr. Pinskier are exercisable.
-38-
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
--------------------------------------------------------------------------------
The following table sets forth information with respect to the beneficial
ownership of 30DC, Inc. outstanding common stock by:
o each person who is known by 30DC to be the beneficial owner of five
percent (5%) or more of 30DC's common stock;
o 30DC's chief executive officer, its other executive officers, and each
director as identified in the "Management-- Executive Compensation"
section; and
o all of the Company's directors and executive officers as a group.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. Shares of common stock and options, warrants
and convertible securities that are currently exercisable or convertible within
60 days of the date of this document into shares of the Company's common stock
are deemed to be outstanding and to be beneficially owned by the person holding
the options, warrants or convertible securities for the purpose of computing the
percentage ownership of the person, but are not treated as outstanding for the
purpose of computing the percentage ownership of any other person.
The information below is based on the number of shares of 30DC, Inc. common
stock that 30DC believes was beneficially owned by each person or entity as of
June 30, 2014, including options exercisable within 60 days.
TITLE NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT
OF CLASS BENEFICIAL OWNER (1) BENEFICIAL OWNER OF CLASS (2)
--------- ------------------------------- -------------------- ---------------
Common Edward Dale, Director, 20,036,440 26.07%
President, CEO (Directly and
Beneficially through Marillion
Partnership)
Common Gregory H. Laborde, Director, 3,507,250 4.56%
(Beneficially through GHL
Group, Ltd.)
Common Theodore A. Greenberg, CFO, 2,680,770 3.44%
Secretary and Director
Common Pierce McNally, Director (3) 292,500 0.13%
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TITLE NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT
OF CLASS BENEFICIAL OWNER (1) BENEFICIAL OWNER OF CLASS (2)
--------- ------------------------------- -------------------- ---------------
Common Henry Pinskier, Director and 1,247,000 1.60%
Chairman of the Board
Common Jonathan Lint (Beneficially 13,487,363 17.55%
through Netbloo Media, Ltd.)
Common All Directors and Executive 27,763,960 35.21%
Officers as a Group (5 persons)
---------
(1) All directors can be reached at the address of the Company.
(2) At June 30, 2014, the Company had 76,853,464 shares of its common
stock issued and outstanding. The Company had 2,600,000 options issued
and outstanding which were exercisable, but 600,000 of these options
are not included in this calculation as the Company considers them to
be "out of the money" and does not expect the status to change in the
next 60 days.
(3) Mr. McNally's ownership total includes 192,500 options which were
exercisable at June 30, 2014 but not included in his percentage.
Rule 13d-3 under the Securities Exchange Act of 1934 governs the determination
of beneficial ownership of securities. That rule provides that a beneficial
owner of a security includes any person who directly or indirectly has or shares
voting power and/or investment power with respect to such security. Rule 13d-3
also provides that a beneficial owner of a security includes any person who has
the right to acquire beneficial ownership of such security within sixty days,
including through the exercise of any option, warrant or conversion of a
security. Any securities not outstanding which are subject to such options,
warrants or conversion privileges are deemed to be outstanding for the purpose
of computing the percentage of outstanding securities of the class owned by such
person. Those securities are not deemed to be outstanding for the purpose of
computing the percentage of the class owned by any other person.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
-------------------------------------------------------
RELATED PARTY TRANSACTIONS
OFFICERS AND DIRECTORS
During the years ended June 30, 2014 and 2013, Marillion Partnership
("Marillion"), an affiliate of the Company that manages marketing and
development for the Company and provides the services of Edward Dale as CEO was
paid contractor fees of $294,653 and $378,596 (inclusive of $40,000 bonus)
respectively. Mr. Dale is CEO, President and a Director of the Board of the
Company.
During the years ended June 30, 2014 and 2013, Theodore A. Greenberg earned
salary of $200,000 each year. Mr. Greenberg is CFO and a Director of the
Company. On October 11, 2012 Mr. Greenberg was issued 1,500,000 options to
purchase shares of the Company's common stock. The company computed the cost of
-40-
these options using the Black-Scholes option pricing formula which resulted in
total cost of $119,288 of which $33,619 and $76,814 were recorded as expense
during the years ended June 30, 2014 and 2013 respectively.
During the years ended June 30, 2014 and 2013, Henry Pinskier earned directors'
fees of $50,000 and $-0- respectively. Mr. Pinskier is a Director and Chairman
of the Board of the Company. On October 11, 2012 Mr. Pinskier was issued
1,500,000 options to purchase shares of the Company's common stock. The company
computed the cost of these options using the Black-Scholes option pricing
formula which resulted in total cost of $119,288 of which $33,618 and $76,814
were recorded as expense during the years ended June 30, 2014 and 2013
respectively.
During the years ended June 30, 2014 and 2013, Gregory Laborde earned directors'
fees of $30,000 and $-0- respectively. During the years ended June 30, 2014 and
2013 GHL Group, Ltd. whose President, Gregory H. Laborde is a Director, earned
contractor fees of $60,000 and $81,313 respectively. $45,000 of this amount
earned during the year ended June 30, 2013 was paid by issuance of 500,000 of
the Company's restricted common shares.
During the years ended June 30, 2014 and 2013, Pierce McNally earned directors'
fees of $30,000 and $-0- respectively.
OTHER SHAREHOLDERS
During the year ended June 30, 2014 and 2013, Raine Ventures, LLC , a company
affiliated with Dan Raine earned contractor fees of $166,667 and $251,785
respectively. Mr. Raine had beneficial ownership of greater than 5% of the
Company until February 28, 2014. On February 28, 2014, the Company divested the
Immediate Edge in return for 10,560,000 of the Company shares which was all of
the Company shares owned by Raine Ventures.
During the years ended June 30, 2014 and 2013 Netbloo earned contractor fees of
$300,000 and $225,000. Netbloo is a greater than 5% shareholder.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
-----------------------------------------------
GENERAL. Malone Bailey, LLP is the Company's principal auditing accountant firm.
The Company's Board of Directors has considered whether the provisions of audit
services is compatible with maintaining independence.
The following table represents aggregate fees billed to the Company for the
years ended June 30, 2014 and 2013 by Malone Bailey, LLP
Year Ended June 30,
2014 2013
--------------- ---------------
Audit Fees $ 71,600 $ 70,000
Audit-related Fees $ 0 $ 0
Tax Fees $ 0 $ 0
All Other Fees $ 0 $ 0
--------------- ---------------
Total Fees $ 71,600 $ 70,000
-41-
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
------------------------------------------------
The following is a complete list of exhibits filed as part of this Form 10K.
Exhibit number corresponds to the numbers in the Exhibit table of Item 601 of
Regulation S-K.
(a) Audited financial statements for years ended June 30, 2014 and 2013
(b) EXHIBIT NO. DESCRIPTION
----------- --------------------------------------------------------------
3.1 Articles of Incorporation of Infinity Capital Group, Inc. (1)
3.2 Bylaws of Infinity Capital Group, Inc. (1)
31.1 Certification of Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act
31.2 Certification of Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act
32.1 Certification of Principal Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act
32.2 Certification of Principal Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act
101.INS XBRL Instance Document (2)
101.SCH XBRL Taxonomy Extension Schema Document (2)
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document (2)
101.DEF XBRL Taxonomy Extension Definition Linkbase Document (2)
101.LAB XBRL Taxonomy Extension Label Linkbase Document (2)
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document (2)
-------------
(1) Incorporated by reference from the exhibits included in the Company's Form
8K12g3 filed with the Securities and Exchange Commission (www.sec.gov), dated
May 5, 2005. A copy can be provided by mail, free of charge, by sending a
written request to 30DC, Inc., 80 Broad Street, 5th Floor, NY, NY 10004.
(2) 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.
-42-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
30DC, Inc.
Dated: October 10, 2014
By: /s/ Edward Dale
------------------------------------
Edward Dale, President and
Chief Executive Officer
(Principal Executive Officer)
By: /s/ Theodore A. Greenberg
------------------------------------
Theodore A. Greenberg,
Chief Financial Officer
(Principal Accounting Officer),
Secretary and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Dated: October 10, 2014
30DC , Inc.
-------------------------------------
/s/ Edward Dale
-------------------------------------
Edward Dale, Director
/s/ Theodore A. Greenberg
-------------------------------------
Theodore A. Greenberg, Director
/s/ Henry Pinskier
-------------------------------------
Henry Pinskier, Director
/s/ Gregory Laborde
-------------------------------------
Gregory Laborde, Director
-43