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, 2011
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:
Title of each class registered Name of each exchange
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 |_| 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.
|X|
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 $2,645,193 as of December 31, 2010.
There were 74,520,248 shares outstanding of the registrant's Common Stock as of
December 13, 2011.
TABLE OF CONTENTS
PART I
ITEM 1 Business 4
ITEM 1 A. Risk Factors 9
ITEM 1 B. Unresolved Staff Comments 16
ITEM 2 Properties 16
ITEM 3 Legal Proceedings 16
ITEM 4 Removed and Reserved 16
PART II
ITEM 5 Market for Registrant's Common Equity, Related Stockholder Matters and 16
Issuer Purchases of Equity Securities
ITEM 6 Selected Financial Data 19
ITEM 7 Management's Discussion and Analysis of Financial Condition and Results of 19
Operations
ITEM 7 A. Quantitative and Qualitative Disclosures About Market Risk 23
ITEM 8 Financial Statements and Supplementary Data 23
ITEM 9 Changes in and Disagreements with Accountants on Accounting and Financial 24
Disclosure
ITEM 9 A. Controls and Procedures 24
ITEM 9 B Other Information 25
PART III
ITEM 10 Directors, Executive Officers, and Corporate Governance 25
ITEM 11 Executive Compensation 29
ITEM 12 Security Ownership of Certain Beneficial Owners and Management and Related 36
Stockholder Matters
ITEM 13 Certain Relationships and Related Transactions, and Director Independence 38
ITEM 14 Principal Accounting Fees and Services 39
PART IV
ITEM 15 Exhibits, Financial Statement Schedules 40
SIGNATURES
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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").
Infinity was incorporated on July 8, 2003, in Maryland. Until September 10,
2010, Infinity operated as a non-diversified closed-end management investment
company which filed a notice of election to be regulated as a business
development company under the 1940 Act.
On September 10, 2010, Infinity filed a Notification of Withdrawal of Election
to be Subject to Sections 55 through 65 of the Investment Company Act of 1940
filed pursuant to Section 54(c) of the Investment Company Act of 1940 (the 1940
Act) on Form N-54C. Effective upon receipt by the Securities and Exchange
Commission (SEC) the Company was no longer deemed a Business Development Company
and subject to the provisions of the 1940 Act.
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 is now the primary business of Infinity. In addition, as a
result of the transaction the Company's year end changed from December 31st to
June 30th.
Upon closing Messrs. Edward Dale and Clinton Carey were both appointed to the
Board of Directors of Infinity, Mr. Dale was appointed the new Chief Executive
Officer of the Company and Mr. Carey was appointed as the Chief Operating
Officer. Mr. Dale is also the manager and an equity holder of the largest
shareholder of 30DC, Marillion Partnership. Infinity has subsequently been
renamed 30DC, Inc. (Maryland) ("30DC and together with its subsidiary "the
Company").
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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.
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"). 30 Day was acquired from the Marillion
Partnership and Edward Wells Dale, both of Victoria, Australia, in consideration
for the issuance of 2,820,000 shares of Common Stock of 30DC DE. Immediate was
acquired from Dan Raine of Cheshire, United Kingdom, in consideration for the
issuance of 600,000 shares of Common Stock of 30DC DE. The acquired businesses
were sold subject to specific liabilities which included accounts payable,
accrued expenses and deferred revenue. The acquisitions were pursuant to an
agreement dated November 14, 2008. Mr. Dale and Mr. Raine were part of the
founding group of shareholders of 30DC DE and in conjunction with the
acquisitions, Mr. Dale was named the Chief Executive Officer of 30DC DE.
30 Day Challenge and Immediate Edge are 30DC's two business divisions The 30 Day
Challenge division offers a free online ecommerce training program, year round,
with an online education subscription service. Additional offerings are products
and services and periodic premium live seminars intended to target experienced
Internet business operators. Immediate Edge is an online education program
subscription service offering high-end internet marketing instruction and
strategies for experienced online commerce practitioners.
On August 24, 2011 the Company entered into a Share Sale and Purchase Agreement
(the "Purchase") with RivusTV Ltd, ("Rivus") which was organized and exists in
Victoria, Australia. Rivus offers a solution to broadcast digital content across
the Internet on a revenue share basis. The purchase price for 100% of Rivus'
issued and outstanding shares is 45% of 30DC's adjusted issued and outstanding
shares immediately prior to closing which equates to 31% of the total
outstanding shares after closing without regards to the adjustment factor. The
adjustment factor to 30DC's outstanding shares accounts for 30DC's non-operating
liabilities, as defined and is expected to increase the deemed outstanding by
approximately four million shares which would increase Rivus post closing
ownership by an additional 1%. The Purchase is subject to both 30DC and Rivus
completing satisfactory due diligence on each other and a minimum capital raise
of $5 million Australian Dollars (AUD) (currently approximately $5.15 million)
by January 16, 2012 or such other that date that the parties shall agree.
BUSINESS MODEL
30DC's business is driven by expanding its community of members, who have grown
from 1,000 members in 2005 to nearly 100,000 members in 2011. The primary driver
of 30DC's community growth is the Challenge which is a free online internet
marketing program that is paced to be taken over a two-month period. In
substantial detail, the Challenge takes participants through each of the steps
from developing an idea through creating a fully-functioning online revenue
generating business. 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 subscription products ranging in price from $30 - $100 per month
o weekend seminars priced up to $1,000 per participant
o individual courses covering a range of topics such as valuing web
sites
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o one to one mentoring and private business consulting programs
30DC also generates revenue by promoting third party internet marketing products
and services to its base of customers.
30DC plans to increase revenues through expanding its customer base and by
offering more products to its existing customer base. Recently 30 Day has begun
generating revenue from products that target an audience beyond internet
marketing such as instruction on filming high-quality video utilizing mobile
technology devices.
BUSINESS DIVISIONS
THE 30 DAY CHALLENGE
OVERVIEW
On July 15, 2009, 30DC DE acquired the net assets making up the 30 Day Challenge
("30 Day") from the Marillion Partnership and Edward Dale, an officer of 30DC
DE. In exchange for the net assets, 30DC DE issued 2,820,000 shares of common
stock to Marillion Partnership which became 30DC DE's majority shareholder and
subsequently the largest shareholder of the Company. The net assets included
cash, accrued receivables, intellectual property and property and equipment, and
outstanding liabilities consisting of accounts payable, accrued expenses and
deferred revenues.
The 30 Day Challenge division 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 monthly subscriptions, individual
content specific courses, third party products, premium live seminars and one to
one mentoring and consulting. As a third party affiliate, 30 Day Challenge earns
commissions ranging between 20% and 75% on sales of internet marketing products
and services in a price range of $47 to $1,997. Specific products include the
Challenge +, which is offered as a monthly subscription for approximately $30
per month, Dominiche `Buying and Selling Websites' instruction program
("Dominiche"), the Marillion Project which includes intensive consulting and
training for up to $10,000 per year and live seminars which offer premium
content and networking opportunities for internet marketers willing to pay
$1,000 for a three-day seminar.
30 DAY 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
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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 six years and
multiple web sites including the principal web site of the Challenge which is
Challenge.co.
COMMUNITY GROWTH
As indicated below, the 30 Day community has experienced growth over the past
six years;
2005: ~ 1,000 Participants
2006: ~ 3,500 Participants
2007: ~ 15,000 Participants
2008: ~ 45,000 Participants
2009: ~ 80,000 Participants
2010: ~ 90,000 Participants
2011: ~100,000 Participants
Strategies are being implemented and developed to further the growth of the
community including increased marketing through affiliates and joint venture
programs.
THE IMMEDIATE EDGE
OVERVIEW
On July 15, 2009, 30DC DE acquired the net assets making up the Immediate Edge
("Immediate") from Dan Raine, a founding shareholder of 30DC DE. In exchange for
the net assets, 30DC DE issued 600,000 shares of common stock. The net assets
include cash and an outstanding liability consisting of deferred revenues.
Immediate provides a subscription-based Internet education program offering
high-end internet marketing instruction and strategies for online commerce
practitioners. Such education includes advice on selling digital products and
services, how to run membership sites, affiliate management systems, rewards
programs and search engine optimization among other services. Immediate also
generates revenue from standalone products and affiliate marketing of targeted
third-party products to its customer base.
BUSINESS MODEL
Immediate charges subscribers $97 per month for its flagship product the
Immediate Edge which includes information on topics like social bookmarking, web
2.0, Facebook marketing and Twitter strategies. This can represent value for
subscribers because it enables them to avoid paying search engine optimizers
fees for their services. Immediate also offers standalone products including
software plug-ins that enhance the capabilities of commercially available
software designed to drive more traffic to customer web sites. Prior to the
acquisition of Immediate' operations by 30DC DE, Immediate was a customer of 30
Day.
IMMEDIATE EDGE TECHNOLOGY AND INTELLECTUAL PROPERTY
The Immediate Edge intellectual property includes proprietary content developed
over the past four years on varying aspects of internet marketing as well as a
number of web sites including the primary web site Immediate Edge.com. The
member only web site contains self contained training programs ("blueprints") on
specific topics, including but not limited to, creating apps, AdSense, Sniper
Traffic, Flippa, Facebook, business building, product execution and content
clusters which are implementation guides. Members are invited participate in
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question and answer session with internet marketing industry leaders and the
sessions are archived on the member only web site. Members can submit their web
site for a thorough site analysis and these are made available for other members
to access. Members have access to the training center which contains sections on
subjects including, but not limited to, finding a niche, market research, search
engine optimization, social marketing, copywriting, outsourcing and selling your
web site. Members have access to a variety of tools and shortcuts that a geared
to managing an online business.
GROWTH OPPORTUNITIES
The Challenge affords Immediate with a platform for reaching new subscribers.
The Immediate Edge subscription product is promoted to the 30 Day community as a
service for online business operators who have gone beyond the initial stage of
learning, wanting to take their business to the next level and wanting to stay
on-top of trends and ensure their Internet marketing strategies employ the
latest tools and techniques. Immediate also runs $1 for one week trial
subscriber promotions a few times a year to attract new subscribers. Future
growth is also expected to come from increased frequency of standalone products
from annually to quarterly and to market the products to a wider audience
including through affiliate marketing and joint ventures.
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 with the more
sophisticated and successful online businesses being potential customers for the
offerings of 30 Day and Immediate.
To reach a wider audience of potential customers, the Company has begun a more
robust affiliate program where third parties will promote the Company's
products. A custom affiliate system has been designed to track customer
referrals by the affiliate referring the customer so future customer purchases
can be credited to the affiliate who will earn commission on such purchases.
Historically, the entry point of participants has been the free Challenge
program for which no affiliate commissions were earned, the new tracking system
encourages affiliate referrals by enabling commissions to the affiliates for
future purchases of participants referred to the free program. The Company is
planning joint venture arrangements with other marketing companies where each
will promote the other's products to their respective customer bases through
custom webinars and bonus products specifically tailored to the target audience.
The Company is also developing products that appeal to a wider market segment,
such as instructional videos for using popular technology and social media
products. These more consumer oriented products will expand the Company's reach
beyond internet marketing businesses to a much larger potential customer base.
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 not historically taken this approach but as
this type of marketing becomes more sophisticated and segmenting of target
customers more precise, the Company expects the benefits will increase relative
to cost and is exploring this avenue to further increase its customer base.
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COMPETITION
As internet commerce has grown at a double digit rate in the past decade,
internet marketing and education companies have helped fuel this growth. 30DC is
one of a number of companies that offer training to newcomers as well as
experienced sellers in "how to grow a business by more effectively marketing on
the Internet." While some general education companies offer courses in Internet
marketing, 30DC's primary competition comes from small Internet marking
companies focused on building a loyal following of customers. 30DC has built
relationships with a number of its competitors whereby they cross promote each
other's offerings which sometimes overlap and sometimes cover different aspects
of Internet marketing. 30DC's free Challenge program is the largest offering of
this type from any company we know of and has helped to build the Company's
customer base. The Company earns revenue from customers in its database
purchasing products and services from third parties, some of whom are competitor
Internet marketing companies.
INTELLECTUAL PROPERTY
The Company's recorded and unrecorded assets consist primarily of property and
equipment, goodwill and internally developed intangible property such as domain
names, websites, customer lists and copyrights. We do not hold any patents or
patent applications.
EMPLOYEES
As of June 30, 2011, we had approximately 10 employees and contractors.
ITEM 1A. RISK FACTORS
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RISKS RELATING TO OUR BUSINESS AND STRUCTURE
RISKS RELATED TO OUR BUSINESS AND INDUSTRY
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, 2011, the Company has a working capital deficit of approximately
$1,644,000 and has accumulated losses of approximately $2,768,000 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 and upon attaining profitable operations. The Company 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
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going concern. Since the start of the Company's fiscal year in July 2010, the
Company raised $382,800 in new capital investment, less capital raising costs of
$40,550, for net proceeds of $342,250 and settled approximately $850,000 of
liabilities by issuing shares of the Company's common stock. To fund working
capital for the next twelve months, the Company expects to raise additional
capital, to settle additional liabilities using the Company's stock and to
improve the results of operations from increasing revenue and a reduction in
operating costs which during the current fiscal year has included significant
non-recurring transaction costs. The Company has signed an agreement with
RivusTV Ltd. pursuant to which the companies have initiated a joint capital
raising effort.
30DC CAN GIVE NO ASSURANCE OF SUCCESS OR PROFITABILITY TO THE COMPANY'S
INVESTORS.
There is no assurance that 30DC will operate profitably. There is no assurance
that the Company will continue to generate revenues or that the Company will be
able to generate profits, or that the market price of the Company's common stock
will be increased thereby.
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 may see an increase in our legal and accounting expenses as a result
of such requirements. We estimate such costs on an annualized basis to be
approximately $200,000, 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. If we 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.
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".
THE COMPANY WILL 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.
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
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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
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.
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RISK FACTORS RELATING TO THE COMPANY AND BUSINESS
Any person or entity contemplating an investment in the securities offered
hereby should be aware of the high risks involved and the hazards inherent
therein. Specifically, the investor should consider, among others, the following
risks:
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.
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 Chairman of the Board, President and Chief Executive Officer, and Dan Raine,
our Executive VP of Business Development. 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.
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.
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.
-12-
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 INTELLECTUAL PROPERTY AND 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.
Although we maintain insurance against fires, earthquakes and general business
interruptions, the amount of coverage 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.
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
-13-
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.
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.
-14-
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.
We are 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.
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 Rivus
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
-15-
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.
ITEM 1B. UNRESOLVED STAFF COMMENTS
----------------------------------
None.
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 2010 for twelve months and is continuing on a
month-to-month basis. The lease is noncancellable 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, 2011 and 2010 was approximately $1,843 and $ 0,
respectively.
REAL PROPERTY
None.
MINERAL PROPERTIES
None.
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. (REMOVED AND RESERVED)
------------------------------
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. On December 9, 2010, as
result of our name change our trading symbol was changed to "TDCH." Prior to
December 9, 2010, our common stock traded under the symbol "IGCP."
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, 2011
and 2010. The quotations were obtained from information published by the FINRA
-16-
and reflect inter-dealer prices, without retail mark-up, mark-down or commission
and may not necessarily represent actual transactions.
MARKET INFORMATION
HIGH LOW
FISCAL YEAR ENDED JUNE 30, 2011: -------- --------
Quarter Ended September 30, 2010 $0.39 $0.04
Quarter Ended December 31, 2010 $0.28 $0.05
Quarter Ended March 31, 2011 $0.18 $0.08
Quarter Ended June 30, 2011 $0.38 $0.17
HIGH LOW
FISCAL YEAR ENDED JUNE 30, 2010: -------- --------
Quarter Ended September 30, 2009 $0.25 $0.11
Quarter Ended December 31, 2009 $0.15 $0.08
Quarter ended March 31, 2010 $0.08 $0.01
Quarter ended June 30, 2010 $0.06 $0.02
HOLDERS
As of June 30, 2011, the Company had approximately 125 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.
PENNY STOCK RULES
The shares of Company common stock are covered by Section 15(g) of the
Securities Exchange Act of 1934 and SEC Rules 15g-1 through 15g-6, which impose
additional sales practice requirements on broker-dealers who sell Company
securities to persons other than established customers and accredited investors.
Rule 15g-2 declares unlawful any broker-dealer transactions in penny stocks
unless the broker-dealer has first provided to the customer a standardized
disclosure document.
Rule 15g-3 provides that it is unlawful for a broker-dealer to engage in a penny
stock transaction unless the broker-dealer first discloses and subsequently
confirms to the customer the current quotation prices or similar market
information concerning the penny stock in question.
Rule 15g-4 prohibits broker-dealers from completing penny stock transactions for
a customer unless the broker-dealer first discloses to the customer the amount
of compensation or other remuneration received as a result of the penny stock
transaction.
Rule 15g-5 requires that a broker-dealer executing a penny stock transaction,
other than one exempt under Rule 15g-1, disclose to its customer, at the time of
or prior to the transaction, information about the sales persons' compensation.
Because a "penny stock" is, generally speaking, one selling for less than $5.00
per share, the Company's common stock may be subject to the foregoing rules. The
application of the penny stock rules may affect stockholders' ability to sell
their shares because some broker-dealers may not be willing to make a market in
the Company's common stock because of the burdens imposed upon them by the penny
stock rules.
-17-
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
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 the following unregistered sales and issuances of our securities from
July 1, 2010 through June 30, 2011.
DATE OF SALE TITLE OF SECURITIES NO. OF SHARES CONSIDERATION CLASS OF PURCHASER
---------------------- --------------------- ----------------- ------------------------ -----------------------
9/10/10 (1) Common stock 60,984,000 30DC Acquisition Business Associate
9/22/10 (2) Common stock 2,554,205 Private Placement Investors
9/22/10 (2) Warrants 5,108,410 Private Placement Investors
9/30/10 (1) Common stock 660,000 Consulting Services Business Associate
9/30/10 (1) Common stock 480,770 Consulting Services Business Associate
9/30/10 (1) Common stock 444,327 Consulting Services Business Associate
9/30/10 (1) Common stock 769,231 Contactor Services Business Associate
10/28/10 (1) Common stock 675,314 Consulting Services Business Associate
11/4/10 (2) Common stock 38,462 Private Placement Investors
11/4/10 (2) Warrants 76,924 Private Placement Investors
11/10/10 (2) Common stock 115,386 Private Placement Investors
11/10/10 (2) Warrants 230,772 Private Placement Investors
11/24/10 (2) Common stock 76,924 Private Placement Investors
11/24/10 (2) Warrants 153,848 Private Placement Investors
12/23/10 (2) Common stock 307,696 Private Placement Investors
12/23/10 (2) Warrants 615,392 Private Placement Investors
2/10/11 (1) Common stock 76,923 Consulting Services Business Associate
2/10/11 (1) Common stock 384,616 Employee Services Officer
2/10/11 (1) Common stock 96,154 Consulting Services Business Associate
-18-
DATE OF SALE TITLE OF SECURITIES NO. OF SHARES CONSIDERATION CLASS OF PURCHASER
---------------------- --------------------- ----------------- ------------------------ -----------------------
2/14/11 (2) Common stock 155,001 Private Placement Investors
2/14/11 (2) Warrants 310,002 Private Placement Investors
3/9/11 (2) Common stock 153,848 Private Placement Investors
3/9/11 (2) Warrants 307,696 Private Placement Investors
EXEMPTION FROM REGISTRATION CLAIMED
(1) ALL OF THE ABOVE SALES BY THE COMPANY OF ITS UNREGISTERED SECURITIES WERE
MADE BY THE COMPANY IN RELIANCE UPON SECTION 4(2) OF THE SECURITIES ACT OF 1933,
AS AMENDED (THE "1933 ACT"). ALL OF THE INDIVIDUALS AND/OR ENTITIES THAT
PURCHASED THE UNREGISTERED SECURITIES WERE KNOWN TO THE COMPANY AND ITS
MANAGEMENT, THROUGH PRE-EXISTING BUSINESS RELATIONSHIPS. ALL PURCHASERS WERE
PROVIDED ACCESS TO ALL MATERIAL INFORMATION, WHICH THEY REQUESTED, AND ALL
INFORMATION NECESSARY TO VERIFY SUCH INFORMATION AND WERE AFFORDED ACCESS TO
MANAGEMENT OF THE COMPANY IN CONNECTION WITH THEIR PURCHASES. ALL PURCHASERS OF
THE UNREGISTERED SECURITIES ACQUIRED SUCH SECURITIES FOR INVESTMENT AND NOT WITH
A VIEW TOWARD DISTRIBUTION, ACKNOWLEDGING SUCH INTENT TO THE COMPANY. ALL
CERTIFICATES OR AGREEMENTS REPRESENTING SUCH SECURITIES THAT WERE ISSUED
CONTAINED RESTRICTIVE LEGENDS, PROHIBITING FURTHER TRANSFER OF THE CERTIFICATES
OR AGREEMENTS REPRESENTING SUCH SECURITIES, WITHOUT SUCH SECURITIES EITHER BEING
FIRST REGISTERED OR OTHERWISE EXEMPT FROM REGISTRATION IN ANY FURTHER RESALE OR
DISPOSITION.
(2) ALL OF THE ABOVE SALES BY THE COMPANY OF ITS UNREGISTERED SECURITIES WERE
MADE BY THE COMPANY IN RELIANCE UPON RULE 506 OF REGULATION D OF THE SECURITIES
ACT OF 1933, AS AMENDED (THE "1933 ACT"). ALL OF THE INDIVIDUALS AND/OR ENTITIES
THAT PURCHASED THE UNREGISTERED SECURITIES WERE PRIMARILY EXISTING SHAREHOLDERS,
KNOWN TO THE COMPANY AND ITS MANAGEMENT, THROUGH PRE-EXISTING BUSINESS
RELATIONSHIPS, AS LONG STANDING BUSINESS ASSOCIATES. ALL PURCHASERS WERE
PROVIDED ACCESS TO ALL MATERIAL INFORMATION, WHICH THEY REQUESTED, AND ALL
INFORMATION NECESSARY TO VERIFY SUCH INFORMATION AND WERE AFFORDED ACCESS TO
MANAGEMENT OF THE COMPANY IN CONNECTION WITH THEIR PURCHASES. ALL PURCHASERS OF
THE UNREGISTERED SECURITIES ACQUIRED SUCH SECURITIES FOR INVESTMENT AND NOT WITH
A VIEW TOWARD DISTRIBUTION, ACKNOWLEDGING SUCH INTENT TO THE COMPANY. ALL
CERTIFICATES OR AGREEMENTS REPRESENTING SUCH SECURITIES THAT WERE ISSUED
CONTAINED RESTRICTIVE LEGENDS, PROHIBITING FURTHER TRANSFER OF THE CERTIFICATES
OR AGREEMENTS REPRESENTING SUCH SECURITIES, WITHOUT SUCH SECURITIES EITHER BEING
FIRST REGISTERED OR OTHERWISE EXEMPT FROM REGISTRATION IN ANY FURTHER RESALE OR
DISPOSITION.
ISSUER PURCHASES OF EQUITY SECURITIES
30DC, Inc. did not repurchase any shares of its common stock during the year
ended June 30, 2011.
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
-19-
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 20 AND
ELSEWHERE IN THIS REPORT.
OVERVIEW
RESULTS OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 2011 COMPARED TO THE YEAR ENDED JUNE 30, 2010
During the year ended June 30, 2011, the Company recognized revenues of
$1,893,314 from its operations compared to $2,002,556 during the year ended June
30, 2010. Revenues of the Company were from the following sources during the
year ended June 30, 2011 compared to June 30, 2010.
Year Ended Year Ended Increase or
June 30, 2011 June 30, 2010 (Decrease)
------------------ ------------------ ------------
Revenue
Commissions $ 449,800 $ 738,842 $ (289,042)
Subscription Revenue 673,650 762,873 (89,223)
Products and Services 190,837 173,744 17,093
Seminars and Mentoring 579,027 327,097 251,930
------------------ ------------------ ------------
Total Revenues $ 1,893,314 $ 2,002,556 $ (109,242)
------------------ ------------------ ------------
The $289,042 decrease in commissions was a result of a number of factors. During
the year ended June 30, 2010, the Company promoted some new affiliate programs
which attracted purchases from all active participants resulting in additional
commissions. Existing affiliate programs typically generate the majority of
commissions from new participants. Other factors included fewer new participants
in the Company's Challenge program in the year ended June 30, 2011 and a large
payer of affiliate commissions revised their policy to only pay commissions for
the first year of a subscription product rather than paying commissions over the
life of the subscription. During the year ended June 30, 2011, there were no
material amounts earned from new affiliate programs but the Company began
selling more of its own products and services such as video recordings of the
Company's live seminars to its full list of active participants.
The $89,223 decrease in subscription revenue was due to a net decrease in active
subscribers. For the year ended June 30, 2011 the active subscriber base
averaged 988 per month and for the year ended June 30, 2010 the active
subscriber base averaged 1,259 per month. The decrease in subscribers was almost
entirely from the Company's Challenge Plus subscription product which was
started in 2009 and had a large initial subscriber base which leveled off over
the balance of the fiscal year ending June 30, 2010. A few times a year the
Company will run promotions aimed at increasing the subscription base and this
was partially delayed during the year ended June 30, 2011 year due to the longer
duration of the Company's Challenge program which ended nearly a month later
during the year ended June 30, 2011.
The $17,093 increase in products and services revenue was primarily due to an
increase in the number of the Company's own products being offered for sale
which started during the year end June 30, 2010. Previously the Company had been
offering more third party products for which affiliate commissions were earned.
The Company's own products include video recordings of the Company's live
seminars and tools to aid in operating internet-based businesses.
The $251,930 increase in seminars and mentoring income is primarily from an
increase in the number of customers participating in the mentoring program which
-20-
is priced from $5,000 to $10,000 per year and the revenue from which is
recognized ratably over the one year term. For the year ended June 30, 2011
there was an average of 94 mentoring students per month and for the year ended
June 30, 2010 there was an average of 33 mentoring students per month.
During the year ended June 30, 2011, the Company incurred $3,197,048 in
operational expenses compared to $3,030,052 during the year ended June 30, 2010.
Operational expenses during the years ended June 30, 2011 and 2010, include the
following categories:
Year Ended Year Ended Increase or
June 30, 2011 June 30, 2010 Decrease
---------------- ------------------- -----------
Accounting Fees $ 296,037 $ 320,543 $ (24,506)
Paypal Fees 44,652 55,624 (10,972)
Commissions 97,839 69,445 28,394
Independent Contractors 556,305 600,521 (44,216)
Depreciation 70,743 61,669 9,074
Internet Expenses 64,731 55,767 8,964
Legal Fees 60,996 52,874 8,122
Officer's Salaries 200,000 - 200,000
Payroll Taxes 39,878 33,280 6,598
Related Party Contractors 809,864 1,408,669 (598,805)
Telephone 37,944 33,251 4,693
Transaction Fees 670,138 - 670,138
Travel & Entertainment 156,490 256,547 (100,057)
Other Operating Expenses 91,431 81,862 9,569
---------------- ------------------- ------------
Total Operating Expenses $ 3,197,048 $ 3,030,052 $ 166,996
================ =================== ============
The $24,506 decrease in accounting fees due to a decrease in audit fees of
approximately $88,000 offset by an increase of approximately $64,000 in fees for
accountant consultants engaged to assist with the Company's SEC filing
requirements.
The increase of $28,394 in commissions is from additional affiliate commissions
incurred on the increased sales of products and services and the fact that a
greater percentage of products and services were sold through affiliates during
the year ended June 30, 2011.
The decrease of $44,216 in independent contractors was primarily due to a
decrease of approximately $78,000 for investor relations consultants, of which
$52,750 was the decrease in equity based compensation offset by an approximately
$30,000 increase due to change in exchange rates.
The increase of $200,000 in officer's salaries was for the Company's CFO,
Theodore A. Greenberg which was necessitated by the share exchange and
requirements for the Company's public filings.
Related Party Contractor Fees consist of payments to Marillion Partnership, 23V
Industries, Ltd. which was succeeded by Raine Ventures, LLC and Jesselton, Ltd.
under contracts for services which include Ed Dale acting as 30DC's Chief
Executive Officer, Dan Raine acting as 30DC's Vice President of Business
Development and Clinton Carey acting as 30DC's Chief Operating Officer
respectively. The $598,805 decrease results from larger bonus payments to
Marillion and 23V during the year ended June 30, 2010 based on the net cash flow
of the 30 Day Challenge and Immediate Edge divisions. The bonuses were no longer
applicable after the share transaction with Infinity in September 2010.
-21-
The increase of $670,138 in transaction fees was due to consultants advising on
the process which resulted in completion of the share exchange including
$250,000 to Jesselton, Ltd., $231,050 ($250,000 AUD) to Corholdings Pty Ltd and
$189,088 to Prestige Financial Center, Inc.
The decrease of $100,057 in travel and entertainment reflects fewer overseas
trips during the year ended June 30, 2011 than during the year ended June 30,
2010.
During the year ended June 30, 2011, the Company recognized a net loss from
continuing operations of ($1,340,545) compared to a net loss of ($1,063,386)
during the year ended June 30, 2010. The increased loss of $277,159 was a
primarily the result of the $166,996 increase in operational expenses and the
$109,242 decrease in revenues during the period shown above.
ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS
Significant accounting policies and recent accounting pronouncements are
included in note 2 to the financial statements included herein.
LIQUIDITY AND CAPITAL RESOURCES
The Company had a cash balance of $33,790 at June 30, 2011 and the Company had a
working capital deficit of $1,644,259. Since the start of the Company's fiscal
year in July 2010, the Company raised $382,800 in new capital investment, less
capital raising costs of $40,550 for net proceeds of $342,250 and settled
approximately $850,000 of expenses and liabilities by issuing shares of the
Company's common stock. To fund working capital for the next twelve months, the
Company expects to raise additional capital, to settle additional liabilities
using the Company's stock and to improve the results of operations from
increasing revenue and a reduction in operating costs which during the current
year has included significant non-recurring transaction costs. As further
discussed in Note 13 to the consolidated financial statements, the Company has
signed an agreement with RivusTV Ltd. pursuant to which the companies have
initiated a joint capital raising effort.
Included in liabilities of discontinued operations at June 30, 2011 is $193,367
(including $58,347 included in due to related parties) in notes payable plus
related accrued interest that are in default for lack of repayment by their due
date.
During the year ended June 30, 2011, the Company used $343,319 in operating
activities. During the year ended June 30, 2010, the Company used $439,916 in
operating activities. The decreased use of funds of $96,597 was due to expenses
paid or settled with shares of the Company's common stock and accrued but unpaid
expenses offsetting an increased operating loss and decrease in deferred
revenue.
During the year ended June 30, 2011, the Company used $13,204 in investing
activities. During the year ended June 30, 2010, the Company used $65,248 in
investing activities. The decrease in investment of $52,044 was due to a
decrease in the amount of computer and audio visual equipment purchased by the
Company.
During the year ended June 30, 2011, financing activities provided the Company
with $349,750. During the year ended June 30, 2010, financing activities
provided the Company with $494,210. In each period receipts from the Company's
private placement memorandum provided the bulk of these funds with the 2010
period raising a larger sum of capital.
In August 2010, 30DC issued a private placement memorandum ("PPM") seeking to
raise a maximum of $3,000,000 at a price of 26 cents per unit or 11,538,462
units if the $3,000,000 maximum is raised. Each unit consists of one share of
Common Stock of Infinity, a warrant exercisable for 90 days from the date of
issuance (subsequently amended to expire March 15, 2011), to purchase one share
of Common Stock of Infinity with an exercise price of 37 cents, and a warrant
-22-
exercisable for five years from the date of issuance, to purchase one share of
Common Stock of Infinity for 50 cents. 30DC received $501,590 between July 2009
and June 2010 under a prior PPM for which a closing did not occur and the funds
were considered to be interest free loans pending closing. At June 30, 2010, the
$501,590 is included as private placement subscriptions received in the
liability section of the Balance Sheet. Pursuant to an agreement with the
subscribers, the $501,590 became part of the August 2010 PPM. A first closing of
the August 2010 PPM was held on September 22, 2010 consisting of the $501,590
received under the prior PPM and $162,500 in new investment funds, less capital
raising costs of $33,100 for net proceeds of $630,990 which represents 2,554,205
units consisting of 2,554,205 shares of common stock and 2,554,205 of each of
the two warrants. Second and third closings were held in November and December
2010 which raised additional net proceeds of $132,550. Fourth and fifth closings
were held in February and March 2011 which raised additional net proceeds of
$80,300. The March 15, 2011 warrants have expired with none exercised.
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, 2011, the Company has a working capital deficit of approximately
$1,644,000 and has accumulated losses of approximately $2,768,000 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 and upon attaining profitable operations. The Company 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.
Since the start of the Company's fiscal year in July 2010, the Company raised
$382,800 in new capital investment, less capital raising costs of $40,550, for
net proceeds of $342,250 and settled approximately $850,000 of liabilities by
issuing shares of the Company's common stock. To fund working capital for the
next twelve months, the Company expects to raise additional capital, to settle
additional liabilities using the Company's stock and to improve the results of
operations from increasing revenue and a reduction in operating costs which
during the current fiscal year has included significant non-recurring
transaction costs. The Company has signed an agreement with RivusTV Ltd.
pursuant to which the companies have initiated a joint capital raising effort.
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 year ended June 30, 2011
appear as pages F-1 through F-24.
-23-
30DC, INC. AND SUBSIDIARY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2011 AND 2010
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' 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
To the
Board of Directors and Shareholders of 30DC Inc.
We have audited the accompanying consolidated balance sheets of 30DC Inc and
Subsidiary (the "Company") as of June 30, 2011 and 2010, and the related
consolidated statements of operations and comprehensive loss, changes in
stockholders' 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 the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audits 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 also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, 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
Subsidiary as of June 30, 2011 and 2010, and the consolidated results of their
operations and their 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
the Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has had recurring losses, and has a working
capital and stockholders' deficiency as of June 30, 2011. These conditions raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans regarding 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/ Marcum LLP
-----------------------------
New York, NY
December 13, 2011
F-3
30DC, INC. AND SUBSIDIARY
Consolidated Balance Sheets
June June
30, 2011 30, 2010
----------------- --------------------
Assets
Current Assets
Cash and Cash Equivalents $ 33,790 $ 28,405
Accrued Commissions Receivable 41,199 66,705
Deferred Financing Costs - 7,500
Assets of Discontinued Operations 99,375 -
----------------- --------------------
Total Current Assets 174,364 102,610
Property and Equipment, Net 84,041 111,516
Goodwill 1,503,860 -
----------------- --------------------
Total Assets $ 1,762,265 $ 214,126
================= ====================
Liabilities and Stockholders' Deficiency
Current Liabilities
Accounts Payable $ 565,534 $ 272,438
Accrued Expenses and Refunds 335,288 248,319
Deferred Revenue 273,641 278,118
Private Placement Subscriptions Received - 501,590
Due to Related Parties 262,761 202,380
Liabilities of Discontinued Operations 381,399 -
----------------- --------------------
Total Current Liabilities 1,818,623 1,502,845
----------------- --------------------
Total Liabilities 1,818,623 1,502,845
----------------- --------------------
Stockholders' Deficiency
Preferred Stock, Par Value $0.001, 10,000,000 Authorized, -0- Issued - -
Common Stock, Par Value $0.001, 100,000,000 authorized,
74,520,248 and 60,984,000 issued and outstanding respectively 74,520 60,984
Paid in Capital 2,758,001 -
Accumulated Deficit (2,767,957) (1,327,911)
Accumulated Other Comprehensive Loss (120,922) (21,792)
----------------- --------------------
Total Stockholders' Deficiency (56,358) (1,288,719)
----------------- --------------------
Total Liabilities and Stockholders' Deficiency $ 1,762,265 $ 214,126
================= ====================
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,
2011 2010
----------------- --------------------
Revenue
Commissions $ 449,800 $ 738,842
Subscription Revenue 673,650 762,873
Products and Services 190,837 173,744
Seminars and Mentoring 579,027 327,097
----------------- --------------------
Total Revenue 1,893,314 2,002,556
Operating Expenses 3,197,048 3,030,052
----------------- --------------------
Operating Loss (1,303,734) (1,027,496)
Other Income (Expense)
Foreign Currency Loss (36,811) (39,986)
Gain on Sale of Assets - 4,096
------------------ --------------------
Total Other Income (Expense) (36,811) (35,890)
----------------- --------------------
Loss From Continuing Operations (1,340,545) (1,063,386)
Loss From Discontinued Operations (99,501) -
----------------- --------------------
Net Loss (1,440,046) (1,063,386)
Foreign Currency Translation (Loss) Gain (99,130) 1,408
----------------- --------------------
Comprehensive Loss $ (1,539,176) $ (1,061,978)
================= ====================
Weighted Average Common Shares Outstanding
Basic 71,078,136 60,984,000
Diluted 71,078,136 60,984,000
Loss Per Common Share (Basic and Diluted)
Continuing Operations $ (0.02) $ (0.02)
Discontinued Operations (0.00) -
Net Loss Per Common Share $ (0.02) $ (0.02)
The accompanying notes are an integral part of the
consolidated financial statements.
F-5
30DC, INC. And Subsidiary
Consolidated Statements of Changes in Stockholders' Deficiency
ACCUMULATED
OTHER TOTAL
COMMON STOCK ADDITIONAL COMPREHENSIVE ACCUMULATED STOCKHOLDERS'
SHARES PAR VALUE PAID IN CAPITAL INCOME (LOSS) DEFICIT DEFICIENCY
---------------------------------------------------------------------------------------
Balance - June 30, 2009 Combined (1) 15,840,000 $ 15,840 $ - $ (23,200) $ (219,381) $ (226,741)
Net Loss - - - - (1,063,386) (1,063,386)
Foreign currency translation - - - 1,408 - 1,408
Issuance of Common Stock for 30 Day and
Immediate acquisition (1) 45,144,000 45,144 - - (45,144) -
---------------------------------------------------------------------------------------
Balance - June 30, 2010 60,984,000 $ 60,984 $ - $ (21,792) $ (1,327,911) $(1,288,719)
Net Loss - - - - (1,440,046) (1,440,046)
Foreign currency translation - - - (99,130) - (99,130)
Infinity Share Exchange 6,547,391 6,547 1,041,037 - - 1,047,584
Issuance of Common Stock to Non-Employees 1,842,334 1,842 474,146 - - 475,988
Issuance of Common Stock to Employee 384,615 385 99,615 - - 100,000
Issuance of Common Stock to Investors, Net 1,472,318 1,472 340,778 - - 342,250
Issuance of Common Stock to Settle Prior
Subscriptions Received 1,929,204 1,929 499,661 - - 501,590
Issuance of Common Stock to Settle
Liabilities 1,360,386 1,361 302,764 - - 304,125
---------------------------------------------------------------------------------------
Balance - June 30, 2011 74,520,248 $ 74,520 $ 2,758,001 $ (120,922) $ (2,767,957) $ (56,358)
=======================================================================================
(1) Restated for the 13.2 share exchange ratio between Infinity and 30DC
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,
2011 2010
----------------- ---------------
Cash Flows from Operating Activities:
Loss From Continuing Operations $ (1,340,545) $ (1,063,386)
Adjustments to Reconcile Loss from Continuing Operations
to Net Cash Used In Operations
Depreciation and Amortization 70,743 61,669
Equity Based Payments To Non-Employees 475,988 -
Equity Based Payments To Employees 100,000 -
Gain on Sale of Property and Equipment - (4,096)
Changes in Operating Assets and Liabilities
Accrued Commissions Receivable 43,784 (29,686)
Accounts Payable (3,222) (47,378)
Accrued Expenses and Refunds 150,403 210,020
Deferred Revenue (76,518) 230,561
Due to Related Parties 236,048 202,380
----------------- ---------------
Net Cash Used in Operating Activities (343,319) (439,916)
----------------- ---------------
Cash Flows from Investing Activities
Purchases of Property and Equipment (16,554) (89,043)
Proceeds From Sale of Property and Equipment - 23,795
Cash - Acquired In Acquisition of Infinity 3,350 -
----------------- ---------------
Net Cash Used in Investing Activitities (13,204) (65,248)
----------------- ---------------
Cash Flows from Financing Activities
Sale of common stock, net 342,250 -
Stock Subscriptions Receivable - 120
Deferred Financing Costs 7,500 (7,500)
Private Placement Subscriptions Received - 501,590
----------------- ---------------
Net Cash Provided by Financing Activities 349,750 494,210
----------------- ---------------
Cash Flows from Discontinued Operations
Cash Flows From Operating Activities (21,333) -
----------------- ---------------
Net Cash Used in Discontinued Operations (21,333) -
----------------- ---------------
Effect of Foreign Exchange Rate Changes on Cash 33,491 12,944
----------------- ---------------
Increase in Cash and Cash Equivalents 5,385 1,990
Cash and Cash Equivalents - Beginning of Period 28,405 26,415
----------------- ---------------
Cash and Cash Equivalents - End of Period $ 33,790 $ 28,405
================= ===============
Supplemental Disclosures of Non Cash Financing Activity
Private Placement Subscriptions Received Reclassified to Equity $ 501,590 $ -
Common Stock Issued to Settle Liabilities, Including $25,000 in Discontinued Operations $ 304,125 $ -
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, 2011
NOTE 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
---------------------------------------------------------
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"). 30 Day was acquired from
the Marillion Partnership and Edward Wells Dale, both of Victoria, Australia, in
consideration for the issuance of 2,820,000 shares of Common Stock of 30DC DE
which were subsequently exchanged for 37,224,000 shares in the exchange with
Infinity detailed below. Immediate was acquired from Dan Raine of Cheshire,
United Kingdom, in consideration for the issuance of 600,000 shares of Common
Stock of 30DC DE which were subsequently exchanged for 7,920,000 shares in the
exchange with Infinity detailed below. The acquired businesses were sold subject
to specific liabilities which included accounts payable, accrued expenses and
deferred revenue. The acquisitions were pursuant to an agreement dated November
14, 2008. Mr. Dale and Mr. Raine were part of the founding group of shareholders
of 30DC DE and in conjunction with the acquisitions, Mr. Dale was named the
Chief Executive Officer of 30DC DE. In accordance with the provisions of
Accounting Standards Codification ("ASC") 805, "Business Combinations", the
acquisitions of 30 Day and Immediate were accounted for as transactions between
entities under common control, whereby the acquired assets and liabilities of 30
Day and Immediate were recognized in the Financial Statements at their carrying
amounts and the acquisitions are reflected in the accompanying Financial
Statements for the year ended June 30, 2010 as if they occurred as of the
beginning of the period. The June 30, 2009 balance on the Statement of Changes
in Stockholders' Equity represents the combined balances of 30DC DE, 30 Day and
Immediate prior to the acquisitions.
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 has subsequently changed its
name to 30DC, Inc. ("30DC" and together with its subsidiary "the Company").
After the share exchange, the former shareholders in 30DC DE held approximately
90% of the outstanding shares in Infinity and the officers of 30DC DE became the
officers of Infinity. 30DC DE was the accounting acquirer in the transaction and
its historical financial statements will be the historical financial statements
of 30DC. Infinity's operations were discontinued and subsequent to the share
exchange are accounted for as discontinued operations.
30DC offers Internet marketing services and related training that help Internet
companies in operating their businesses. 30DC's core business units are 30 Day
and Immediate. 30 Day, with more than 90,000 active online participants, offers
a free e-commerce training program year round along with an online education
subscription service and periodic premium live seminars that are targeted to
experienced Internet business operators. Immediate is an online educational
program subscription service offering high-end Internet marketing instruction
and strategies for experienced online ecommerce practitioners. Other revenue
streams include sales of instructional courses and software tools related to
Internet marketing 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 recorded and unrecorded assets consist primarily of property and
F-8
30DC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2011
equipment, goodwill and internally developed intangible property such as domain
names, websites, customer lists and copyrights.
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. The Company has
had recurring losses and as of June 30, 2011, the Company has a working capital
deficit of approximately $1,644,000 and has accumulated losses of approximately
$2,768,000 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 and upon attaining profitable operations. The
Company 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.
Since the start of the Company's fiscal year in July 2010, the Company raised
$382,800 in new capital investment, less capital raising costs of $40,550, for
net proceeds of $342,250 and settled approximately $850,000 of liabilities by
issuing shares of the Company's common stock. To fund working capital for the
next twelve months, the Company expects to raise additional capital, to settle
additional liabilities using the Company's stock and to improve the results of
operations from increasing revenue and a reduction in operating costs which
during the current fiscal year has included significant non-recurring
transaction costs. As further discussed in note 13, the Company has signed an
agreement with RivusTV Ltd. pursuant to which the companies have initiated a
joint capital raising effort.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
--------------------------------------------------
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 for the period beginning September 10, 2010, the date of
the share exchange with Infinity, and ending June 30, 2011. For the year ending
June 30, 2010 and for the period beginning July 1, 2010 and ending September 10,
2010 only the accounts of 30DC DE are included in the financial statements.
F-9
30DC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2011
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original maturity of
three months or less as cash equivalents.
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.
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. 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.
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.
F-10
30DC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2011
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.
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.
All subscription revenue is 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 when the customer purchase is made. Deferred
revenue consists of the unearned portion of subscription payments, seminar fees
and mentoring revenue as of the financial statement date.
EQUITY-BASED PAYMENTS TO NON-EMPLOYEES
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.
FOREIGN CURRENCY TRANSLATION AND REMEASUREMENT
The functional currency of the Company's 30 Day Challenge division is the
Australian dollar. All other Company operations use the United States dollar as
their functional currency. Under ASC 830 "Foreign Currency Matters", 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
F-11
30DC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2011
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.
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 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.
NET 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. The computation of basic loss per share for
the years ended June 30, 2011 and 2010 excludes potentially dilutive securities
consisting of 3,401,522 warrants and 600,000 options at June 30, 2011 because
their inclusion would be anti-dilutive.
RECENT ACCOUNTING PRONOUNCEMENTS
In December 2010 the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("ASU") 2010-28, "Intangibles - Goodwill and Other
(Topic 350): When to Perform Step 2 of the Goodwill Impairment Test for
Reporting Units with Zero or Negative Carrying Amounts". ASU 2010-28 modifies
Step 1 of the goodwill impairment test for reporting units with zero or negative
carrying amounts by requiring an entity to perform Step 2 of the goodwill
impairment test if is more likely than not that a goodwill impairment exists.
This update will be effective for fiscal years beginning after December 15,
2010. The adoption of this standard is not expected to have a material impact on
the Company's consolidated financial position and results of operations.
The FASB has issued ASU 2010-29, Business Combinations (Topic 805): Disclosure
of Supplementary Pro Forma Information for Business Combinations. This amendment
affects any public entity as defined by Topic 805, Business Combinations that
enters into business combinations that are material on an individual or
aggregate basis. The comparative financial statements should present and
disclose revenue and earnings of the combined entity as though the business
combination(s) that occurred during the current year had occurred as of the
beginning of the comparable prior annual reporting period only. The amendments
also expand the supplemental pro forma disclosures to include a description of
the nature and amount of material, nonrecurring pro forma adjustments directly
attributable to the business combination included in the reported pro forma
revenue and earnings. The amendments are effective prospectively for business
combinations for which the acquisition date is on or after the beginning of the
F-12
30DC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2011
first annual reporting period beginning on or after December 15, 2010. The
adoption of this standard is not expected to have a material impact on the
Company's financial position and results of operations.
In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (Topic 220):
Presentation of Comprehensive Income. This guidance improves the comparability,
consistency and transparency of financial reporting and increases the prominence
of items reported in other comprehensive income. The guidance provided by this
update becomes effective for interim and annual periods beginning on or after
December 15, 2011. Since this ASU will only change the format of financial
statements it is expected that the adoption of this ASU will not have a material
effect on a Company's condensed consolidated financial position and results of
operations.
In September 2011, the FASB issued ASU No. 2011-08, Intangibles - Goodwill and
Other (Topic 350) - Testing Goodwill for Impairment (ASU 2011-08), to simplify
how entities test goodwill for impairment. ASU 2011-08 allows entities to first
assess qualitative factors to determine whether it is more likely than not the
fair value of a reporting unit is less than its carrying amount. If a greater
than 50 percent likelihood exists that the fair value is less than the carrying
amount then a two-step goodwill impairment test as described in Topic 350 must
be performed. The guidance provided by this update becomes effective for annual
and interim goodwill impairment tests performed for fiscal years beginning after
December 15, 2011. The Company has elected early adoption of this standard and
the adoption did not have a material impact on the Company's consolidated
financial position and results of operations.
Other accounting standards that have been issued or proposed by the FASB or
other standards-setting bodies that do not require adoption until a future date
are not expected to have a material impact on our financial statements upon
adoption.
NOTE 3. BUSINESS COMBINATION
----------------------------
The Company accounts for business combinations under ASC Topic 805 which
establishes principles and requirements as to how acquirers recognize and
measure the identifiable assets acquired, the liabilities assumed and goodwill
acquired in a business combination.
30DC, INC.
On September 10, 2010, Infinity exchanged 60,984,000 shares for 100% of the
outstanding shares of 30DC DE. After the share exchange, the former shareholders
in 30DC DE held approximately 90% of the outstanding shares in Infinity and the
officers of 30DC DE became the officers of Infinity.
Accordingly, the share exchange has been accounted for as a reverse business
combination in which 30DC DE is deemed to be the accounting acquirer.
The fair value of the assets acquired in the share exchange with Infinity was
$1,689,880 based on 6,547,391 shares issued at a value of $0.16 per share and
the assumption of identifiable liabilities of $642,297. As part of the share
exchange 30DC DE acquired identifiable assets of $186,020 and the remaining
portion of fair value has been allocated to goodwill. Pursuant to the reverse
business combination, 30DC DE has restated its statements of stockholders'
F-13
30DC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2011
equity on a recapitalization basis, so that all accounts are now presented as if
the reverse business combination had occurred at the beginning of the earliest
period presented.
NOTE 4. DISCONTINUED OPERATIONS
-------------------------------
INTRODUCTION
On September 10, 2010, immediately prior to the share exchange with 30DC DE,
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.
Results of Discontinued Operations for the
Year Ended
June 30, 2011
----------------------
Revenues $-
Operating expenses 16,845
Loss from operations (16,845)
Realized loss on marketable securities (24,490)
Unrealized loss on marketable securities (58,166)
----------------------
Net loss $(99,501)
======================
Assets and Liabilities of Discontinued Operations as of June 30, 2011
Assets
------------------
Marketable securities $99,375
================
Total assets of discontinued operations $99,375
================
Liabilities
------------------
Accounts payable $94,139
Accrued expenses 46,233
Notes payable 135,020
Due to related parties 106,007
----------------
Total liabilities of discontinued operations $381,399
================
Included in liabilities of discontinued operations at June 30, 2011 are $193,367
(including $58,347 of notes payable included in due to related parties) in notes
payable plus related accrued interest of which are in default for lack of
repayment by their due date. For the period subsequent to the share exchange
with 30DC DE through June 30, 2011 the Company incurred interest expense on
notes payable of $14,710 which is included in the Statement of Operations under
income (loss) from discontinued operations.
F-14
30DC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2011
NOTE 5. PRO FORMA FINANCIAL INFORMATION
---------------------------------------
The following unaudited consolidated pro forma information gives effect to the
share exchange with Infinity (discussed in Note 1) 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 Year Ended
June 30, 2011 June 30, 2010
(Unaudited) (Unaudited)
--------------- --------------
Revenues $ 1,893,313 $ 2,002,556
Operating Expenses 3,272,394 3,157,062
--------------- --------------
Loss from Continuing Operations (1,379,081) (1,154,506)
Loss from Discontinued Operations (126,790) (607,701)
--------------- --------------
Net Loss (1,505,871) (1,762,207)
Foreign Currency Translation Gain (Loss) (99,130) 1,408
--------------- --------------
Comprehensive Loss $ (1,605,001) $ (1,760,799)
=============== ==============
Basic and Diluted Loss Per Share $ (.02) $ (.03)
Weighted Average Shares Outstanding -
Basic & Diluted 72,351,739 67,531,391
NOTE 6. PRIVATE PLACEMENT MEMORANDUM
-------------------------------------
In August 2010, 30DC issued a private placement memorandum ("PPM") seeking to
raise a maximum of $3,000,000 at a price of 26 cents per unit or 11,538,462
units if the $3,000,000 maximum is raised, the PPM ended March 15, 2011. Each
unit consists of one share of Common Stock of Infinity, a warrant exercisable
until March 15, 2011, to purchase one share of Common Stock of Infinity with an
exercise price of 37 cents, and a warrant exercisable for five years from the
date of issuance, to purchase one share of Common Stock of Infinity for 50
cents. 30DC received $501,590 between July 2009 and June 2010 under a prior PPM
for which a closing did not occur and the funds were considered to be interest
free loans pending closing. At June 30, 2010, the $501,590 is included as
private placement subscriptions received in the liability section of the Balance
Sheet. Pursuant to an agreement with the subscribers, the $501,590 became part
of the August 2010 PPM. A first closing of the August 2010 PPM was held on
September 22, 2010 consisting of the $501,590 received under the prior PPM and
$162,500 in new investment funds, less capital raising costs of $33,100 for net
proceeds of $630,990 which represents 2,554,205 units consisting of 2,554,205
shares of common stock and 2,554,205 of each of the two warrants. Second and
third closings were held in November and December 2010 which raised additional
net proceeds of $132,550. Fourth and fifth closings were held in February and
March 2011 which raised additional net proceeds of $80,300. The March 15, 2011
warrants have expired with none exercised.
F-15
30DC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2011
NOTE 7. RELATED PARTY TRANSACTIONS
-----------------------------------
The Company entered into three-year Contract For Services Agreements commencing
July 2009 with the Marillion Partnership ("Marillion") for services which
includes Mr. Edward Dale acting as the Company's Chief Executive Officer, with
23V Industries, Ltd. ("23V") for services which include Mr. Dan Raine acting as
the Company's Vice President of Business Development and with Jesselton, Ltd.
("Jesselton") for services which include Mr. Clinton Carey acting as the
Company's Chief Operating Officer. Effective April 1, 2010, Raine Ventures, LLC
("Raine Ventures") replaced 23V Industries, Ltd in providing consulting services
to the Company which include Mr. Raine acting as the Company's Vice President of
Business Development. These agreements are non-cancelable by either party for
the initial two years and then with six months' notice by either party for the
duration of the contract. Mr. Dale and Mr. Carey are directors of the Company,
Mr. Dale and Marillion hold majority interest in the Company's outstanding
common stock and Mr. Raine is the beneficial owner of greater than 10% of the
Company's outstanding common stock. Marillion Partnership is owned by affiliates
of Mr. Dale. 23V and Raine Ventures are owned 100% by Mr. Raine.
Cash remuneration under The Marillion and Raine Ventures agreements is $250,000
per year and $200,000 under the Jesselton agreement. As further described in
footnote 13, cash remuneration for the Marillion and Jesselton agreements has
been amended for the year ended June 30, 2012 to $317,825 and $254,260
Australian Dollars respectively. If in any year starting from the commencement
date, 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, 2011 and 2010.
During the term of the agreements, Marillion, Jesselton and Raine Ventures are
prohibited from engaging in any other business activity that competes with 30DC,
Inc. without written consent of the 30DC, Inc. Board of Directors.
In July, 2009 when 30DC acquired 30 Day and Immediate, Messrs. Dale and Carey
signed executive services agreements with the Company and Mr. Raine signed a
consulting services agreement with the Company. Pursuant to the agreements with
Marillion, Jesselton and 23V (effective April 1, 2010 Raine Ventures replaced
23V), the contract for services agreements memorialized the preexisting
contractual relationship and formally set the terms and conditions between the
parties from July 1, 2009 and all prior understandings and agreements - oral or
written were merged therein, including the respective executive services and
consulting services agreements. All compensation under the contract for services
agreements is identical with the respective executive services and consulting
agreements. Where applicable under local law, all payroll and other taxes are
the responsibility of Marillion, Jesselton, 23V and Raine Ventures and they have
provided the Company with indemnification of such taxes which under the prior
contracts may have been a liability of the Company. The parties acknowledged
that the effective date of the agreements relates back to the contractual
relationship between the parties.
30DC's Board of Directors approved a bonus to Marillion based upon the net cash
flow of the Company's 30 Day Challenge division and a bonus to Raine Ventures
based upon the net cash flow of the Company's Immediate Edge division (formerly
Immediate) until such time as 30DC had completed a merger or public stock
F-16
30DC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2011
listing, which occurred on September 10, 2010. For the year ended June 30, 2011
the bonus for Marillion was $79,643, all earned prior to September 10, 2010 and
total compensation was $359,864 and the bonus for Raine Ventures was $-0- and
total compensation was $250,000. For the year ended June 30, 2010 the bonus for
Marillion was $496,714 and total compensation was $746,714, the bonus for 23V
was $154,014 and total compensation was $341,514 and the bonus for Raine
Ventures (successor to 23V) was $57,941 and total compensation was $120,411, all
of which were included in Operating Expenses in the Statement of Operations.
Subsequent to the September 10, 2010 merger, Marillion and Raine Ventures are
being paid in accordance with their contracted amounts and bonuses based upon
net cash flow are no longer applicable. Amounts may vary from period to period
due to fluctuations in foreign currency exchange rates.
Jesselton earned $250,000 upon completion of the share exchange between 30DC and
Infinity on September 10, 2010. $125,000 of this amount was satisfied by
issuance of 480,770 of the Company's common shares. The remaining $125,000 is
included in due to related parties in the liability section of the balance
sheet. Jesselton also settled $200,000 of contract fees for the fiscal year
ending June 30, 2010 for an additional 769,231 common shares of the Company.
Beginning with the year ending June 30, 2011, the Company pays Marillion $2,500
AUD per month to cover office related expenses which is included in operating
expenses.
Due to related parties also includes $121,750 due to Theodore A. Greenberg,
30DC's CFO for compensation. On February 10, 2011 Mr. Greenberg received 480,770
common shares of the Company in settlement of $100,000 prior compensation and
$25,000 due for consulting work prior to Mr. Greenberg joining the Company,
NOTE 8. PROPERTY AND EQUIPMENT
-------------------------------
Property and equipment consists of the following at June 30, 2011 and 2010:
2011 2010
-------------- --------------
Computer and Audio Visual Equipment $ 450,630 $ 339,630
Office equipment and Improvements 71,870 53,129
-------------- --------------
522,500 392,759
Less: Accumulated Depreciation
and Amortization (438,459) (281,243)
-------------- --------------
$ 84,041 $ 111,516
============== ==============
Depreciation and amortization expense was $70,743 for the year ended June 30,
2011 and $61,669 for the year ended June 30, 2010.
Property and equipment, net are stated in the functional currency of each branch
of the Company and where applicable are translated to the reporting currency of
the US Dollar at each period end. Accordingly, property and equipment, net is
subject to change as a result of changes in foreign currency exchange rates.
F-17
30DC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2011
NOTE 9. INCOME TAXES
---------------------
The Company's income tax provision (benefit) consists of the following:
Year Ended Year Ended
June 30, 2011 June 30, 2010
-------------------- --------------------
Federal
Current $ - $ -
Deferred (217,283) (359,800)
State and Local
Current $ - $ -
Deferred (13,017)
Change in valuation allowance (230,300) (359,800)
-------------------- --------------------
Income tax provision (benefit) $ - $ -
==================== ====================
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, 2011 and June 30, 2010 are as
follows:
Year Ended Year Ended
June 30, 2011 June 30, 2011
-------------- ---------------
Deferred tax asset
Net operating loss carryforward - Federal $ 518,300 $ 274,100
Net operating loss carryforward - State 14,600
Fixed asset depreciation 21,200 17,700
Accrued expenses 36,000 68,000
-------------- ---------------
Total deferred tax asset 590,100 359,800
Less valuation allowance (590,100) (359,800)
-------------- ---------------
Total net deferred tax asset $ - $ -
============== ===============
F-18
30DC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2011
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, 2011 June 30, 2010
---------------- ---------------
U.S. statutory rate (34.0%) (34.0%)
State and local taxes net of federal benefit (2.0)
Change in valuation allowance 17.2 32.0
Nondeductible transaction fees
10.6 0.0
Other Permanent differences 8.2 2.0
---------------- ---------------
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. The Company considers projected future taxable income and tax
planning strategies in making this assessment. The Company 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 $590,100 has
been established. For the years ended June 30, 2011 and June 30, 2010, the
change in valuation allowance was $230,300 and $359,800 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
derecoginition, 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
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 evaluation was performed for the 2008,
2009 and 2010 tax years, which are subject to examination. The Company believes
that its income tax positions and deductions would be sustained on audit and
does not anticipate any adjustments that would result in material changes to its
financial position.
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, 2011 and 2010. Management is currently unaware of any issues
under review that could result in significant payments, accruals or material
deviations from its position.
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
F-19
30DC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2011
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.
For the years ended June 30, 2011 and June 30, 2010, the Company had
approximately $1,524,300 and $806,100 of U.S. federal net operating loss
carryovers, respectively which expire starting in 2031. 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.
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 has filed all U.S. federal tax returns and is in the process of
filing state and local tax returns for Infinity since 2005. The Company believes
no material tax balance is due for all tax returns which have not yet been
filed.
NOTE 10. REVENUE CONCENTRATION
-------------------------------
For the year ended June 30, 2010, the Company earned revenue from one customer
representing approximately 12% of total revenues. No customers exceeded 10% of
revenue for the year ended June 30, 2011.
NOTE 11. STOCKHOLDERS' EQUITY
-----------------------------
COMMON STOCK
Prior to the share exchange with Infinity on September 10, 2010, 30DC DE
outstanding common shares were as follows:
Shares
---------
Common shares outstanding, July 1, 2009 1,200,000
Issuance of shares for acquisitions 3,420,000
---------
shares outstanding, September 10, 2010 4,620,000
=========
The share exchange ratio was 13.2:1 with 30DC DE shareholders receiving
60,984,000 of Infinity common shares for exchanging their 4,620,000 common
shares of 30DC DE. The share exchange resulted in 30DC DE becoming a
wholly-owned subsidiary of Infinity but for accounting purposes 30DC DE was
F-20
30DC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2011
deemed the acquirer. In the financial statements, for comparison purposes,
shares outstanding at June 30, 2010 were restated to the 60,984,000
post-exchange amount from the 4,620,000 which were actually outstanding on that
date.
In August 2010, 30DC issued the private placement memorandum ("PPM") discussed
in note 6. A first closing was held on September 22, 2010 for which 2,554,205
units were issued consisting of 2,554,205 shares of common stock and 2,554,205
of each of the two warrants. Subsequent closings were held from November 2010 to
March 2011 for which 538,468 units were issued consisting of 538,468 shares of
common stock and 538,468 of each of the two warrants.
On September 30, 2010, the Company issued common shares to settle outstanding
liabilities and for shares due under services agreements as follows;
Cameron Associates, an investor relations firm, pursuant to a contract signed
December 8, 2009 under which Cameron was due 50,000 shares of the Company's
common stock which was adjusted to 660,000 shares under the exchange ratio.
Jesselton, Ltd, was issued a total of 1,250,001 common shares of the Company
(see Note 7).
Corholdings Pty Ltd., settled $125,000 AUD ($115,025 USD) of the $250,000 AUD
($231,050 USD) fee they were due for advising on the process which resulted in
completion of the share exchange for 444,327 common shares of the Company.
In February 2010, 30DC engaged Prestige Financial Center, Inc. ("Prestige") a
registered Broker Dealer to provide investment banking and advisory services to
the Company pursuant to which Prestige had the opportunity to earn fees for
various services. Under terms of the contract as revised in June 2010, Prestige
is due a reverse merger fee of an option to purchase at least 1% of the
Company's outstanding common shares at the completion of a reverse merger with a
publicly-traded company at an exercise price of $0.001 per share. The Company
entered into a release agreement dated October 28, 2010 with Prestige under
which Prestige was issued 675,314 shares of the Company's restricted common
stock and both parties released each other from any other claims.
Theodore A. Greenberg was issued 480,770 common shares of the Company (see note
7).
On February 10, 2011, Cameron Associates settled $20,000 of consulting fees due
for 76,923 common shares of the Company.
F-21
30DC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2011
Summary of Common Stock Outstanding;
Prior to the share exchange 4,620,000
Exchange Ratio 13.2
-----------------
Shares Issued in the Exchange 60,984,000
Infinity Outstanding pre Exchange 6,547,391
PPM Closing September 2010 2,554,205
PPM Closings November 2010 - March 2011 847,317
Cameron Associates 736,923
Jesselton, Ltd. 1,250,001
Corholdings, Pty Ltd. 444,327
Prestige Financial Center, Inc. 675,314
Theodore A. Greenberg 480,770
-----------------
Common Shares Outstanding June 30, 2011 74,520,248
=================
WARRANTS AND OPTIONS
Infinity issued 600,000 options under its 2008 stock option plan which are fully
vested and remain outstanding as follows:
404,000 options exercisable at 80 cents per share expiring August 7, 2018
196,000 options exercisable at 50 cents per share expiring January 5, 2019
192,500 of these options are held by Pierce McNally a director of the Company
and the balance are held by a former employee and former directors of Infinity.
No options have been issued under Infinity's stock option plan since the share
exchange with 30DC DE.
At June 30, 2011 the outstanding options had no intrinsic value.
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 the PPM discussed in Note 6, a first closing was held on September
22, 2010 under which 2,554,205 warrants at 37 cents per share, expiring December
21, 2010 were issued along with 2,554,205 warrants at 50 cents per share
expiring September 22, 2015. The warrants expiring December 21, 2010 were
subsequently extended to March 15, 2011. From November 2010 through March 2011,
an additional 847,317 of 37 cent warrants expiring March 15, 2011 were issued
and 847,317 of the 50 cent warrants with an expiration five years from the date
of investment were issued. All of the warrants expiring March 15, 2011 expired
unexercised.
F-22
30DC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2011
NOTE 12. OPERATING EXPENSES
----------------------------
Operating Expenses consist of the following:
Year Ended Year Ended
June 30, 2011 June 30, 2010
---------------- ------------------
Related Party Contractor Fees Base Compensation(1) $ 730,221 $ 700,000
Related Party Contractor Fees Bonus Compensation(1)(2) 79,643 708,669
Officer's Salary 200,000 -
Independent Contractors 556,305 600,521
Transaction Fees (3) 670,138 -
Professional Fees 357,034 387,003
Travel Expenses 150,136 240,283
Other Operating Costs 453,571 393,576
---------------- ------------------
Total Operating Expenses $ 3,197,048 $ 3,030,052
================ ==================
--------------------
(1) Related party contractors include Marillion which provides services to
the Company including Edward Dale to act as Chief Executive Officer of
the Company, 23V and Raine Ventures which provides services to the
Company including for Dan Raine to act as Vice President for Business
Development and Jesselton, Ltd. which provides services to the Company
including Clinton Carey serving as Chief Operating Officer of the
Company.
(2) 30DC's Board of Directors approved a bonus to Marillion based upon the
net cash flow of the Company's 30 Day Challenge division (formerly 30
Day) and a bonus to 23V and Raine Ventures based upon the net cash
flow of the Company's Immediate Edge division (formerly Immediate)
until such time as 30DC had completed a merger or public stock listing
which occurred on September 10, 2010.
(3) Transaction fees were incurred upon completion of the 30DC/Infinity
share exchange for consulting services which resulted in completion of
the share exchange. $250,000 was due to Jesselton, Ltd., $250,000 AUD
($231,050) was due to Corholdings Pty, Ltd. and Prestige was due
675,314 common shares which were valued at $189,088.
NOTE 13. SUBSEQUENT EVENTS
---------------------------
On August 24, 2011 the Company entered into a Share Sale and Purchase Agreement
(the "Purchase") with RivusTV Ltd, ("Rivus") which was organized and exists in
Victoria, Australia. Rivus offers a solution to broadcast digital content across
the Internet on a revenue share basis. The purchase price for 100% of Rivus'
issued and outstanding shares is 45% of 30DC's adjusted issued and outstanding
shares immediately prior to closing which equates to 31% of the total
outstanding after closing without regards to the adjustment factor. The
adjustment factor to 30DC's outstanding shares accounts for 30DC's non-operating
liabilities and is expected to increase the deemed outstanding by approximately
F-23
30DC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2011
four million shares which would increase Rivus post closing ownership by an
additional 1%. The Purchase is subject to both 30DC and Rivus completing
satisfactory due diligence on each other and a minimum capital raise of $5
million AUD (currently approximately $5.15 million) by January 16, 2012 or such
other that date that the parties shall agree.
On December 12, 2011 cash remuneration for the contract for services agreements
with Marillion and Jesselton was amended for the year ended June 30, 2012 to the
Australian Dollar equivalent of the originally contracted amounts at the
exchange rate on the contract start date of July 15, 2009. The Marillion
original contract amount of $250,000 has been amended to $317,825 AUD Dollars
and the Jesselton original contract amount of $200,000 has been amended to
$254,260 AUD.
The Company evaluates events that have occurred after the balance sheet date but
before the financial statements are issued. Based upon the evaluation, the
Company did not identify any recognized or non-recognized subsequent events that
would require adjustment or disclosure in the consolidated financial statements.
F-24
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
--------------------------------------------------------------------------------
Not applicable.
ITEM 9A. CONTROLS AND PROCEDURES
--------------------------------
DISCLOSURE CONTROLS AND PROCEDURES
Disclosure controls and procedures (as defined in Rule 13(a) - 15(e)) are
controls and procedures that are designed to ensure that information required to
be disclosed by a public company in the reports that if files or submits under
the Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the SEC's rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by a public company in the
reports that it files or submits under the Exchange Act is accumulated and
communicated to the company's management, including its principal executive and
principal financial officers, or persons performing similar functions, as
appropriate to allow timely decisions regarding required disclosure. Disclosure
controls and procedures include many aspects of internal control over financial
reporting.
Based upon their evaluation, our Chief Executive Officer and Chief Financial
Officer have concluded that material weakness in internal control over financial
reporting existed at June 30, 2011.
MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate internal
control over financial reporting as defined in Rule 13a-15(f) under the Exchange
Act. Internal control over financial reporting refers to a process designed by,
or under the supervision of, our Chief Executive Officer and Chief Financial
Officer and effected by our Board, management and other personnel, to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles, including those policies and
procedures that:
(1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of our
assets;
(2) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that the our
receipts and expenditures are being made only in accordance with
authorizations of our management and directors; and
(3) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use or disposition of our assets that
could have a material effect on our consolidated financial statements.
It should be noted, however, that because of inherent limitations, internal
control over financial reporting cannot provide absolute assurance of the
prevention or detection of misstatements. In addition, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.
In connection with the preparation of this Annual Report on Form 10-K for the
year ended June 30, 2011, management, with the participation of our Chief
Executive Officer and Chief Financial Officer, has evaluated the effectiveness
of our disclosure controls and procedures and internal controls over financial
reporting, pursuant to Rule 13a-15 under the Exchange Act, based on criteria for
effective internal control over financial reporting described in Internal
-24-
Control - Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based upon their evaluation, our Chief
Executive Officer and Chief Financial Officer have concluded that material
weakness in internal control over financial reporting and limited segregation of
duties existed at June 30, 2011 as follows;
(1) Due to the small size of its staff, the Company did not have
sufficient segregation of duties to support its internal control over
financial reporting.
(2) The Company has installed software that does not prevent erroneous or
unauthorized changes to previous reporting periods and does not
provide an adequate audit trail or entries made in the accounting
software.
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.
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, 2011, that has materially
affected, or is reasonably likely to materially affect, its internal control
over financial reporting.
ITEM 9B. OTHER INFORMATION
--------------------------
Not applicable.
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,
2011.
NAME AGE POSITION
------------------------- ------- ---------------------------------------------
Edward Dale 41 President, CEO and Chairman of the Board
Theodore A. Greenberg 52 CFO, Secretary and Director
Clinton Carey 41 COO and Director
Gregory H. Laborde 47 Director
Pierce McNally 62 Director
30DC's officers are elected by the Company's shareholders and hold office until
their successors are duly elected and qualified under Infinity's bylaws.
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.
-25-
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 41, has served as the Chairman of the Board, 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. In 2006, Mr. Dale created and marketed the Dominiche `Buying and
Selling websites' program. Mr. Dale is a manager and equity owner of the
Marillion Partnership.
THEODORE A. GREENBERG, DIRECTOR AND CHIEF FINANCIAL OFFICER
Mr. Greenberg, age 52, 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 and received an MBA in Finance & Business Policy from the
University of Chicago. Mr. Greenberg earned certification as a Certified Public
Accountant in New York State.
CLINTON CAREY, DIRECTOR AND CHIEF OPERATING OFFICER
Mr. Carey, age 41, has served as Chief Operating Officer and Director of 30DC
since the transaction between Infinity and 30DC DE on September 10, 2010. Mr.
Carey was a founding shareholder of 30DC DE and served as a director from
October 2008 until September 10, 2010 and Chief Operation Officer starting in
July 2009. Over the past 17 years, Mr. Carey has been involved in startup
businesses at both the management and the directorial level. Mr. Carey was a
director of Roper River Resources and was involved in the reverse takeover of
Roper River Resources by Webjet, in Australia. Following Webjet, Mr. Carey
became involved in several technology companies including Banque Technology
Systems (UK), MobiData Ltd (Australia) and MDS Group Ltd (UK) for which he
helped raise capital and was involved in strategic planning and business
development. Mr. Carey holds a degree in Economics from Bond University.
DAN RAINE, EXECUTIVE VICE PRESIDENT OF BUSINESS DEVELOPMENT OF 30DC
Mr. Raine, age 38, has served as Vice President of Business Development of 30 DC
since the transaction between Infinity and 30DC DE on September 10, 2010. Mr.
Raine was a founding shareholder of 30DC DE and served as Executive Vice
President of Business Development starting in July 2009. In 2006, Mr. Raine
developed the concept of the Immediate Edge of which he was the owner and
operator and which launched its subscription service in January 2007. Mr. Raine
operated the Immediate Edge from 2007 until its acquisition by 30DC DE in July
2009.
-26-
GREGORY H. LABORDE, DIRECTOR
Mr. Laborde, age 47, has served as a Director of 30DC since September 10, 2010.
Prior to the transaction between Infinity and 30DC DE, Mr, Labord 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 holds a Bachelor of Science degree in Engineering from
Lafayette College.
PIERCE MCNALLY, DIRECTOR
Mr. McNally, age 62, 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 Strategic Officer and General
Counsel of OutsourceOne, Inc. a third party benefits administration and
technology 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 serves 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
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.
-27-
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.
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 Infinity's business opportunities which come to their
attention. The Company's officers and directors do, however, have a fiduciary
duty of loyalty to Infinity 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,
-28-
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 to officers during the
fiscal years ended June 30, 2011, 2010 and 2009. 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, 2011.
SUMMARY EXECUTIVES COMPENSATION TABLE
NON-EQUITY NON-QUALIFIED
INCENTIVE DEFERRED
STOCK OPTION PLAN COMPENSATION ALL OTHER
SALARY BONUS AWARDS AWARDS COMPEN-SATIONEARNINGS COMPENSATION TOTAL
NAME & POSITION YEAR ($) ($) ($) ($) ($) ($) ($) ($)
-------------------- -------- ------------ ---------- ---------- ---------- ---------- -------------- -------------- ----------
Edward Dale, CEO 2011 280,221(2) 79,643 0 0 0 0 0 359,864
(7) 2010 250,000(1) 496,714 0 0 0 0 0 746,714
Clinton Carey, COO 2011 200,000(4) 0 0 0 0 0 0 200,000
(7) 2010 200,000(3) 0 0 0 0 0 0 200,000
Dan Raine, 2011 250,000(6) 0 0 0 0 0 0 250,000
VP Business 2010 250,000(5) 211,925 0 0 0 0 0 461,925
Development (7)
Theodore A. 2011 200,000(10) 0 0 0 0 0 0 200,000
Greenberg, CFO, 2010 6,000(9) 0 0 0 0 0 0 6,000
and Secretary 2009 24,000(8) 0 0 0 0 0 0 24,000
Gregory H. 2011 0 0 0 0 0 0 0 0
Laborde, Former 2010 6,000(9) 0 0 0 0 0 0 6,000
President and CEO 2009 41,863(11) 0 0 0 0 0 0 41,863
--------------------
(1) During the year ended June 30, 2010, Marillion Partnership ("Marillion"), a
company affiliated with Edward Dale was paid $746,714, which includes a bonus of
$496,714. This amount was included in related party contractor fees. By contract
Marillion receives annual contractor fees of $250,000. 30DC DE's Board of
Directors approved Marillion receiving a bonus based on the net cash flow of the
30 Day Challenge business unit until such point as 30DC completed the Agreement
which closed on September 10, 2010. Subsequent to that time, Marillion's
contractor fees have followed the contracted amount.
(2) During the year ended June 30, 2011, Marillion, a company affiliated with
Edward Dale was paid $359,864, which includes a bonus of $79,643. This amount
was included in related party contractor fees. By contract Marillion receives
annual contractor fees of $250,000 however, since payment is made in Australian
Dollars, and the amount reported in the Company's financial statements is based
upon the average exchange rate for the year, fluctuation in the exchange rate
can cause the amount reported to vary from the contract amount. 30DC's Board of
Directors approved Marillion receiving a bonus based on the net cash flow of the
30 Day Challenge business unit until such point as 30DC completed the Agreement
which closed on September 10, 2010. Subsequent to that time, Marillion's
contractor fees have followed the contracted amount.
(3) During the year ended June 30, 2010, Jesselton, Ltd. ("Jesselton"), a
company affiliated with Clinton Carey earned $200,000 in contractor fees that
were accrued but unpaid and included in related party contractor fees. This
-29-
amount was paid in shares of the Company after completion of the acquisition of
30DC by Infinity.
(4) During the year ended June 30, 2011, Jesselton, a company affiliated with
Clinton Carey earned $200,000 in contractor fees which were included in related
party contractor fees, Jesselton, Ltd., also earned $250,000 pursuant to a
consulting agreement for services in connection with the closing of the
acquisition of 30DC by Infinity; $125,000 was paid in shares of the Company.
(5) During the year ended June 30, 2010, 23V Ltd. and Raine Ventures, LLC
(collectively "Raine V"), companies affiliated with Dan Raine were paid
$461,925, which includes a bonus of $211,925. This amount was included in
related party contractor fees. By contract Raine V receives annual contractor
fees of $250,000. 30DC DE's Board of Directors approved Raine V receiving a
bonus based on the net cash flow of the Immediate Edge unit until such point as
30DC completed the Agreement which closed on September 10, 2010. Subsequent to
that time, Raine V's contractor fees have followed the contracted amount.
(6) During the year ended June 30, 2011, Raine V, a company affiliated with Dan
Raine earned $250,000 which were included in related party contractor fees.
(7) Compensated by 30DC DE for the fiscal year ended June 30, 2010. Prior to
fiscal year June 30, 2010 the business of 30DC was operated by 30 Day Challenge
and Immediate Edge which were unincorporated entities. Mr. Dale operated 30 Day
Challenge from whom he and entities affiliated with him received owner's
distributions of $272,787 for the fiscal year ended June 30, 2009. Mr. Raine
operated the Immediate Edge from whom he received owner's distributions of
$425,402 for the fiscal year ended June 30, 2009.
(8) During the year ended June 30, 2009, Theodore A. Greenberg earned salary of
$24,000. The compensation was accrued but not actually paid.
(9) Mr. Greenberg and Mr. Laborde signed amendments to their employment
contracts with Infinity which states they would receive no further cash
compensation until the business operations and liquidity of the Company
improved. They each received $6,000- cash compensation during the year ended
June 2010 prior to the effective date of the amendment. The amount due Mr.
Laborde was paid to GHL, Group, Ltd. and was included in management fee
expenses.
(10) During the year ended June 30, 2011, Theodore A. Greenberg earned salary of
$200,000 for his services as an officer of the Company. $100,000 of this amount
was paid in shares of the Company and the balance was accrued but not actually
paid.
(11) During the year ended June 30, 2009, GHL Group, Ltd., a company affiliated
with Gregory H. Laborde, was paid $41,383. The payment was included in
management fee expenses. By contract Mr. Laborde was due annual compensation of
$90,000 of which he waived $48,617. Mr. Laborde resigned as the President and
CEO, effective September 10, 2010.
OPTION/SAR GRANTS IN THE LAST FISCAL YEAR
COMPENSATION PURSUANT TO STOCK OPTION PLAN
On August 7, 2008 our directors approved the Company's 2008 Stock Option Plan
(the "Plan") authorizing the plan to grant options to purchase up to 970,934
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.
-30-
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. If the employee owns more than 10% of our stock, the exercise price
of any incentive option granted must be at least 110% of fair market value and
must be exercised within five years after the grant.
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
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 Section22(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.
Aggregated Option/SAR Exercises in Last Fiscal Year,
and Fiscal Year-End Option/SAR Values
NUMBER OF SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
FY-END FY-END ($)
---------------------- ------------------
NAME SHARES VALUE EXERCISABLE/ EXERCISABLE/
ACQUIRED ON REALIZED UNEXERCISABLE UNEXERCISABLE
EXERCISE (#) ($)
--------------------- -- --------------- -- ----------- ----- ---------------------- ----- ------------------
Pierce McNally 0 0 36,500/0 $0/0
Conrad Huss 0 0 36,500/0 $0/0
Ernest Chu 0 0 36,500/0 $0/0
On August 10, 2010 the board of directors approved the issuance of 36,500
immediately vesting options to purchase one share of the Company's common stock
with an exercise price of $0.50 per share to each of the Company's three
independent directors; Pierce McNally, Conrad Huss and Ernest Chu. Mr. Huss and
Mr. Chu resigned from the board of directors on September 10, 2010; Mr. McNally
still currently serves as a director.
-31-
CONTRACTOR AGREEMENTS AND TERMINATION OF CONTRACTOR AND CHANGE-IN-CONTROL
ARRANGEMENTS
MARILLION PARTNERSHIP
The Company entered into three-year Contract For Services Agreements commencing
July 2009 with the Marillion Partnership ("Marillion") for services which
includes Mr. Edward Dale acting as the Company's Chief Executive Officer
providing for among other things, the payment of $250,000 in cash remuneration
per year.
CLINTON CAREY
The Company entered into three-year Contract For Services Agreements commencing
July 2009 with Jesselton, Ltd. ("Jesselton") for services which include Mr.
Clinton Carey acting as the Company's Chief Operating Officer providing for
among other things, the payment of $200,000 in cash remuneration per year.
In August, 2008, Marillion Partnership, then owner of 30 Day Challenge,
contracted with Jesselton, Ltd. in connection with the acquisition and merger
process which resulted in signing of the Agreement with Infinity. Compensation
under the consulting agreement wass contingent on completion of the transaction
with Infinity. Upon execution of the Agreement with Infinity $250,000 (US) was
owed to Jesselton, Ltd., a consulting firm which Mr. Carey is associated with.
DAN RAINE
The Company entered into three-year Contract For Services Agreements 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.
In July, 2009 when 30DC DE acquired 30 Day and Immediate, Messrs. Dale and Carey
signed executive services agreements with the Company and Mr. Raine signed a
consulting services agreement with the Company. Pursuant to the agreements with
Marillion, Jesselton and 23V (effective April 1, 2010 Raine Ventures replaced
23V), the contract for services agreements memorialized the preexisting
contractual relationship and formally set the terms and conditions between the
parties from July 1, 2009 and all prior understandings and agreements - oral or
written were merged therein, including the respective executive services and
consulting services agreements. All compensation under the contract for services
agreements is identical with the respective executive services and consulting
agreements. Where applicable under local law, all payroll and other taxes are
the responsibility of Marillion, Jesselton, 23V and Raine Ventures and they have
provided the Company with indemnification of such taxes which under the prior
contracts may have been a liability of the Company. The parties acknowledged
that the effective date of the agreements relates back to the contractual
relationship between the parties.
Cash remuneration under The Marillion and Raine Ventures agreements is $250,000
per year and $200,000 under the Jesselton agreement. On December 12, 2011, cash
remuneration for the Marillion and Jesselton agreements was amended for the year
ended June 30, 2012 to $317,825 and $254,260 Australian Dollars respectively. If
in any year starting from the commencement date, 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, 2011 and 2010.
-32-
DESCRIPTION OF 30 DC DE CONTRACTOR AGREEMENTS
The Marillion, Jesselton and Raine V contractor are with 30DC DE, at this time
no one has contractor or employment agreements with Infinity. The agreements
provide for 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.
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
The Company does not pay any Directors fees for meeting attendance.
-33-
DIRECTORS COMPENSATION
The following table sets forth certain information concerning compensation paid
to the Company's directors during the year ended June 30, 2011:
FEES NON-QUALIFIED
EARNED DEFERRED
NAME OR PAID STOCK OPTION NON-EQUITY COMPENSATION
IN CASH AWARDS AWARDS INCENTIVE PLAN EARNINGS ALL OTHER TOTAL
($) ($) ($) COMPENSATION ($) ($) COMPENSATION ($) ($)
---------------- --------- ---------- ---------- ------------------ ------------------ ------------------ ----------
Edward Dale (1) $ -0- $ -0- $ -0- $ -0- $ -0- $359,864 $359,864
Clinton Carey $ -0- $ -0- $ -0- $ -0- $ -0- $ 200,000 $200,000
(2)
Theodore A. $ -0- $ -0- $ -0- $ -0- $ -0- $ 200,000 $200,000
Greenberg (3)
Gregory H. $ -0- $ -0- $ -0- $ -0- $ -0- $-0- $-0-
Laborde
Pierce McNally $ -0- $ -0- $10,120 $ -0- $-0- $ -0- $10,120
(4)
Conrad R. Huss $ -0- $ -0- $10,120 $ -0- $-0- $ -0- $10,120
(4)
Ernest D. Chu $ -0- $ -0- $10,120 $ -0- $-0- $ -0- $10,120
(4)
----------------
(1) During the year ended June 30, 2011, Marillion Partnership, a company
affiliated with Edward Dale was paid $359,864. The payment was included in
related party contractor fees.
(2) During the year ended June 30, 2011, Jesselton, Ltd. a company affiliated
with Clinton Carey was paid $200,000. The payment was included in related party
contractor fees. Jesselton, Ltd., also earned $250,000 pursuant to a consulting
agreement for services in connection with the closing of the acquisition of 30DC
by Infinity; $125,000 was paid in shares of the Company.
(3) During the year ended June 30, 2011, Theodore A. Greenberg earned salary of
$200,000 for his services as an officer of the Company. $100,000 of this amount
was paid in shares of the Company and the balance was accrued but not actually
paid.
(4) On August 10, 2010, 109,500 Options of Infinity were reallocated to the
Company's disinterested directors, Pierce McNally, Conrad Huss, and Ernest Chu
for service to the Corporation under the 2008 Corporate Stock Option Plan. Each
of these directors received 36,500 options with an exercise price of $0.50 per
share which expire January 5, 2011. Mr. Huss and Mr. Chu resigned from the board
of directors on September 10, 2010; Mr. McNally still currently serves as a
director.
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.
The Company does not pay any Directors fees for meeting attendance.
-34-
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
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 Infinity 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 an Option Plan. As of June 30, 2011, 600,000 options are
outstanding under the 2008 Option Plan of which all 600,000 are exercisable.
During the year ended June 30, 2011, 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.
-35-
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, 2011, including options exercisable within 60 days.
(REMAINDER OF PAGE LEFT BLANK INTENTIONALLY)
-36-
TITLE OF CLASS NAME AND ADDRESS OF BENEFICIAL AMOUNT AND NATURE OF PERCENT OF CLASS
OWNER (1) BENEFICIAL OWNER (2)
------------------------ -------------------------------- ----------------------- -------------------------
Common Restricted Edward Dale, Director, 27,346,925 36.70%
President, CEO and Chairman of
the Board (Directly and
Beneficially through Marillion
Partnership)
Common Restricted Clinton Carey, Director and COO 3,432,000 4.61%
Common Restricted Gregory H. Laborde, Director, 2,957,250 3.97%
Former President, CEO, and
Chairman of the Board
(Beneficially through GHL
Group, Ltd.)
Common Restricted Theodore A. Greenberg, CFO, 1,580,477 2.12%
Secretary and Director
Common Restricted Pierce McNally, Director 192,500 0.26%
Common Restricted Dan Raine (Beneficially 10,560,000 14.17%
through Raine Ventures, LLC)
Common Restricted All Directors and Executive 35,509,445 47.65%
Officers as a Group (5 persons)
------------------------
(1) All directors can be reached at the address of the Company.
(2) At June 30, 2011, the Company had 74,520,248 shares of its common stock
issued and outstanding. The Company had 600,000 options issued and
outstanding, but the 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.
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.
-37-
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
-------------------------------------------------------
RELATED PARTY TRANSACTIONS
During the years ended June 30, 2011 and 2010, Marillion Partnership
("Marillion"), a company affiliated with Edward Dale was paid contractor fees of
$359,864 and $746,714 respectively. Mr. Dale is CEO, President and Chairman of
the Board of the Company.
During the years ended June 30, 2011 and 2010, Jesselton, Ltd. ("Jesselton"), a
company affiliated with Clinton Carey earned $200,000 in contractor fees each
year. Mr. Carey is COO and a Director of the Company.
During the year ended June 30, 2011 and 2010, 23V Ltd. and Raine Ventures, LLC
(collectively "Raine V"), companies affiliated with Dan Raine earned paid
$250,000 and $461,925 in contractor fees respectively. Mr. Raine has beneficial
ownership of 14.17% of the Company.
During the years ended June 30, 2011 and 2010, Theodore A. Greenberg earned
salary of $200,000 and $6,000, respectively. Mr. Greenberg is CFO and a Director
of the Company.
GHL Group, Ltd., a company affiliated with Gregory H. Laborde, was paid $6,000
during the year ended June 30, 2010. Mr. Laborde is the sole shareholder of GHL
Group, Ltd. and was President, CEO of Infinity through September 10, 2010. He
remains a director of the Company.
On September 15, 2009, the holders of Infinity notes totaling $125,000
foreclosed on collateral of 200,000 shares of Strategic Environmental owned by
Infinity and 250,000 shares of Infinity pledged by GHL Group, Ltd., a company
controlled by Gregory Laborde, a former Officer and a current director of the
Company. On August 12, 2010, the Company entered into a Settlement Agreement and
Mutual Release with the holders of these notes to pay the full balance due,
accrued interests along with additional consideration of $6,250 in cash and
5,000 shares of Blackstar Energy Group, Inc. As part of the agreement the
holders of the notes agreed to return 140,000 shares of Strategic Environmental
back to the Company and 190,000 shares of Company stock back to GHL Group, Ltd.
The consideration due to effect the settlement was not paid and the shares were
not returned.
On July 15, 2009, 30DC DE acquired the net assets making up the 30 Day Challenge
from the Marillion Partnership and Edward Dale, an officer of the Company. In
exchange for the net assets, 30DC DE issued 2,820,000 shares of 30DC DE's common
stock. The net assets include cash, accrued receivables and property and
equipment, and outstanding liabilities consisting of accounts payable, accrued
expenses and deferred revenues.
On July 15, 2009, 30DC DE acquired the net assets making up the Immediate Edge
from Dan Raine, a founding shareholder of 30DC DE. In exchange for the net
assets, 30DC DE issued 600,000 shares of 30DC DE's common stock to Mr. Raine.
The net assets include cash and an outstanding liability consisted of deferred
revenues.
30DC DE entered into a three-year Contract For Services Agreement commencing
July 2009 with the Marillion Partnership ("Marillion") for services which
includes Mr. Edward Dale acting as the Company's Chief Executive Officer
providing for among other things, the payment of $250,000 in cash remuneration
per year. The contact is noncancelable by either party for the initial two years
and then with six months notice by either party for the duration of the
contract. If in any year starting from the commencement date, revenues of 30DC
doubles then Marillion will be due shares in 30DC, Inc. equal to 50% of cash
remuneration as additional compensation.
30DC DE 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
-38-
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
contract is non-cancelable by either party for the first two years and with six
months notice by either party for the duration of the contract. If in any year
starting from the commencement date, revenues of 30DC, Inc. doubles then Raine
Ventures will be due shares in 30DC equal to 50% of cash remuneration as
additional compensation payable in shares of 30DC, Inc.
The Company entered into three-year Contract For Services Agreements commencing
July 2009 with Jesselton, Ltd. ("Jesselton") for services which include Mr.
Clinton Carey acting as the Company's Chief Operating Officer providing for
among other things, the payment of $200,000 in cash remuneration per year. The
contract is non-cancelable by either party for the first two years and with six
months notice by either party for the duration of the contract. If in any year
starting from the commencement date, revenues of 30DC doubles then Jesselton
will be due shares in 30DC, Inc. equal to 50% of cash remuneration as additional
compensation payable in shares of 30DC, Inc.
Cash remuneration under The Marillion and Raine Ventures agreements is $250,000
per year and $200,000 under the Jesselton agreement. On December 12, 2011, cash
remuneration for the Marillion and Jesselton agreements was amended for the year
ended June 30, 2012 to $317,825 and $254,260 Australian Dollars respectively. If
in any year starting from the commencement date, 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, 2011 and 2010.
In August, 2008, 30DC contracted with two consultants in connection with the
acquisition and merger process which resulted in signing of the Agreement with
Infinity. Compensation under both consulting agreements was contingent on
completion of the transaction with Infinity. Upon execution of the Agreement
$250,000 (US) was owed to Jesselton, Ltd , a consulting firm which Mr. Carey,
COO and a Director of the Company, is associated with and $250,000 (Australian)
was owed to the other consultant.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
-----------------------------------------------
GENERAL. Marcum, LLP ("Marcum") 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, 2011 and 2010 by Marcum, LLP
Year Ended June 30,
2011 2010
-------------- ------------
Audit Fees $195,990 $207,000
Audit-related Fees $0 $0
Tax Fees $0 $0
All Other Fees $0 $0
-------------- ------------
Total Fees $195,990 $207,000
-39-
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, 2011 and 2010
(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
the Sarbanes-Oxley Act
31.2 Certification of Chief Financial Officer pursuant to Section 302
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
-40-
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: December 13 , 2011
By: /s/ Edward Dale
------------------------------------------
Edward Dale, President, Chief Executive
Officer and Chairman of the Board
By: /s/ Theodore A. Greenberg
------------------------------------------
Theodore A. Greenberg, Chief Financial
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: December 13, 2011
30DC , Inc.
--------------------------------------
/s/ Edward Dale
--------------------------------------
Edward Dale, Director
/s/ Theodore A. Greenberg
--------------------------------------
Theodore A. Greenberg, Director
/s/ Clinton Carey
--------------------------------------
Clinton Carey, Director
/s/ Gregory Laborde
--------------------------------------
Gregory Laborde, Director
/s/ Pierce McNally
--------------------------------------
Pierce McNally, Director
-41-