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, 2012
Or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________ to _____________
Commission file number: 000-30999
30DC, INC.
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(Exact name of registrant as specified in its charter)
Maryland 16-1675285
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State or other jurisdiction of I.R.S. Employer
incorporation or organization Identification No.
80 Broad Street, 5th Floor, New York, New York 10004
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(212) 962-4400
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class registered on which registered
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Not Applicable Not Applicable
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $0.001
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(Title of class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes |_| No |X|
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. |_|
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes |_| No |X|
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Website, if any, every Interactive Data file required to
be submitted and posted pursuant to Rule 405 of Regulation S-T (section 232.405
of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files)
Yes |X| No |_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss. 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. |_|
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 $8,306,558 as of December 31, 2011.
There were 86,931,169 shares outstanding of the registrant's Common Stock as of
June 3, 2013.
TABLE OF CONTENTS
PART I
ITEM 1 Business 4
ITEM 1 A. Risk Factors 10
ITEM 1 B. Unresolved Staff Comments 17
ITEM 2 Properties 17
ITEM 3 Legal Proceedings 17
ITEM 4 Mine Safety Disclosures 17
PART II
ITEM 5 Market for Registrant's Common Equity, Related Stockholder Matters and 18
Issuer Purchases of Equity Securities
ITEM 6 Selected Financial Data 20
ITEM 7 Management's Discussion and Analysis of Financial Condition and Results of 20
Operations
ITEM 7 A. Quantitative and Qualitative Disclosures About Market Risk 24
ITEM 8 Financial Statements and Supplementary Data 24
ITEM 9 Changes in and Disagreements with Accountants on Accounting and Financial 25
Disclosure
ITEM 9 A. Controls and Procedures 25
ITEM 9 B Other Information 26
PART III
ITEM 10 Directors, Executive Officers, and Corporate Governance 26
ITEM 11 Executive Compensation 30
ITEM 12 Security Ownership of Certain Beneficial Owners and Management and Related 37
Stockholder Matters
ITEM 13 Certain Relationships and Related Transactions, and Director Independence 39
ITEM 14 Principal Accounting Fees and Services 40
PART IV
ITEM 15 Exhibits, Financial Statement Schedules 41
SIGNATURES 42
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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, when it filed a Notification of
Withdrawal of Election to be Subject to Sections 55 through 65 of the Investment
Company Act of 1940 on Form N-54C and as a result was no longer 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 became the primary business of Infinity. Infinity was
renamed 30DC, Inc. (Maryland) ("30DC" and together with its subsidiary "the
Company.").
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
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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
Historically, the 30 Day Challenge division has offered a free online ecommerce
training program, an online education subscription service, periodic live
seminars and a one to one mentoring program. Within the past few years the
Company started selling individual marketing information products each focused
on a particular marketing strategy. As further described below, in May 2012, the
MagCast Publishing Platform, a cloud-based digital publishing platform was
launched. 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 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 date that the parties shall agree. In
March 2012 the Purchase expired before all terms and conditions could be met.
In May of 2012 the Company signed a joint venture agreement ("JV Agreement")
with Netbloo Media, Ltd. ("Netbloo") for the MagCast Publishing Platform
("MagCast") which was jointly developed. MagCast provides customers access to a
cloud-based service to create an application ("App") to publish a digital
magazine on Apple Corporation's online marketplace Apple Newsstand and includes
executive training modules as well as a three-month trial subscription to the
Company's Immediate Edge subscription product and other bonus products. Under
the terms of the JV Agreement the Company is responsible for marketing, sales
and administration and Netbloo is responsible for product development. MagCast
was launched in May 2012 and a majority of sales were the result of affiliate
marketing relationships which result in commission of 50% of gross revenue for
those sales to the affiliate responsible for the sale. All MagCast sales revenue
has been recorded by the Company and commission expense has been recorded for
the amount due to Netbloo which is 50% of revenue reduced by affiliate
commissions and other allowable costs.
On December 31, 2012 the Company and Netbloo entered into an asset purchase
agreement for the Company to purchase Netbloo's 50% interest in the MagCast JV
Agreement and Market Pro Max a product which helps companies run online
information businesses for a purchase price of 13,487,363 shares of the
Company's common stock. Netbloo received a three year contractor agreement with
annual compensation of $300,000 which is payable in monthly installments of
$25,000 and may be terminated after two years subject to a six month termination
payment. The contractor agreement was effective October 1, 2012.
BUSINESS MODEL
The Company's long-term strategy is to increase the number of products it sells
and services it offers while expanding the audience to which it markets those
products and services. Historically, 30DC's approach has been to build its
community of members through the Challenge, a free online internet marketing
program which has been taken by nearly 200,000 people and continues to be
available today. The course content in the Challenge is geared for anyone with
an interest in internet marketing; participants might be interested in starting
a brand new business, in extending an existing business to the online platform
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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 individual courses covering a range of topics such as valuing web
sites,
o MagCast Publishing Platform, and
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 during and after the Challenge.
To expand the market for its products 30DC began a more comprehensive program of
selling through affiliate marketing relationships during the year ended June 30,
2012. Approximately one-third of revenues were generated through affiliate
sales. Affiliates promote 30DC's products to their own customer base and receive
a commission from 30DC as a percentage of gross revenue which varies by product
and subscription from 20% to 50%. For the MagCast launch, the Company focused on
affiliates with large customer bases by conducting private webinars to promote
sales to individual affiliate groups of customers.
To expand the number of products the Company sells and services it offers while
limiting its upfront investment, 30DC has developed a number of collaborative
arrangement product development relationships. In a typical collaborative
arrangement, the cost and human resources devoted to product development will be
borne by the collaborative arrangement partner and 30DC will provide marketing,
sales, customer training and support. For MagCast Publishing Platform the idea
was jointly developed and Netbloo oversaw product development with input from
30DC. Revenue generated from a collaborative arrangement is split 50-50 after
allowed costs such as affiliate commissions and processing fees. In addition to
marketing and the other responsibilities noted above, 30DC manages the financial
aspect of sales; managing merchant processor relationships, collecting funds and
issuing refunds. The Company records all sales proceeds as gross revenue with
payment to the collaborative arrangement partner reflected as a cost in
operating expenses.
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
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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 individual content specific courses,
third party products, one to one mentoring and consulting and most recently the
MagCast Publishing Platform which was launched in May 2012. As a third party
affiliate, 30 Day Challenge earns commissions ranging between 20% and 75% on
sales of internet marketing products and services. Specific products include the
Dominiche `Buying and Selling Websites' instruction program ("Dominiche"),
Online Local Hero instruction program and the Marillion Project which includes
intensive consulting and training for up to $10,000 per year.
The MagCast Publishing Platform, launched in May 2012 resulted from the
collaboration of 30DC and Netbloo, an existing Marillion Project customer of the
Company, and fits the model of joint venture product development with limited
cost and risk to the Company. MagCast is also an example of a product which is
relevant to the Company's historical internet marketing customer base but is
also of interest to a much broader audience and increases the potential number
of customers. Since the Challenge originated, 30DC has marketed third party
products for a number of other producers of information products for the
internet marketing industry and for service providers to internet-based
businesses such as hosting companies. 30DC has developed a working relationship
with a number of these companies that they are now serving as affiliates for
30DC by marketing 30DC's products to their own customer bases.
The Company signed a joint venture agreement ("JV Agreement") with Netbloo for
the MagCast Publishing Platform ("MagCast") which was jointly developed. MagCast
provides customers access to a cloud-based service to create an application
("App") to publish a digital magazine on Apple Corporation's online marketplace
Apple Newsstand and includes executive training modules as well as a three-month
trial subscription to the Company's Immediate Edge subscription product and
other bonus products.
On December 31, 2012 the Company and Netbloo entered into an asset purchase
agreement for the Company to purchase Netbloo's 50% interest in the MagCast JV
Agreement and Market Pro Max, an online marketing platform that allows anyone to
create digital products and quickly build a variety of eCommerce marketing
websites for a purchase price of 13,487,363 shares of the Company's common
stock.
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
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
www.Challenge.co.
The MagCast Publishing Platform is a cloud-based service to create an
application ("App") to publish a digital magazine and includes executive
training modules. The software code, domain names and websites to operate
MagCast and the executive training modules are all proprietary to 30DC. The
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Company has filed a trademark application for the name MagCast.
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 five 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
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.
The MagCast Publishing Platform was launched in May 2012 and targets customers
who want to market to the growing base of Apple I-Pad users, MagCast has
initially been sold to the Company's historical customer base in the internet
marketing industry and the Company believes there is strong future growth to
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additional customers in the internet marketing industry as well as to customers
in new market segments. The Company started generating significant revenue
through affiliate marketing relationships during the fiscal year ended June 30,
2012 and plans to expand the use of affiliate marketing going forward.
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.
With the May 2012 launch of the MagCast Publishing Platform, the Company has
begun selling products which are applicable not only to its historical customer
base in the internet marketing industry but to a much wider audience of
potential customers. Anyone looking to market to the growing number of Apple
I-Pad users, sales of which per Apple Inc.'s financial statements now exceed 100
million, is a potential customer for MagCast. To penetrate this market, the
Company initially launched MagCast by selling through affiliate arrangements
with other marketing companies that have introduced MagCast to their customer
bases through custom webinars and bonus products specifically tailored to the
target audience.
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.
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.
There are a number of competitors for the Company's MagCast Publishing Platform
product including software companies who sell do it yourself products and
competitors with similar cloud-based offerings as the Company. The Company sees
the market for digital publishing consisting of a number of segments including
large companies with sizable internal resources, the historical non-digital
publishing market and smaller entrepreneurial businesses. The Company believes
MagCast can a dominant product for the entrepreneurial market, including
Internet self- publishers and other creators of user generated content and
believes its executive training modules and support are key selling points to
customers who have limited resources. Additionally, the Company believes its
affiliate marketing network is a valuable competitive advantage in reaching
potential customers and utilizes the Company's historical marketing expertise.
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When MagCast was launched the Company made a strategic decision to offer an
attractive price for a lifetime license to gain some initial traction in the
market and proof of concept for the product. Going forward the company plans to
offer MagCast on a subscription basis which will produce and ongoing annuity
revenue stream. The Company believes they offer customers good value in terms of
features and price compared to competitor offerings.
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, copyrights and trademarks. We do not hold any
patents or patent applications.
EMPLOYEES
As of June 30, 2012, we had approximately 10 employees and contractors. Our
employees and contractors are located both in the United States and in our
offshore offices.
ITEM 1A. RISK FACTORS
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RISKS RELATING TO OUR BUSINESS AND STRUCTURE
RISKS RELATED TO OUR BUSINESS AND INDUSTRY
THE COMPANY HAS A LIMITED OPERATIONAL HISTORY.
We have a limited history upon which an evaluation of our prospects and future
performance can be made. Our proposed operations are subject to all business
risks associated with new enterprises. The likelihood of our success must be
considered in light of the problems, expenses, difficulties, complications, and
delays frequently encountered in connection with the expansion of a business
operation in an emerging industry, and the continued development of advertising,
promotions, and a corresponding customer base. There is a possibility that we
could sustain losses in the future, and there are no assurances that we will
ever operate profitably.
GOING CONCERN
The consolidated financial statements included herein have been prepared using
accounting principles generally accepted in the United States of America
applicable for a going concern which assumes that the Company will realize its
assets and discharge its liabilities in the ordinary course of business. As of
June 30, 2012, the Company has a working capital deficit of approximately
$1,703,000 and has accumulated losses of approximately $2,736,000 since its
inception. Its ability to continue as a going concern is dependent upon the
ability of the Company to obtain the necessary financing to meet its obligations
and pay its liabilities arising from normal business operations when they come
due. In May 2012, the Company launched MagCast which the Company expects to be
an integral part of its businesses on an ongoing basis. MagCast is being sold
through an affiliate network which expands the Company's selling capability and
has a broad target market beyond the Company's traditional customer base.
Until the Company achieves sustained profitability it does not have sufficient
capital to meet its needs and continues to seek loans or equity placements to
cover such cash needs. No commitments to provide additional funds have been made
and there can be no assurance that any additional funds will be available to
cover expenses as they may be incurred. If the Company is unable to raise
additional capital or encounters unforeseen circumstances, it may be required to
take additional measures to conserve liquidity, which could include, but not
necessarily be limited to, issuance of additional shares of the Company's stock
to settle operating liabilities which would dilute existing shareholders,
curtailing its operations, suspending the pursuit of its business plan and
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controlling overhead expenses. The Company cannot provide any assurance that new
financing will be available to it on commercially acceptable terms, if at all.
These conditions raise substantial doubt about the Company's ability to continue
as a going concern. These consolidated financial statements do not include any
adjustments to the amounts and classification of assets and liabilities that may
be necessary should the Company be unable to continue as a going concern.
To fund working capital for the next twelve months, the Company expects
operations to continue to improve through increased sales of MagCast, to reduce
costs due to 100% ownership of MagCast, to settle additional liabilities using
the Company's stock and to raise additional capital.
THE COMPANY MAY NEED ADDITIONAL FINANCING FOR WHICH 30DC HAS NO COMMITMENTS, AND
THIS MAY JEOPARDIZE EXECUTION OF THE COMPANY'S BUSINESS PLAN.
30DC has limited funds, and such funds may not be adequate to carry out the
business plan. The Company's ultimate success depends upon its ability to raise
additional capital. The Company has not investigated the availability, source,
or terms that might govern the acquisition of additional capital and will not do
so until it determines a need for additional financing. If the Company needs
additional capital, it has no assurance that funds will be available from any
source or, if available, that they can be obtained on terms acceptable to the
Company. If not available, 30DC's operations will be limited to those that can
be financed with its modest capital.
WE WILL INCUR EXPENSES IN CONNECTION WITH OUR SEC FILING REQUIREMENTS AND WE MAY
NOT BE ABLE TO MEET SUCH COSTS, WHICH COULD JEOPARDIZE OUR FILING STATUS WITH
THE SEC.
As a public reporting company we are required to meet the filing requirements of
the SEC. We estimate accounting and legal expenses on an annualized basis to be
approximately $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. During
the last two years, we have been unable to meet our filing requirements on a
timely basis. If we continue to be unable to meet our filing requirements or are
not compliant in meeting the filing requirements of the SEC, we could lose our
status as a 1934 Act Company, which could compromise our ability to raise funds.
WE ARE HIGHLY DEPENDENT ON THE SERVICES OF KEY PERSONNEL.
Our success depends and will depend on the efforts and abilities of Edward Dale,
our President, Chief Executive Officer and a Director, and 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.
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".
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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.
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.
-12-
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
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.
-13-
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.
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.
-14-
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 Netbloo
transaction. We have limited experience in identifying acquisition targets, and
successfully completing and integrating any acquired businesses, technologies,
services or products into our current infrastructure. The process of integrating
any acquired business, technology, service or product may result in unforeseen
operating difficulties and expenditures and may divert significant management
attention from our ongoing business operations. As a result, we will incur a
variety of costs in connection with an acquisition and may never realize our
anticipated benefits.
WE MAY ENGAGE IN TRANSACTIONS THAT PRESENT CONFLICTS OF INTEREST.
The Company and officers and directors may enter into agreements with the
Company from time to time which may not be equivalent to similar transactions
entered into with an independent third party. A conflict of interest arises
whenever a person has an interest on both sides of a transaction. While we
believe that it will take prudent steps to ensure that all transactions between
the Company and any officer or director is fair, reasonable, and no more than
the amount it would otherwise pay to a third party in an "arms-length"
transaction, there can be no assurance that any transaction will meet these
requirements in every instance.
THE COMPANY MAY IN THE FUTURE ISSUE MORE SHARES WHICH COULD CAUSE A LOSS OF
CONTROL BY ITS PRESENT MANAGEMENT AND CURRENT STOCKHOLDERS.
30DC may issue further shares as consideration for the cash or assets or
services out of its authorized but unissued common stock that would, upon
issuance, represent a majority of the voting power and equity of the Company.
The result of such an issuance would be those new stockholders and management
would control the Company, and persons unknown could replace the Company's
management at this time. Such an occurrence would result in a greatly reduced
percentage of ownership of 30DC by its current shareholders, which could present
significant risks to investors.
THE REGULATION OF PENNY STOCKS BY SEC AND FINRA MAY DISCOURAGE THE TRADABILITY
OF OUR SECURITIES.
The Company is a "penny stock" company. Our securities currently trade over the
counter ("OTC") on the OTC Pink market operated by OTC Market Group, Inc and are
subject to a Securities and Exchange Commission rule that imposes special sales
practice requirements upon broker-dealers who sell such securities to persons
other than established customers or accredited investors. For purposes of the
rule, the phrase "accredited investors" means, in general terms, institutions
with assets in excess of $5,000,000, or individuals having a net worth in excess
of $1,000,000 or having an annual income that exceeds $200,000 (or that, when
combined with a spouse's income, exceeds $300,000). For transactions covered by
the rule, the broker-dealer must make a special suitability determination for
the purchaser and receive the purchaser's written agreement to the transaction
prior to the sale. Effectively, this discourages broker-dealers from executing
-15-
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.
ITEM 1B. UNRESOLVED STAFF COMMENTS
----------------------------------
Not Applicable.
ITEM 2. PROPERTIES
------------------
FACILITIES
The current corporate address is 80 Broad Street, 5th Floor, New York, New York
10004. The telephone number is 212-962-4400. The Company entered into a new
lease effective March 2011 for twelve months which was renewed in March 2012 for
twelve months. The lease is non-cancellable with a minimum monthly payment of
$99 and provision for additional charges for use of facilities and services
utilized on an as-needed basis. Rent expense incurred under the lease in the
years ended June 30, 2012 and 2011 was approximately $1,393 and $1,843,
respectively.
-16-
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. MINE AND SAFETY DISCLOSURES
-----------------------------------
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
--------------------------------------------------------------------------------
The Company's common stock is presently traded over the counter ("OTC") on the
OTC Pink market operated by OTC Market Group, Inc. 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, 2012
and 2011. The quotations were obtained from information published by the FINRA
and reflect inter-dealer prices, without retail mark-up, mark-down or commission
and may not necessarily represent actual transactions.
MARKET INFORMATION
FISCAL YEAR ENDED JUNE 30, 2012: HIGH LOW
---------- ----------
Quarter Ended September 30, 2011 $0.60 $0.17
Quarter Ended December 31, 2011 $0.53 $0.29
Quarter Ended March 31, 2012 $0.36 $0.13
Quarter Ended June 30, 2012 $0.25 $0.10
FISCAL YEAR ENDED JUNE 30, 2011: HIGH LOW
---------- ----------
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
-17-
HOLDERS
As of June 30, 2012, the Company had approximately 150 holders of record of the
Common Stock. Since a portion of the Company's common stock may be held in
"street" or nominee name, the Company is unable to determine the exact number of
beneficial holders.
DIVIDEND POLICY
The Company currently anticipates that it will retain all of its earnings to
finance the operation and expansion of its business, and therefore does not
intend to pay dividends on its Common Stock in the foreseeable future. Since its
inception, the Company has never declared or paid any cash dividends on its
Common Stock. Any determination to pay dividends in the future is at the
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 did not make any unregistered sales and issuances of our securities from July
1, 2011 through June 30, 2012.
ISSUER PURCHASES OF EQUITY SECURITIES
30DC, Inc. did not repurchase any shares of its common stock during the year
ended June 30, 2012.
During the year ended June 30, 2012, the Company did settle payments exceeding
the amount due under the Marillion Partnership contractor agreement through the
return by Marillion of 1,591,827 of the Company's common shares and such shares
have been canceled.
DATE OF TITLE OF NO. OF CLASS OF
PURCHASE SECURITIES SHARES CONSIDERATION PURCHASER
--------------- --------------- ------------- --------------- ------------------
June 28, 2012 Common Stock 1,591,827 $159,183 Affiliate
ITEM 6. SELECTED FINANCIAL DATA
-------------------------------
Not applicable.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
--------------------------------------------------------------------------------
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL
STATEMENTS AND NOTES THERETO AND THE OTHER FINANCIAL INFORMATION INCLUDED
ELSEWHERE IN THIS REPORT. THIS DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS
THAT INVOLVE RISKS AND UNCERTAINTIES. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY
FROM THOSE ANTICIPATED IN THESE FORWARD LOOKING STATEMENTS AS A RESULT OF ANY
NUMBER OF FACTORS, INCLUDING THOSE SET FORTH UNDER "RISK FACTORS" ON PAGE 11 AND
ELSEWHERE IN THIS REPORT.
-18-
OVERVIEW
The Company has two business divisions, 30 Day Challenge and Immediate Edge. 30
Day Challenge offers a free online ecommerce training program and an online
education subscription service. In addition, periodic premium live seminars are
produced which are 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. The Purchase expired March 31, 2012 before all the terms
and conditions could be met.
The Company has been developing and selling more of its own products and has
been reducing operating costs. As part of the cost reduction efforts, effective
February 1, 2012 the Company consolidated its two subscription products; the
Immediate Edge and Challenge Plus. Resources and marketing efforts for
subscriptions are now exclusively for the Immediate Edge. The Company expects
future growth to come from new products which are developed internally or
through joint venture arrangements. There can be no assurance new products will
be developed and if developed there can be no assurance that new products will
produce significant revenue.
In May of 2012 the Company signed a JV Agreement with Netbloo for the MagCast
Publishing Platform ("MagCast") which was jointly developed. MagCast provides
customers access to a cloud-based service to create an application ("App") to
publish a digital magazine on Apple Corporation's online marketplace Apple
Newsstand and includes executive training modules as well as a three-month trial
subscription to the Company's Immediate Edge subscription product and other
bonus products. Under the terms of the JV Agreement the Company is responsible
for marketing, sales and administration and Netbloo is responsible for product
development. MagCast was launched in May 2012 and a majority of sales were the
result of affiliate marketing relationships which resulted in commissions of 50%
of gross revenue for those sales to the affiliate responsible for the sale. All
MagCast sales revenue has been recorded gross by the Company and commission
expense has been recorded for the amount due to Netbloo which is 50% of revenue
reduced by affiliate commissions and other allowable costs.
On December 31, 2012 the Company and Netbloo entered into an asset purchase
agreement for the Company to purchase Netbloo's 50% interest in the MagCast JV
Agreement and Market Pro Max, a product which helps companies run online
information businesses for a purchase price of 13,487,368 shares of the
Company's common stock. Netbloo received a three year contractor agreement with
annual compensation of $300,000 which is payable in monthly installments of
$25,000 and may be terminated after two years subject to a six month termination
payment. The contractor agreement was effective October 1, 2012.
The Company has no plans at this time for purchases or sales of fixed assets
which would occur in the next twelve months.
The Company has no expectation or anticipation of significant changes in number
of employees in the next twelve months.
LIQUIDITY AND CAPITAL RESOURCES
The Company had a cash balance of $1,031,167 at June 30, 2012 and the Company
had a working capital deficit of $1,703,230. $684,655 of the amount included in
accrued expenses at June 30, 2012 was for MagCast affiliate commissions and the
amount due Netbloo under the collaborative arrangement. At April 30, 2013 the
Company had a working capital deficit of approximately $1,800,000; the
approximately $100,000 additional working capital deficit was funded by an
increase in the amount due to related parties. Subsequent to June 30, 2012 the
-19-
Company received $105,000 in cash from the sale of 300,000 shares of Strategic
Environmental and Energy Resources, Inc. which were included in Assets of
Discontinued Operations. To fund working capital for the remainder of the year
ending June 30, 2013 and in the year ending June 30, 2014, the Company expects
to raise capital and to improve the results of operations from increasing
revenue as well as a reduction in operating costs. Increased revenue is expected
to come from further sales of MagCast Publishing Platform, including recurring
revenue as the Company transitions to monthly licenses, Market Pro Max which has
not been extensively marketed and introduction of new products some of which
will be extensions of existing product lines. During the year ended June 30,
2012 operating costs included significant amounts due to Netbloo under the
collaborative arrangement which subsequent to the Company's acquisition of the
other 50% of the collaborative arrangement from Netbloo are no longer owed..
Included in liabilities of discontinued operations at June 30, 2012 is $169,801
(including $45,031 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. Approximately $50,000 of this amount has been repaid subsequent to June
30, 2012.
During the year ended June 30, 2012, operating activities provided the Company
with $1,033,204. During the year ended June 30, 2011, the Company used $343,319
in operating activities. The increase of $1,376,523 in funds provided from
operating activities was due to a number of factors. The change to net income of
$32,207 from a net loss of $1,440,046 which was primarily due to increased sales
from the launch of the MagCast Publishing Platform, an increase of $644,336 in
the change of accrued commissions expense which was primarily due to commissions
due affiliates and payments due to Netbloo pursuant to the collaborative
arrangement both of which relate to sales of the MagCast Publishing Platform and
an increase of $108,018 in the change of due to related parties. These were
offset by a increase of $156,104 in accounts receivable, an increase of $159,183
in the amount due from related parties which was settled by the by surrender of
Company shares, a decrease of $575,988 in the amount of expenses paid or settled
with shares of the Company's common stock and a decrease of $77,423 in loss from
discontinued operations.
During the year ended June 30, 2012, no funds were provided by or used for
financing activities. During the year ended June 30, 2011, financing activities
provided the Company with $349,750 which came from the Company's private
placement memorandum described below.
In August 2010, 30DC issued a private placement memorandum ("PPM") at 26 cents
per unit which, net of expenses, raised a total of $843,840 inclusive of
$501,590 which was previously recorded as a loan. In conjunction with the PPM,
the Company issued 3,401,522 units consisting 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 exercisable
for five years from the date of issuance, to purchase one share of Common Stock
of Infinity for 50 cents. The March 15, 2011 warrants expired with none
exercised.
GOING CONCERN
The consolidated financial statements have been prepared using accounting
principles generally accepted in the United States of America applicable for a
going concern which assumes that the Company will realize its assets and
discharge its liabilities in the ordinary course of business. As of June 30,
2012, the Company has a working capital deficit of approximately $1,703,000 and
has accumulated losses of approximately $2,736,000 since its inception. At April
30, 2013 the Company had a working capital deficit of approximately $1,800,000;
the approximately $100,000 additional working capital deficit was funded by an
increase in the amount due to related parties. Subsequent to June 30, 2012 the
Company received $105,000 in cash from the sale of 300,000 shares of Strategic
Environmental and Energy Resources, Inc. which were included in Assets of
Discontinued Operations. The Company's ability to continue as a going concern is
-20-
dependent upon the ability of the Company to obtain the necessary financing or
to earn profits from its business operations to meet its obligations and pay its
liabilities arising from normal business operations when they come due. In May
2012 the Company launched MagCast which the Company expects to be an integral
part of its businesses on an ongoing basis. MagCast is being sold through an
affiliate network which expands the Company's selling capability and has a broad
target market beyond the Company's traditional customer base. Until the Company
achieves sustained profitability it does not have sufficient capital to meet its
needs and continues to seek loans or equity placements to cover such cash needs.
No commitments to provide additional funds have been made and there can be no
assurance that any additional funds will be available to cover expenses as they
may be incurred. If the Company is unable to raise additional capital or
encounters unforeseen circumstances, it may be required to take additional
measures to conserve liquidity, which could include, but not necessarily be
limited to, issuance of additional shares of the Company's stock to settle
operating liabilities which would dilute existing shareholders, curtailing its
operations, suspending the pursuit of its business plan and controlling overhead
expenses. The Company cannot provide any assurance that new financing will be
available to it on commercially acceptable terms, if at all. These conditions
raise substantial doubt about the Company's ability to continue as a going
concern.
RESULTS OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 2012 COMPARED TO THE YEAR ENDED JUNE 30, 2011
During the year ended June 30, 2012, the Company recognized revenues of
$2,916,341 from its operations compared to $1,893,314 during the year ended June
30, 2011. Revenues of the Company were from the following sources during the
year ended June 30, 2012 compared to June 30, 2011.
Year Ended Year Ended Increase or
June 30, 2012 June 30, 2011 (Decrease)
--------------- --------------- ------------
Revenue
Commissions $ 203,188 $ 449,800 $ (246,612)
Subscription Revenue 609,951 673,650 (63,699)
Products and Services 1,486,719 190,837 1,295,882
Seminars and Mentoring 616,483 579,027 37,456
--------------- --------------- ------------
Total Revenues $ 2,916,341 $ 1,893,314 $ 1,023,027
--------------- --------------- ------------
The $246,612 decrease in commissions was primarily the result of two factors.
Fewer new participants in the Company's Challenge program in the year ended June
30, 2012 resulted in fewer customer referrals for web site hosting and other
services typically purchased by new participants. A large payer of affiliate
commissions revised their policy midway through the year ended June 30, 2011 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, 2012, there were no material amounts earned from new affiliate programs but
the Company began selling more of its own products and services such as the
MagCast Publishing Platform.
The $63,699 decrease in subscription revenue was due to discontinuance of the
Company's Challenge Plus subscription product in February 2012 offset by an
increase in subscribers for the Immediate Edge which averaged 477 subscribers
per month for the year ended June 30, 2012 and averaged 449 subscribers per
month for the year ended June 30, 2011. When Challenge Plus was discontinued,
company resources were consolidated to focus on the Immediate Edge and some
Challenge Plus subscribers migrated to the Immediate Edge.
-21-
The $1,295,882 increase in products and services revenue was primarily due to
the launch of the MagCast Publishing Platform in May 2012 which generated
revenue of 1,239,371 during the year ended June 30, 2012 of which $156,104 was
receivable at June 30, 2012 as a result of sales made under a payment plan
arrangement.
The $37,456 increase in seminars and mentoring income reflects an increase in
the average price of the mentoring program offset by a decrease in the number of
mentoring students. The price of the mentoring program increased in March 2011
from $5,000 to $7,500 meaning that 2/3's of the year ending June 30, 2011 was
prior to the increase. For the year ended June 30, 2012 there was an average of
80 mentoring students per month and for the year ended June 30, 2011 there was
an average of 94 mentoring students per month.
During the year ended June 30, 2012, the Company incurred $2,843,294 in
operational expenses compared to $3,197,048 during the year ended June 30, 2011.
Operational expenses during the years ended June 30, 2012 and 2011, include the
following categories:
Year Ended Year Ended Increase or
June 30, 2012 June 30, 2011 Decrease
--------------- --------------- -----------------
Accounting Fees $ 207,324 $ 296,037 $ (88,713)
Paypal Fees 73,746 44,652 29,094
Commissions 833,449 97,839 735,610
Independent Contractors 370,284 556,305 (186,021)
Depreciation 53,701 70,743 (17,042)
Internet Expenses 59,274 64,731 (5,457)
Legal Fees 84,571 60,996 23,575
Officer's Salaries 200,000 200,000 -
Payroll Taxes 32,396 39,878 (7,482)
Related Party Contractors 753,428 809,864 (56,436)
Telephone 90,766 37,944 52,822
Transaction Fees - 670,138 (670,138)
Travel & Entertainment 31,225 156,490 (125,265)
Other Operating Expenses 53,130 91,431 (38,301)
--------------- --------------- -----------------
Total Operating Expenses $ 2,843,294 $ 3,197,048 $ (353,754)
=============== =============== =================
The $88,713 decrease in accounting fees is due to a decrease of approximately
$100,000 for accounting consultants engaged to assist with the Company's initial
SEC filing requirements, a decrease of approximately $34,000 for accounting
consultants in Australia who are no longer required offset by an increase of
approximately $35,000 in audit fees due to catch up of delinquent filings during
the year ended June 30, 2012.
The increase of $29,094 in Paypal fees is due to the $1,295,882 increase in
products and services revenue. Paypal fees decrease as a percentage of revenue
as total revenue increases and are 1% higher for sales to customers outside the
United States.
The increase of $735,610 in commissions is due to the $1,295,882 increase in
products and services revenue. Commissions were paid to affiliates for sales
referrals which led directly to a sale and commissions were paid to
collaborative arrangement partners who worked with the Company in developing the
products which the Company marketed and sold.
The decrease of $186,021 in independent contractor fees was primarily due to
decreases of approximately $56,000 for investor relations consultants,
approximately $67,000 from the reduction of two contractors in the IE division
-22-
and approximately $36,000 from the elimination of a contractor that worked with
the discontinued Challenge Plus subscription product and the Challenge forum.
The increase of $23,575 in legal fees was for fees paid to an Australian law
firm for corporate counsel and tax advice during the year ended June 30, 2012.
The $56,436 decrease in related party contractor fees results from Jesselton,
Ltd. voluntarily withdrawing from its contract with the Company effective March
1, 2012.
The increase in telephone expense of $52,822 is partly due to a premium
high-volume internet package which costs approximately $4,000 per month which
was not in place for most of the year ending June 30, 2011.
The decrease 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. during the year ended June 30, 2011.
The decrease of $125,265 in travel and entertainment reflects fewer overseas
trips during the year ended June 30, 2012 than during the year ended June 30,
2011 and a reduction in the number of live seminars which had substantial travel
costs.
During the year ended June 30, 2012, the Company recognized net income from
continuing operations of $54,285 compared to a net loss of ($1,340,545) during
the year ended June 30, 2011. The net positive change of $1,394,830 was a
primarily the result of the $1,023,027 increase in revenues and $353,754
decrease in operational expenses during the period shown above.
ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS
Significant accounting policies and recent accounting pronouncements are
included in Note 2 in the Notes to the Financial Statements included herein.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
-------------------------------------------------------------------
Our Company's business activities contain elements of risk. Neither our
investments nor an investment in us is intended to constitute a balanced
investment program.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
---------------------------------------------------
The audited financial statements of 30DC, Inc. for the years ended June 30, 2012
and 2011 appear as pages F-1 through F-21.
-23-
30DC, INC. AND SUBSIDIARY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2012 AND 2011
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
its Subsidiary (collectively the "Company") as of June 30, 2012 and 2011, and
the related consolidated statements of operations and comprehensive income
(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 audits 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 its
Subsidiary as of June 30, 2012 and 2011, 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 a working capital deficit and
stockholders' deficiency as of June 30, 2012. 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
June 3, 2013
F-3
30DC, INC. AND SUBSIDIARY
Consolidated Balance Sheets
June June
30, 2012 30, 2011
---------------- -------------------
Assets
Current Assets
Cash and Cash Equivalents $ 1,031,167 $ 33,790
Accrued Commissions Receivable 15,805 41,199
Accounts Receivable 156,104 -
Assets of Discontinued Operations 95,625 99,375
---------------- -------------------
Total Current Assets 1,298,701 174,364
Property and Equipment, Net 34,100 84,041
Goodwill 1,503,860 1,503,860
---------------- -------------------
Total Assets $ 2,836,661 $ 1,762,265
================ ===================
Liabilities and Stockholders' Deficiency
Current Liabilities
Accounts Payable $ 581,775 $ 565,534
Accrued Expenses and Refunds 494,603 303,318
Accrued Commissions Expense 699,592 31,970
Deferred Revenue 244,378 273,641
Due to Related Parties 606,827 262,761
Liabilities of Discontinued Operations 374,756 381,399
---------------- -------------------
Total Current Liabilities 3,001,931 1,818,623
---------------- -------------------
Total Liabilities 3,001,931 1,818,623
---------------- -------------------
Stockholders' Deficiency
Preferred Stock, Par Value $0.001, 10,000,000 Authorized, -0- Issued - -
Common Stock, Par Value $0.001, 100,000,000 authorized,
72,928,421 and 74,520,248 issued and outstanding respectively 72,928 74,520
Paid in Capital 2,600,410 2,758,001
Accumulated Deficit (2,735,750) (2,767,957)
Accumulated Other Comprehensive Loss (102,858) (120,922)
---------------- -------------------
Total Stockholders' Deficiency (165,270) (56,358)
---------------- -------------------
Total Liabilities and Stockholders' Deficiency $ 2,836,661 $ 1,762,265
================ ===================
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,
2012 2011
--------------- -----------------
Revenue
Commissions $ 203,188 $ 449,800
Subscription Revenue 609,951 673,650
Products and Services 1,486,719 190,837
Seminars and Mentoring 616,483 579,027
--------------- -----------------
Total Revenue 2,916,341 1,893,314
Operating Expenses 2,843,294 3,197,048
--------------- -----------------
Operating Income (Loss) 73,047 (1,303,734)
Other Income (Expense)
Foreign Currency Transaction Loss (18,762) (36,811)
--------------- -----------------
Total Other Income (Expense) (18,762) (36,811)
--------------- -----------------
Income (Loss) From Continuing Operations 54,285 (1,340,545)
Loss From Discontinued Operations (22,078) (99,501)
--------------- -----------------
Net Income (Loss) 32,207 (1,440,046)
Foreign Currency Translation Gain (Loss) 18,064 (99,130)
--------------- -----------------
Comprehensive Income (Loss) $ 50,271 $ (1,539,176)
=============== =================
Weighted Average Common Shares Outstanding
Basic 74,511,549 71,078,136
Diluted 74,511,549 71,078,136
Income (Loss) Per Common Share (Basic and Diluted)
Continuing Operations $ 0.00 $ (0.02)
Discontinued Operations (0.00) (0.00)
Net Income (Loss) Per Common Share $ 0.00 $ (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
Additional Other Total
Common Stock Paid In Comprehensive Accumulated Stockholders'
Shares Par Value Capital Income (Loss) Deficit Deficiency
------------ --------- ------------- ------------- ------------ --------------
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)
Net Income - - - - 32,207 32,207
Foreign currency translation - - - 18,064 - 18,064
Settlement of Excess Payment to Related Party (1,591,827) (1,592) (157,591) - - (159,183)
------------ --------- ------------- ------------- ------------ -------------
Balance - June 30, 2012 72,928,421 $ 72,928 $ 2,600,410 $(102,858) $(2,735,750) $ (165,270)
============ ========= ============= ============= ============ =============
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,
2012 2011
-------------- -----------------
Cash Flows from Operating Activities:
Net Income (Loss) $ 32,207 $ (1,440,046)
Loss From Discontinued Operations 22,078 99,501
Adjustments to Reconcile Income (Loss) from Continuing Operations
to Net Cash Provided By (Used In) Operating Activities
Depreciation and Amortization 53,701 70,743
Equity Based Payments To Non-Employees - 475,988
Equity Based Payments To Employees - 100,000
Changes in Operating Assets and Liabilities
Accrued Commissions Receivable 23,561 43,784
Accounts Receivable (156,104) -
Due From Related Party (Note 8) (159,183) -
Accounts Payable 25,819 (3,222)
Accrued Expenses and Refunds 197,825 127,117
Accrued Commissions Expense 667,622 23,286
Deferred Revenue (18,388) (76,518)
Due to Related Parties 344,066 236,048
-------------- -----------------
Net Cash Provided By (Used in) Operating Activities 1,033,204 (343,319)
-------------- -----------------
Cash Flows from Investing Activities
Purchases of Property and Equipment (7,118) (16,554)
Cash - Acquired In Acquisition of Infinity - 3,350
-------------- -----------------
Net Cash Used in Investing Activitities (7,118) (13,205)
-------------- -----------------
Cash Flows from Financing Activities
Sale of common stock, net - 342,250
Deferred Financing Costs - 7,500
-------------- -----------------
Net Cash Provided by Financing Activities - 349,750
-------------- -----------------
Cash Flows from Discontinued Operations
Cash Flows From Operating Activities (24,971) (21,333)
-------------- -----------------
Net Cash Used in Discontinued Operations (24,971) (21,333)
-------------- -----------------
Effect of Foreign Exchange Rate Changes on Cash (3,738) 33,491
-------------- -----------------
Increase in Cash and Cash Equivalents 997,377 5,385
Cash and Cash Equivalents - Beginning of Period 33,790 28,405
-------------- -----------------
Cash and Cash Equivalents - End of Period $ 1,031,167 $ 33,790
============== =================
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
Common Stock Surrendered to Settle Related Party Liability (See Note 8) $ 159,183 $ -
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, 2012
NOTE 1. DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION AND LIQUIDITY
--------------------------------------------------------------------
30DC, Inc., Delaware, ("30DC DE") was incorporated on October 17, 2008 in the
state of Delaware, as a holding company, for the purpose of building, acquiring
and managing international web-based sales and marketing companies. On July 15,
2009, 30DC DE completed the acquisitions of the business and assets of 30 Day
Challenge ("30 Day") and Immediate Edge ("Immediate"). 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. 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.
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 approximately 100,000 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 commerce 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
equipment, goodwill and internally developed intangible property such as domain
names, websites, customer lists and copyrights.
In May of 2012 the Company signed a joint venture agreement ("JV Agreement")
with Netbloo Media, Ltd. ("Netbloo") for the MagCast Publishing Platform
("MagCast") which was jointly developed. MagCast provides customers access to a
cloud-based service to create an application ("App") to publish a digital
magazine on Apple Corporation's online marketplace Apple Newsstand and includes
executive training modules as well as a three-month trial subscription to the
Company's Immediate Edge subscription product and other bonus products. Under
the terms of the JV Agreement the Company is responsible for marketing, sales
and administration and Netbloo is responsible for product development. MagCast
was launched in May 2012 and a majority of sales were the result of affiliate
marketing relationships which result in commission of 50% of gross revenue for
those sales to the affiliate responsible for the sale. Pursuant to ASC 808-10
the joint operating activity with Netbloo is considered a collaborative
arrangement. The Company has been deemed the principal participant and has
recorded all revenue under the JV Agreement on a gross basis with the 50% of
revenue due Netbloo, net of affiliate commissions and other allowable costs,
recorded as commission expense.
F-8
30DC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2012
On December 31, 2012 the Company and Netbloo entered into an asset purchase
agreement for the Company to purchase Netbloo's 50% interest in the MagCast JV
Agreement and Market Pro Max an online marketing platform that allows anyone to
create digital products and quickly build a variety of eCommerce marketing
websites for a purchase price of 13,487,363 shares of the Company's common
stock. Netbloo received a three year contractor agreement with annual
compensation of $300,000 which is payable in monthly installments of $25,000 and
may be terminated after two years subject to a six month termination payment.
The contractor agreement was effective October 1, 2012.
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. The Purchase expired March 31, 2012 before all the terms
and conditions could be met.
GOING CONCERN
The consolidated financial statements have been prepared using accounting
principles generally accepted in the United States of America applicable for a
going concern which assumes that the Company will realize its assets and
discharge its liabilities in the ordinary course of business. As of June 30,
2012, the Company has a working capital deficit of approximately $1,703,000 and
has accumulated losses of approximately $2,736,000 since its inception. At April
30, 2013 the Company had a working capital deficit of approximately $1,800,000.
Subsequent to June 30, 2012 the Company received $105,000 in cash from the sale
of 300,000 shares of Strategic Environmental and Energy Resources, Inc. which
were included in Assets of Discontinued Operations. The Company's ability to
continue as a going concern is dependent upon its ability to obtain the
necessary financing or to earn profits from its business operations to meet its
obligations and pay its liabilities arising from normal business operations when
they come due. In May 2012, the Company launched MagCast which the Company
expects to be an integral part of its businesses on an ongoing basis. MagCast is
being sold through an affiliate network which expands the Company's selling
capability and has a broad target market beyond the Company's traditional
customer base. Until the Company achieves sustained profitability it does not
have sufficient capital to meet its needs and continues to seek loans or equity
placements to cover such cash needs. No commitments to provide additional funds
have been made and there can be no assurance that any additional funds will be
available to cover expenses as they may be incurred. If the Company is unable to
raise additional capital or encounters unforeseen circumstances, it may be
required to take additional measures to conserve liquidity, which could include,
but not necessarily be limited to, issuance of additional shares of the
Company's stock to settle operating liabilities which would dilute existing
shareholders, curtailing its operations, suspending the pursuit of its business
plan and controlling overhead expenses. The Company cannot provide any assurance
that new financing will be available to it on commercially acceptable terms, if
at all. These conditions raise substantial doubt about the Company's ability to
continue as a going concern. These consolidated financial statements do not
include any adjustments to the amounts and classification of assets and
liabilities that may be necessary should the Company be unable to continue as a
going concern.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
--------------------------------------------------
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, 2012. 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, 2012
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original maturity of
three months or less as cash equivalents.
The Company maintains its cash in bank deposit accounts which, at times, may
exceed federally insured limits. The Company has not experienced any losses in
such accounts. The Company believes it is not exposed to any significant credit
risk related to cash and cash equivalents.
PROPERTY AND EQUIPMENT
Equipment is recorded at cost less accumulated depreciation and amortization.
Maintenance and repairs are charged to operations as incurred. Asset and related
accumulated depreciation amounts are relieved from the accounts for retirements
or dispositions. Depreciation on equipment is computed using the straight-line
method. Estimated useful lives of three to ten years are used for equipment,
while leasehold improvements are amortized, using the straight line method, over
the shorter of either their economic useful lives or the term of the leases.
GOODWILL AND INTANGIBLE ASSETS
The Company accounts for goodwill and intangible assets in accordance with ASC
350 "Intangibles-Goodwill and Other" ("ASC 350"). ASC 350 requires that goodwill
and other intangibles with indefinite lives be tested for impairment annually or
on an interim basis if events or circumstances indicate that the fair value of
an asset has decreased below its carrying value. The Company completed an
evaluation of goodwill at June 30, 2012 and determined that there was no
impairment.
Goodwill represents the excess of the purchase price over the fair value of net
assets acquired in the Company's share exchange with Infinity which occurred on
September 10, 2010. 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, 2012
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 in accordance with the specific guidance for
recognizing software revenue, where applicable, the Company recognizes revenue
from perpetual software licenses at the inception of the license term, assuming
all revenue recognition criteria have been met. Term-based software license
revenue is recognized on a subscription basis over the term of the license
entitlement. The Company recognizes revenue for software hosting or
software-as-a-service (SaaS) arrangements as the service is delivered, generally
on a straight-line basis, over the contractual period of performance. In
software hosting arrangements where software licenses are sold, the associated
software revenue is recognized according to whether perpetual licenses or term
licenses are sold, subject to the above guidance. In SaaS arrangements where
software licenses are not sold, the entire arrangement is recognized on a
subscription basis over the term of the arrangement. Deferred revenue consists
of the unearned portion of subscription payments, seminar fees and mentoring
revenue as of the financial statement date.
Pursuant to ASC 808-10, the JV Agreement with Netbloo has been classified as a
collaborative arrangement. The Company is deemed to be the principal participant
and has recorded all transactions under the JV Agreement on a gross basis.
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
F-11
30DC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2012
adjustments are recorded as a separate component of accumulated other
comprehensive income. Functional statements of operations amounts expressed in
functional currencies are translated using average exchange rates for the
respective periods. Re-measurement adjustments and gains or losses resulting
from foreign currency transactions are recorded as foreign exchange gains or
losses in the Statement of Operations.
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 INCOME OR LOSS PER SHARE
The Company computes net income or loss per share in accordance with ASC 260
"Earnings per Share." Under ASC 260, basic net income or loss per share is
computed by dividing net income or 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 income
per share 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 however, options
and warrants that have an exercise price in excess of the average market price
during the period are not included in the computation of diluted earnings per
share because they would be antidilutive. The computation of net income per
share for the year ended June 30, 2012 and net loss per share for the year ended
June 30, 2011 excludes potentially dilutive securities consisting of 3,401,522
warrants and 600,000 options because their inclusion would be anti-dilutive. In
computing net income or loss per share, warrants with an insignificant exercise
price are deemed to be outstanding common stock.
RECENT ACCOUNTING PRONOUNCEMENTS
In February 2013, the Financial Accounting Standards Board ("FASB") issued ASU
No. 2013-02, "Reporting of Amounts Reclassified Out of Other Comprehensive
Income ". ASU 2013-02 finalized the reporting for reclassifications out of
accumulated other comprehensive income, which was previously deferred. The
amendments do not change the current requirements for reporting net income or
other comprehensive income in financial statements. However, they do require an
entity to provide information about the amounts reclassified out of accumulated
other comprehensive income by component. An entity is also required to present
on the face of the financials where net income is reported or in the footnotes,
significant amounts reclassified out of accumulated other comprehensive income
by the respective line items of net income, but only if the amount reclassified
is required under U.S. GAAP to be reclassified to net income in its entirety in
the same reporting period. Other amounts need only be cross-referenced to other
disclosures required that provide additional detail of these amounts. The
amendments in this update are effective for reporting periods beginning after
December 15, 2012. The adoption of this standard is not expected to have a
material impact on the Company's consolidated financial statements.
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.
F-12
30DC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2012
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'
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. COLLABORATIVE ARRANGEMENT
---------------------------------
In May of 2012 the Company signed a joint venture agreement ("JV Agreement")
with Netbloo Media, Ltd. ("Netbloo") for the MagCast Publishing Platform
("MagCast") which was jointly developed. MagCast provides customers access to a
cloud-based service to create an application ("App") to publish a digital
magazine on Apple Corporation's online marketplace Apple Newsstand and includes
executive training modules as well as a three-month trial subscription to the
Company's Immediate Edge subscription product and other bonus products. Under
the terms of the JV Agreement the Company is responsible for marketing, sales
and administration and Netbloo is responsible for product development. MagCast
was launched in May 2012 and a majority of sales were the result of affiliate
marketing relationships which result in commission of 50% of gross revenue for
those sales to the affiliate responsible for the sale. Pursuant to ASC 808-10
the joint operating activity with Netbloo is considered a collaborative
arrangement. The Company has been deemed the principal participant and has
recorded all transactions under the JV Agreement on a gross basis with the 50%
amount net of affiliate commissions and other allowable costs due Netbloo
recorded as commission expense.
The following revenue and expense amounts from transactions under the JV
Agreement are included in the Statement of Operations;
Sales of MagCast Publishing Platform $1,239,371
Affiliate Commission Expense, including $320,081 accrued but not paid 320,081
Transaction Fees 29,412
Netbloo Commissions, including $369,582 accrued but not paid 444,939
----------
Net Profit $ 444,939
==========
NOTE 5. DISCONTINUED OPERATIONS
-------------------------------
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.
F-13
30DC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2012
Results of Discontinued Operations for the
Year Ended Year Ended
June 30, 2012 June 30, 2011
-------------- --------------
Other Income $ - $ -
Other expenses 18,328 16,845
Loss from operations (18,328) (16,845)
Realized loss on marketable securities - (24,490)
Unrealized gain (loss) on marketable securities (3,750) (58,166)
-------------- --------------
Net loss $ (22,078) $ (99,501)
============== ==============
Assets and Liabilities of Discontinued Operations as of
June 30, 2012 June 30, 2011
------------- -------------
ASSETS
Marketable securities $ 95,625 $ 99,375
------------- -------------
Total assets of discontinued operations $ 95,625 $ 99,375
============= =============
LIABILITIES
Accounts payable $ 94,428 $ 94,139
Accrued expenses 58,138 46,233
Notes payable 124,770 135,020
Due to related parties 97,420 106,007
------------- -------------
Total liabilities of discontinued operations $ 374,756 $ 381,399
============= =============
NOTES PAYABLE
Included in liabilities of discontinued operations at June 30, 2012 and June 30,
2011 are $169,801 and $193,367 respectively (including $45,031 and $58,347
respectively of notes payable included in due to related parties) in notes
payable plus related accrued interest of which are all in default for lack of
repayment by their due date. For the year ended June 30, 2012 and for the period
subsequent to the share exchange with 30DC DE through June 30, 2011 the Company
incurred interest expense on notes payable of $15,884 and $14,710 respectively
which is included in the Statement of Operations under income (loss) from
discontinued operations.
NOTE 6. 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 as of July 1, 2010. 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.
F-14
30DC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2012
Year Ended
June 30, 2011
(Unaudited)
-----------------
Revenues $ 1,893,313
Operating Expenses 3,272,394
-----------------
Loss from Continuing Operations (1,379,081)
Loss from Discontinued Operations (126,790)
-----------------
Net Loss (1,505,871)
Foreign Currency Translation Loss (99,130)
-----------------
Comprehensive Loss $ (1,605,001)
=================
Basic and Diluted Loss Per Share $ (.02)
Weighted Average Shares Outstanding - Basic and Diluted 72,351,739
NOTE 7. 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.
NOTE 8. RELATED PARTY TRANSACTIONS
-----------------------------------
The Company entered into three-year Contract For Services Agreements commencing
July 2009 ("Commencement Date") 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 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 Mr. Raine are both beneficial owners 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. Jesselton
voluntarily withdrew from its contract with the Company effective March 1, 2012
and Mr. Carey has continued as a director of the Company. The Marillion and
Raine Ventures contracts expired June 30, 2012 and have continued on a month to
month basis under the same terms.
F-15
30DC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2012
Cash remuneration under the Marillion, 23V and Raine Ventures agreements was
initially $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 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 annual contract amount of $250,000
has been amended to $317,825 AUD Dollars and the Jesselton original annual
contract amount of $200,000 has been amended to $254,260 AUD which has been
accrued on a proportionate basis through February 29, 2012 due to Jesselton's
voluntary withdrawal from its contract effective March 1, 2012 resulting in
$169,507 AUD for Jesselton remuneration during the year ended June 30, 2012.
During the year ended June 30, 2012 Marillion was paid $476,111 AUD ($491,690
USD) which exceeds Marillion's contracted amount by $158,139 AUD ($159,183 USD).
The $159,183 was settled by Marillion surrendering 1,591,827 of the Company's
common shares, which it held and the Company has canceled these shares. If in
any year starting from the Commencement Date, revenues of 30DC, Inc. doubles
then a bonus equal to 50% of cash remuneration will be due in shares of 30DC,
Inc. as additional compensation. The bonus was not earned in the fiscal years
ending June 30, 2011 and June 30, 2012.
During the term of the agreements, Marillion, Jesselton and Raine Ventures were
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 23V (succeeded by
Raine Ventures) based upon the net cash flow of the Company's Immediate Edge
division until such time as 30DC had completed a merger or public stock 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, 2012 total compensation
earned by Marillion was $317,825 AUD ($328,376 USD) and total compensation
earned by Raine Ventures was $250,000. Marillion and Raine Ventures are to be
paid in accordance with their annual 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.
Beginning July 1, 2011, the Company paid Marillion $2,500 AUD ($2,582 USD) per
month to cover office related expenses which is included in operating expenses.
At June 30, 2011, due to related parties included $114,715 due to Jesselton
which consists of $6,715 for contractor fees and $108,000 for fees related to
the share exchange between 30DC DE and Infinity and $121,750 due to Theodore A.
Greenberg, 30DC's CFO for compensation. Jesselton earned $250,000 upon
completion of the share exchange between 30DC and Infinity on September 10, 2010
$125,000 of which was satisfied by issuance of 480,770 of the Company's common
shares. 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.
F-16
30DC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2012
At June 30, 2012, due to related parties includes $275,317 due to Jesselton,
which consists of $167,317 for contractor fees and $108,000 for fees related to
the share exchange between 30DC DE and Infinity, $9,815 due to Raine Ventures
under its contractor agreement and $321,000 due to Theodore A. Greenberg for
compensation.
NOTE 9. PROPERTY AND EQUIPMENT
-------------------------------
Property and equipment consists of the following:
June 30, 2012 June 30, 2011
--------------- ---------------
Computer and Audio Visual Equipment $ 437,659 $ 450,630
Office equipment and Improvements 68,859 71,870
--------------- ---------------
506,518 522,500
Less accumulated depreciation and amortization (472,418) (438,459)
--------------- ---------------
$ 34,100 $ 84,041
=============== ===============
Depreciation and amortization expense was $53,701 for the year ended June 30,
2012 and $70,743 for the year ended June 30, 2011.
Property and equipment, net are stated in the functional currency where located
and where applicable are translated to the reporting currency of the US Dollar
at each period end. Accordingly, property and equipment, net are subject to
change as a result of changes in foreign currency exchange rates.
NOTE 10. INCOME TAXES
---------------------
The Company's income tax provision (benefit) consists of the following:
Year Ended Year Ended
June 30, 2012 June 30, 2011
--------------- ---------------
Federal
Current $ - $ -
Deferred 18,200 (217,283)
State and Local
Current $ - $ -
Deferred 1,200 (13,017)
Change in valuation allowance (19,400) 230,300
--------------- ---------------
Income tax provision (benefit) $ - $ -
=============== ===============
F-17
30DC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2012
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, 2012 and June 30, 2011 are as
follows:
Year Ended Year Ended
June 30, 2012 June 30, 2011
--------------- ---------------
Deferred tax asset
Net operating loss carryforward - Federal $ $384,400 $ 518,300
Net operating loss carryforward - State 6,600 14,600
Fixed asset depreciation 21,500 21,200
Accrued expenses 158,200 36,000
--------------- ---------------
Total deferred tax asset 570,700 590,100
Less valuation allowance (570,700) (590,100)
--------------- ---------------
Total net deferred tax asset $ - $ -
=============== ===============
The following is a reconciliation of the U.S. tax statutory income tax rate to
the effective tax rate from continuing operations:
Year Ended Year Ended
June 30, 2012 June 30, 2011
--------------- ---------------
U.S. statutory rate 34.0% (34.0%)
State and local taxes net of federal benefit 1.3 (2.0)
Change in valuation allowance -35.7 17.2
Nondeductible transaction fees 10.6
Other Permanent differences 0.4 8.2
--------------- ---------------
Effective income tax rate (0.0%) (0.0%)
=============== ===============
The Company applies the provisions of ASC 740, which prescribes the recognition
and measurement criteria related to tax positions taken or expected to be taken
in a tax return. For those benefits to be recognized, a tax position must be
more-likely-than-not to be sustained upon examination by taxing authorities. The
ultimate realization of deferred tax assets is dependent upon the generation of
future taxable income during the periods in which those temporary differences
become deductible. Management considers projected future taxable income and tax
planning strategies in making this assessment. Management has concluded that it
is more likely than not that the Company will not be able to realize all of its
tax benefits and therefore a valuation allowance of approximately $570,700 has
been established. For the years ended June 30, 2012 and June 30, 2011, the
change in valuation allowance was a decrease of $19,400 and an increase of
$230,300 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 Company does not expect any significant
changes in its unrecognized tax benefits in the next year.
F-18
30DC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2012
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, 2012 and 2011.
As a corporation formed in the United States, the Company is subject to the
United States corporation income tax on worldwide net income. Since majority
ownership of the Company's shares are held by Australian residents, the Company
is deemed to be an Australian resident corporation and is subject to Australian
corporate income tax on worldwide net income. Corporate income taxes paid to
Australia will generally be available as a credit against United States
corporation income tax. The 30DC DE did not have nexus to any individual state
in the United States prior to the share exchange with Infinity on September 10,
2010 and accordingly no deferred tax asset was recognized for state taxes prior
to that date. Australia does not have any state corporation income tax. Future
changes in Company operations might impact the geographic mix which could affect
the Company's overall effective tax rate.
As of June 30, 2012 and June 30, 2011, the Company had approximately $1,130,600
and $1,524,300 of U.S. federal net operating loss carryovers, respectively which
expire starting in 2030. The U.S. net operating loss carryovers may be subject
to limitation under Internal Revenue Code Section 382 should there be a greater
than 50% change in ownership in the future as determined under the regulations.
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 has filed state and local
tax returns due since the share transaction. The Company is in the process of
filing State and local tax returns for Infinity from 2005-2009. The Company
believes no material tax balance is due for all tax returns which have not yet
been filed.
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
---------
Common 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
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.
F-19
30DC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2012
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;
769,231 for $200,000 in contractor fees due for the fiscal year ending June 30,
2010 and 480,770 for $125,000 of the $250,000 fee that was due for advising on
the process which resulted in completion of the share exchange.
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
8).
On February 10, 2011, Cameron Associates settled $20,000 of consulting fees due
for 76,923 common shares of the Company.
On June 28, 2012, Marillion Partnership surrendered 1,591,827 of the Company's
common shares it held and the Company has canceled these shares (see note 7).
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
Marillion Partnership (1,591,827)
----------------
Common Shares Outstanding June 30, 2012 72,928,421
================
F-20
30DC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2012
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.
As further detailed in Note 13, on October 11, 2012 1,500,000 options
exercisable at $0.08 per share expiring on October 10, 2022 were issued to
Theodore A. Greenberg, the Company's Chief Financial Officer and a Director and
1,500,000 options exercisable at $0.08 per share expiring on October 10, 2022
were issued to Henry Pinskier who joined the Company as a director in October
2012.
At June 30, 2012 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 date five years from the
date of investment were issued. All of the warrants expiring March 15, 2011
expired unexercised.
NOTE 12. SUPPLEMENTAL SCHEDULE OF OPERATING EXPENSES
----------------------------------------------------
Year Ended Year Ended
June 30, 2012 June 30, 2011
--------------- ---------------
Related Party Contractor Fees Base Compensation (1) $ 753,428 $ 730,221
Related party Contractor Fees Bonus Compensation (1)(2) - 79,643
Officer's Salary 200,000 200,000
Independent Contractors 370,284 556,305
Transaction Fees (3) - 670,138
Commissions 833,449 97,839
Professional Fees 291,895 357,034
Travel Expenses 31,225 150,136
Other Operating Costs 363,013 355,732
--------------- ---------------
Total Operating Expenses $ 2,843,294 $ 3,197,048
=============== ===============
-------------------------------------------------------
(1) Related party contractors include Marillion which provides services to the
Company including for Edward Dale to act as Chief Executive Officer of the
Company, Raine Ventures which provides services to the Company including
for Dan Raine to act as Vice President for Business Development and
Jesselton, Ltd. which provided services to the Company including Clinton
Carey serving as Chief Operating Officer of the Company through February
F-21
30DC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2012
28, 2012. The annual contracted amounts are not required to be paid
proportionately throughout the year, however expense is recognized
proportionately throughout the year, and amounts may vary from period to
period due to fluctuations in foreign currency exchange rates.
(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 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 Financial Center, Inc. was due
675,314 common shares which were valued at $189,088.
NOTE 13. SUBSEQUENT EVENTS
--------------------------
Effective July 15, 2012, the Company entered into a six-month Consulting
Services Agreement with GHL Group, Ltd., whose President, Gregory H. Laborde is
a Director. Pursuant to the Consulting Services Agreement, GHL Group received
500,000 shares of the Company's restricted common stock and payments of $3,000
monthly for services including but not limited to evaluation of financial
forecasts, assisting in the development of business and financial plans and
assisting in the identification of potential acquisitions and financial sources.
The contract expired January 15, 2013 and has continued on a month to month
basis under the terms of the expired agreement.
On October 11, 2012, the Company's board of directors approved the Company's
2012 stock option plan and grants of 3,000,000 options to purchase the Company's
common stock with an exercise price of $0.08 per share. 1,500,000 of these
options were granted the Theodore A. Greenberg, the Company's Chief Financial
Officer and a Director of the Company and 1,500,000 of these options were
granted to Henry Pinskier who joined the Company as a Director in October 2012.
On November 20, 2012 the Company issued 515,385 shares of common stock to
consultants as partial payment for services. This included the 500,000 shares of
common stock issued to GHL noted above.
On December 31, 2012 the Company and Netbloo entered into an asset purchase
agreement for the Company to purchase Netbloo's interest in the MagCast JV
Agreement and Market Pro Max a product which helps companies run online
information businesses. Netbloo received a three year contractor agreement with
annual compensation of $300,000 which is payable in monthly installments of
$25,000 and may be terminated after two years subject to a six month termination
payment. The contractor agreement was effective October 1, 2012.
In two separate transactions in January and March 2013 the Company received a
total of $105,000 in cash from the sale of 300,000 shares of Strategic
Environmental and Energy Resources, Inc. which were included in Assets of
Discontinued Operations at a value of $60,000 at June 30, 2012.
Management has evaluated subsequent events to determine if events or
transactions occurring through the date on which the financial statements were
issued, require potential adjustment to or disclosure in the Company's financial
statements.
F-22
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 are controls and other procedures that are
designed to ensure that information required to be disclosed by our Company is
recorded, processed, summarized and reported, within the time periods specified
in the rules and forms of the SEC. Our Chief Executive Officer and Chief
Financial Officer are responsible for establishing and maintaining disclosure
controls and procedures for our Company.
Our management, with the participation of our Chief Executive Officer and Chief
Financial Officer, carried out an evaluation of the effectiveness of our
"disclosure controls and procedures" (as defined in the Securities Exchange Act
of 1934 (the "Exchange Act") Rules 13a-15(e) and 15d-15(e)) as of the end of the
period covered by this annual report on Form 10-K (the "Evaluation Date"). Based
upon that evaluation, our Chief Executive Officer and Chief Financial Officer
concluded that, as of the Evaluation Date, our disclosure controls and
procedures are not effective to ensure that information required to be disclosed
by us in the reports that we file or submit under the Exchange Act (i) is
recorded, processed, summarized and reported, within the time periods specified
in the SEC rules and forms and (ii) is accumulated and communicated to our
management, including our Chief Executive Officer and Chief Financial Officer,
as appropriate to allow timely decisions regarding required disclosure.
Specifically, management's evaluation was based on the following material
weaknesses, which existed as of June 30, 2012:
(1) Financial Reporting Systems: We did not maintain a fully integrated
financial consolidation and reporting system throughout the period and
as a result, extensive manual analysis, reconciliation and adjustments
were required in order to produce financial statements for external
reporting purposes.
(2) Segregation of Duties: We do not currently have a sufficient
complement of technical accounting and external reporting personal
commensurate to support standalone external financial reporting under
public company or SEC requirements. Specifically, the Company did not
effectively segregate certain accounting duties due to the small size
of its accounting staff, and maintain a sufficient number of
adequately trained personnel necessary to anticipate and identify
risks critical to financial reporting and the closing process. In
addition, there were inadequate reviews and approvals by the Company's
personnel of certain reconciliations and other processes in day-to-day
operations due to the lack of a full complement of accounting staff.
(3) Overpayment of Contractor Fees: The Company did not maintain proper
controls over revenue received , and disbursements for, a Paypal
e-commerce account and a related party bank account which had been
used historically by the business prior to the Infinity transaction,
As a result, during the fiscal year ended June 30, 2012, Marillion,
which is a company affiliated with our Chief Executive Officer, was
paid contractor fees of $158,139 AUD ($159,183 USD) in excess of the
amount of its annual contract. The Company has taken steps to prevent
future occurrences by notifying all repeat paying customers that
payments are to be remitted to specific company accounts which have
more appropriate financial controls. The Company's Board has
stipulated that the accounts in question are no longer to be used for
any ongoing or new business, any deposit errors are to be immediately
corrected by transfer of funds to appropriate accounts and that the
Company's Chief Financial Officer be informed of all receipts so funds
can be tracked on a timely basis.
-24-
We believe that our weaknesses in internal control over financial reporting and
our disclosure controls relate in part to the fact that we are an emerging
business with limited personnel. Management and the Board of Directors believe
that the Company must allocate additional human and financial resources to
address these matters. Throughout the year, the Company has been continuously
improving its monitoring of current reporting systems and its personnel. The
Company intends to continue to make improvements in its internal controls over
financial reporting and disclosure controls until its material weaknesses are
remediated.
REMEDIATION OF MATERIAL WEAKNESS
As our current financial condition allows, we are in the process of analyzing
and developing our processes for the establishment of formal policies and
procedures with necessary segregation of duties, which will establish mitigating
controls to compensate for the risk due to lack of segregation of duties.
DISCLOSURE CONTROLS AND PROCEDURES
Our management, including our Chief Executive Officer and Chief Financial
Officer, does not expect that our disclosure controls and procedures or our
internal controls will prevent all errors and all fraud. A control system, no
matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are met. Further,
the design of a control system must reflect the fact that there are resource
constraints and the benefits of controls must be considered relative to their
costs. Because of the inherent limitations in all control systems, no evaluation
of controls can provide absolute assurance that all control issues and instances
of fraud, if any, within the Company have been detected, at this time.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There was no change in the Company's internal control over financial reporting
that occurred during the fiscal quarter ended June 30, 2012, that has materially
affected, or is reasonably likely to materially affect, its internal control
over financial reporting.
ITEM 9B. OTHER INFORMATION
--------------------------
Not applicable.
-25-
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,
2012.
NAME AGE POSITION
------------------------ ------- ----------------------------------------------
Edward Dale 42 President, CEO and Chairman of the Board (1)
Theodore A. Greenberg 52 CFO, Secretary and Director
Clinton Carey 42 Director (2)
Gregory H. Laborde 47 Director
Pierce McNally 63 Director
Henry Pinskier 52 Director (3)
------------------------
(1) Mr. Dale resigned as Chairman of the Board on January 31, 2013 and
remains a Director.
(2) Mr. Carey resigned as the Chief Operating Officer of the Company on
March 1, 2012. Mr. Carey resigned as a Director of the Company on
October 11, 2012.
(3) Mr. Pinskier was elected as a Director on October 11, 2012 and was
elected Chairman of the Board on January 31, 2013
30DC's directors are elected by the Company's shareholders and hold office until
their successors are duly elected and qualified under 30DC's bylaws.
Unless otherwise indicated, the directors named above will serve until the next
annual meeting of 30DC stockholders. Thereafter, directors will be elected for
one-year terms at the annual stockholders' meeting.
BIOGRAPHICAL INFORMATION
The following is a brief account of the business experience during at least the
past five years of the directors and Officers of 30DC, indicating the principal
occupation and employment during that period by each, and the name and principal
business of the organizations by which they were employed.
EDWARD DALE, DIRECTOR AND CHIEF EXECUTIVE OFFICER
Mr. Dale, age 42, has served as a Director and President and CEO of 30DC since
the transaction between Infinity and 30DC DE on September 10, 2010. Mr. Dale was
a founding shareholder of 30DC DE and served as its President, Chief Executive
Officer and a director from October 2008 until September 10, 2010. From 2005 to
2008, Mr. Dale developed the 30 Day Challenge business, which he ran for 4 years
as part of the Marillion Partnership and was sold to 30DC DE in July 2009. In
2006, Mr. Dale created and marketed the Dominiche `Buying and Selling websites'
program. Mr. Dale is a beneficiary of the Marillion Trust which is a partner in
the Company's majority shareholder, Marillion Partnership. On January 31, 2013,
Mr. Dale was adjudicated in personal bankruptcy in Australia resulting from
claims of personal creditors, which is the equivalent of involuntary bankruptcy
in the United States. This action was due to personal creditors unrelated to the
Company and 30DC, Inc. is not a party to the matter. At that time, Mr. Dale
resigned as Chairman of the Board of Directors of the Company a position he had
-26-
held since the transaction between Infinity and 30DC CE on September 10, 2010
and remains a Director.
THEODORE A. GREENBERG, DIRECTOR AND CHIEF FINANCIAL OFFICER
Mr. Greenberg, age 53, 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.
GREGORY H. LABORDE, DIRECTOR
Mr. Laborde, age 48, has served as a Director of 30DC since September 10, 2010.
Prior to the transaction between Infinity and 30DC DE, Mr. Laborde served as
President, Chief Executive Officer and Chairman of the Board of Infinity. Mr.
Laborde currently serves as President and Chief Executive Officer of 21st
Century Investor Relations and has over 22 years experience on Wall Street in
the areas of investment banking, trading, sales and financial consulting. From
1986 to 1997, Mr. Laborde worked in corporate finance at a number of prestigious
NYC based investment banks, including: Drexel Burnham Lambert, Lehman Brothers,
Gruntal & Co., and Whale Securities. During his Wall Street tenure, Mr. Laborde
was involved in over 20 public and private financing transactions totaling over
100 million dollars. In 1999 he founded and took public Origin Investment Group,
a business development company that was involved in investing in IT related
businesses. Mr. Laborde holds a Bachelor of Science degree in Engineering from
Lafayette College.
PIERCE MCNALLY, DIRECTOR
Mr. McNally, age 63, 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.
-27-
HENRY PINSKIER, DIRECTOR
Mr. Pinskier, age 52, joined the Company's board of directors on October 11,
2012 and was elected Chairman of the Board on January 31, 2013. Mr. Pinskier
serves as Chair and Joint Owner (1993- current) of Medi7 Pty Ltd., a General
Practice medical services company with 70 Doctors and staff across multiple
clinics in Melbourne Australia. Mr. Pinskier also currently serves as Chair for
RivusTV P/L an unlisted Public Company, which provides syndicated, secure easy
to use video on demand system utilizing Pay Per View with a multi-level payment
distribution process. He has previously served on the boards of 3 publicly
listed companies in Australia related to Health technology in the area of
Medical devices and services as well as having served as a Director of a Private
US company with an Australian subsidiary delivering safety surveillance
services. Mr. Pinskier has been involved in the Health Sector and IT /IM sector
as well as having served as a Director in the past on a number of Victorian
public sector organizations, VMIA the State Government of Victoria's Insurance
Company from 2005-2011, Yarra Valley Water from 2008-2011 and The Alfred Group
of Hospitals from 2000-2009. From 1985 until 2000, he practiced medicine. Across
the different organizations he Chaired Strategy subcommittees, Risk and Audit
Committees, Nomination Committees and been part of Finance Committees. Mr.
Pinskier attended and graduated MBBS from Monash University in 1984.
CLINTON CAREY, DIRECTOR
Mr. Carey, age 42, served as a Director of 30DC since the transaction between
Infinity and 30DC DE on September 10, 2010 through his resignation from the
board on October 11, 2012. Mr. Carey served as the Company's Chief Operating
Officer from September 10, 2010 through March 1, 2012. 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.
No appointee for a director position has been found guilty of any civil
regulatory or criminal offense or is currently the subject of any civil
regulatory proceeding or any criminal proceeding.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires that the Company's officers and directors, and persons who own more
than ten percent of a registered class of the Company's equity securities, file
reports of ownership and changes in ownership with the Securities and Exchange
Commission. Officers, directors and greater than ten percent stockholders are
required by regulation to furnish to the Company copies of all Section 16(s)
forms they file.
The following persons failed to file forms during the past two fiscal years as
required under Section 16(a) as follows:
None.
CONFLICTS OF INTEREST
Members of the Company's management are associated with other firms involved in
a range of business activities. Consequently, there are potential inherent
conflicts of interest in their acting as officers and directors of the Company.
Insofar as the officers and directors are engaged in other business activities,
-28-
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 30DC business opportunities which come to their
attention. The Company's officers and directors do, however, have a fiduciary
duty of loyalty to 30DC to disclose to it any business opportunities which come
to their attention, in their capacity as an officer and/or director or
otherwise. Excluded from this duty would be opportunities which the person
learns about through his involvement as an officer and director of another
company. The Company has no intention of merging with or acquiring an affiliate,
associate person or business opportunity from any affiliate or any client of any
such person.
-29-
ITEM 11. EXECUTIVE COMPENSATION
-------------------------------
The following table sets forth the compensation paid to officers during the
fiscal years ended June 30, 2012, 2011 and 2010. 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, 2012.
SUMMARY EXECUTIVES COMPENSATION TABLE
NON-EQUITY NON-
INCENTIVE QUALIFIED
PLAN DEFERRED
STOCK OPTION COMPEN COMPENSATION ALL OTHER
SALARY BONUS AWARDS AWARDS SATION EARNINGS COMPENSATION TOTAL
NAME & POSITION YEAR ($) ($) ($) ($) ($) ($) ($) ($)
-------------------- -------- ------------ ---------- ---------- ---------- ---------- -------------- -------------- ----------
Edward Dale, CEO(1) 2012 328,376 0 0 0 0 0 0 328,376
2011 280,221 79,643 0 0 0 0 0 359,864
2010 250,000 496,714 0 0 0 0 0 746,714
Clinton Carey, COO 2012 175,052 0 0 0 0 0 0 175,052
(2) 2011 200,000 0 0 0 0 0 0 200,000
2010 200,000 0 0 0 0 0 0 200,000
Dan Raine, 2012 250,000 0 0 0 0 0 0 250,000
VP Business 2011 250,000 0 0 0 0 0 0 250,000
Development (3) 2010 250,000 211,925 0 0 0 0 0 461,925
Theodore A. 2012 200,000 0 0 0 0 0 0 200,000
Greenberg, CFO, 2011 200,000 0 0 0 0 0 0 200,000
and Secretary (4) 2010 6,000 0 0 0 0 0 0 6,000
--------------------
(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. By contract Marillion was receiving 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. 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.
On December 12, 2011 cash remuneration under the Marillion contractor
agreement was amended for the year ended June 30, 2012 to the Australian
Dollar equivalent of the originally contracted amount at the exchange rate
on the contract start date of July 15, 2009. The original annual contract
amount of $250,000 was amended to $317,825 AUD Dollars Effective July 1,
2012 the United States Dollar equivalent amount varies with the exchange
rate. During the year ended June 30, 2012, Marillion received annual
contractor fees of $328,376. During the year ended June 30, 2012, Marillion
was paid $158,139 AUD ($159,183 USD) in fees beyond their contracted
amount. On June 28, 2012, this excess amount was settled by Marillion
surrendering 1,591,827 of the Company's common shares, which it held and
the Company has canceled these shares.
-30-
(2) 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 amount was paid in shares of the Company after completion of the
acquisition of 30DC by Infinity.
During the year ended June 30, 2011, Jesselton earned $200,000 in
contractor fees which were included in related party contractor fees,
Jesselton, 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.
On December 12, 2011 cash remuneration under the Jesselton contractor
agreement was amended for the year ended June 30, 2012 to the Australian
Dollar equivalent of the originally contracted amount at the exchange rate
on the contract start date of July 15, 2009. The original annual contract
amount of $200,000 was amended to $254,260 AUD Dollars Effective July 1,
2012 the United States Dollar equivalent amount varies with the exchange
rate. During the year ended June 30, 2012, Jesselton, earned $175,052 in
contractor fees. On March 1, 2012, Mr. Carey resigned as the Company's
Chief Operating Officer. At such time, Jesselton voluntarily resigned from
its contract.
(3) 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.
During the years ended June 30, 2011 and June 30, 2012, Raine V, a company
affiliated with Dan Raine earned $250,000 which were included in related
party contractor fees.
(4) During the year ending June 30, 2010, Mr. Greenberg received $6,000 cash
compensation from Infinity which was prior to the transaction with 30DC.
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. Mr. Greenberg earned salary of $200,000 during the year
ended June 30, 2012 which was accrued but has not been paid.
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.
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.
-31-
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 Section 22(e)(3) of
the Internal Revenue Code, the plan option will lapse on the earlier of the
expiration date of the option or one year following the date of such disability.
Subsequent to June 30, 2012, our directors approved the Company's 2012 Stock
Option Plan (the "Plan") authorizing the plan to grant options to purchase up to
7,500,000 shares of the Company's common stock. On October 11, 2012 1,500,000
options to purchase shares of the Company's common stock were issued to Theodore
A. Greenberg the Company's Chief Financial Officer and a Director and 1,500,000
options to purchase shares of the Company's common stock were issued to Henry
Pinskier who is a Director and who subsequently became Chairman of the Board.
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 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.
On December 12, 2011 cash remuneration under the Marillion contractor agreement
was amended for the year ended June 30, 2012 to the Australian Dollar equivalent
of the originally contracted amount at the exchange rate on the contract start
date of July 15, 2009. The original annual contract amount of $250,000 was
amended to $317,825 AUD Dollars Effective July 1, 2012 the United States Dollar
equivalent amount varies with the exchange rate. During the year ended June 30,
2012, Marillion received annual contractor fees of $328,376. During the year
ended June 30, 2012, Marillion was paid $158,139 AUD ($159,183 USD) in fees
beyond their contracted amount. On June 28, 2012, this excess amount was settled
by Marillion surrendering 1,591,827 of the Company's common shares, which it
held and the Company has canceled these shares.
The Marillion contractor agreement expired June 30, 2012 and has continued on a
month to month basis under the terms of the expired agreement.
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.
On December 12, 2011 cash remuneration under the Jesselton contractor agreement
was amended for the year ended June 30, 2012 to the Australian Dollar equivalent
of the originally contracted amount at the exchange rate on the contract start
date of July 15, 2009. The original annual contract amount of $200,000 was
amended to $254,260 AUD Dollars Effective July 1, 2012 the United States Dollar
-32-
equivalent amount varies with the exchange rate. During the year ended June 30,
2012, Jesselton, earned $175,052 in contractor fees. On March 1, 2012, Mr. Carey
resigned as the Company's Chief Operating Officer. At such time, Jesselton
voluntarily resigned from its contract.
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.
The Raine Ventures contractor agreement expired June 30, 2012 and has continued
on a month to month basis under the terms of the expired agreement.
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.
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, 2012 and
2011.
DESCRIPTION OF 30 DC DE CONTRACTOR AGREEMENTS
The Marillion, Jesselton and Raine V contractor agreements were with 30DC DE, a
subsidiary of 30DC, at this time no one has contractor or employment agreements
with 30DC. The agreements provided the following terms:
BONUSES: Performance bonuses and milestones for such bonus are to be determined
by the Board of Directors.
SALARY: Annual reviews of compensation are to be performed by the Board of
Directors. At such review the Board of 30DC shall consider: the responsibilities
of the contractor, the performance of the company, the performance of the
contractor's division, the performance of the contractor, the remuneration
available in the workforce outside the 30DC for persons with responsibilities
and experience equivalent to those of the contractor and the benefits which have
accrued and will accrue under the agreement.
TAKEOVER EVENT: If, a Trade Sale or a Takeover Event occurs and the Executive
providing services through one of the contractor agreements is required to
resign as Officer of the Company, and the Agreement is effectively terminated,
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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.
DIRECTORS COMPENSATION
The following table sets forth certain information concerning compensation paid
to the Company's directors during the year ended June 30, 2012:
NON-QUALIFIED
NON-EQUITY DEFERRED
FEES INCENTIVE PLAN COMPENSATION ALL OTHER
EARNED STOCK OPTION COMPENSATION ($) EARNINGS COMPENSATION ($) TOTAL
NAME OR PAID AWARDS AWARDS ($) ($)
IN CASH ($) ($)
($)
---------------- --------- ---------- ---------- ------------------ ------------------ ------------------ ----------
Edward Dale (1) $ -0- $ -0- $ -0- $ -0- $ -0- $328,376 $328,376
Clinton Carey (2) $ -0- $ -0- $ -0- $ -0- $ -0- $175,052 $175,052
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- $-0- $ -0- $-0- $ -0- $-0-
----------------
(1) During the year ended June 30, 2012, Marillion Partnership, the Company's
majority shareholder and of which Edward Dale, is the beneficial owner of
the shares, was paid $328,376. The payment was included in related party
contractor fees. During the fiscal year ended June 30, 2012, Marillion was
-34-
paid $158,139 AUD ($159,183 USD) in fees beyond their contracted amount. On
June 28, 2012, this excess amount was settled by Marillion surrendering
1,591,827 of the Company's common shares, which it held and the Company has
canceled these shares.
(2) During the year ended June 30, 2012, Jesselton, Ltd. a company affiliated
with Clinton Carey was paid $175,052. The payment was included in related
party contractor fees. Jesselton voluntarily withdrew from its contract
with the Company effective March 1, 2012. At that time Mr. Carey, resigned
as the Company's Chief Operating Officer, but remained as a director of the
Company. Mr. Carey resigned as a director of the Company on October 11,
2012.
(3) During the year ended June 30, 2012, Theodore A. Greenberg earned salary of
$200,000 for his services as an officer of the Company all of which was
accrued but not actually paid.
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.
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 the Company to an
officer except by reason of the fact that such officer is or was the Company's
director in which event this paragraph shall not apply, in any action, suit or
proceeding, whether civil, criminal, administrative or investigative, if a
determination is reasonably and promptly made: (a) by the board of directors by
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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, 2012, 600,000 options are
outstanding under the 2008 Option Plan of which all 600,000 are exercisable.
During the year ended June 30, 2012, 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.
Subsequent to June 30, 2012, our directors approved the Company's 2012 Stock
Option Plan (the "Plan") authorizing the plan to grant options to purchase up to
7,500,000 shares of the Company's common stock. On October 11, 2012 1,500,000
options to purchase shares of the Company's common stock were issued to Theodore
A. Greenberg the Company's Chief Financial Officer and a Director and 1,500,000
options to purchase shares of the Company's common stock were issued to Henry
Pinskier who is a Director and who subsequently became Chairman of the Board.
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, 2012, including options exercisable within 60 days.
-36-
NAME AND ADDRESS OF BENEFICIAL
TITLE OF CLASS OWNER (1) BENEFICIAL OWNER AMOUNT AND NATURE OF PERCENT OF CLASS (2)
------------------------ -------------------------------- ----------------------- -------------------------
Common Restricted Edward Dale, Director, 20,036,440 27.47%
President, CEO and Chairman of
the Board (Directly and
Beneficially through Marillion
Partnership)(3)
Common Restricted Clinton Carey, Director (4) 3,432,000 4.71%
Common Restricted Gregory H. Laborde, Director, 2,957,250 4.06%
Former President, CEO, and
Chairman of the Board
(Beneficially through GHL
Group, Ltd.)
Common Restricted Theodore A. Greenberg, CFO, 1,580,770 2.17%
Secretary and Director
Common Restricted Pierce McNally, Director 192,500 0.26%
Common Restricted Dan Raine (Beneficially 10,560,000 14.48%
through Raine Ventures, LLC)
Common Restricted All Directors and Executive 28,198,960 38.67%
Officers as a Group (5 persons)
------------------------
(1) All directors can be reached at the address of the Company.
(2) At June 30, 2012, the Company had 72,928,421 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.
(3) Mr. Dale resigned as Chairman of the Board on January 31, 2013 and
remains a Director.
(4) Mr. Carey resigned as Chief Operating Officer on March 1, 2012 and
resigned as a director on October 11, 2012.
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
-37-
person. Those securities are not deemed to be outstanding for the purpose of
computing the percentage of the class owned by any other person.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
-------------------------------------------------------
RELATED PARTY TRANSACTIONS
During the years ended June 30, 2012 and 2011, Marillion Partnership
("Marillion"), a company affiliated with Edward Dale was paid contractor fees of
$328,376 and $359,864 respectively. Mr. Dale is CEO, President and Chairman of
the Board of the Company. During the year ended June 30, 2012, Marillion was
paid $158,139 AUD ($159,183 USD) in fees beyond their contracted amount. On June
28, 2012, this excess amount was settled by Marillion surrendering 1,591,827 of
the Company's common shares, which it held and the Company has canceled these
shares.
During the years ended June 30, 2012 and 2011, Jesselton, Ltd. ("Jesselton"), a
company affiliated with Clinton Carey earned contractor fees $175,052 and
$200,000 respectively. Mr. Carey resigned as COO of the Company on March 1, 2012
and resigned as a Director of the Company on October 11, 2012.
During the year ended June 30, 2012 and 2011, Raine Ventures, LLC (collectively
"Raine V"), companies affiliated with Dan Raine earned $250,000 in contractor
fees in each year. Mr. Raine has beneficial ownership of 14.48% of the Company.
During the years ended June 30, 2012 and 2011, Theodore A. Greenberg earned
salary of $200,000 each year. Mr. Greenberg is CFO and a Director of the
Company. On October 11, 2012 Mr. Greenberg was issued 1,500,000 options to
purchase shares of the Company's common stock.
On October 11, 2012 1,500,000 options to purchase shares of the Company's common
stock were issued to Henry Pinskier who is a Director and who subsequently
became Chairman of the Board.
Effective July 15, 2012, the Company entered into a six-month Consulting
Services Agreement with GHL Group, Ltd., whose President, Gregory H. Laborde is
a Director. Pursuant to the Consulting Services Agreement, GHL Group received
500,000 shares of the Company's restricted common stock and payments of $3,000
monthly for services including but not limited to evaluation of financial
forecasts, assisting in the development of business and financial plans and
assisting in the identification of potential acquisitions and financial sources.
The contract expired January 15, 2013 and has continued on a month to month
basis under the terms of the expired agreement.
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. On December 12, 2011 cash remuneration under the Marillion contractor
agreement was amended for the year ended June 30, 2012 to the Australian Dollar
equivalent of the originally contracted amount at the exchange rate on the
contract start date of July 15, 2009. The original annual contract amount of
$250,000 was amended to $317,825 AUD Dollars Effective July 1, 2012 the United
States Dollar equivalent amount varies with the exchange rate. If in any year
starting from the commencement date, revenues of 30DC doubled then Marillion
would be due shares in 30DC, Inc. equal to 50% of cash remuneration as
additional compensation; this threshold was not achieved during the term of the
contract. The Marillion contractor agreement expired June 30, 2012 and has
continued on a month to month basis under the terms of the expired agreement.
-38-
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
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. If in any
year starting from the commencement date, revenues of 30DC, Inc. doubled then
Raine Ventures will be due shares in 30DC equal to 50% of cash remuneration as
additional compensation; this threshold was not achieved during the term of the
contract.. The Raine Ventures contractor agreement expired June 30, 2012 and has
continued on a month to month basis under the terms of the expired agreement.
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. On
December 12, 2011 cash remuneration under the Jesselton contractor agreement was
amended for the year ended June 30, 2012 to the Australian Dollar equivalent of
the originally contracted amount at the exchange rate on the contract start date
of July 15, 2009. The original annual contract amount of $200,000 was amended to
$254,260 AUD Dollars Effective July 1, 2012 the United States Dollar equivalent
amount varies with the exchange rate. If in any year starting from the
commencement date, revenues of 30DC doubled then Jesselton will be due shares in
30DC, Inc. equal to 50% of cash remuneration as additional compensation; this
threshold was not achieved during the term of the contract. Jesselton
voluntarily withdrew from its contract with the Company effective March 1, 2012
and Mr. Carey resigned as Chief Operating Officer.
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,
former COO and formerly a Director of the Company, is associated with and
$250,000 (Australian) was owed to the other consultant. $125,000 of the amount
due to Jesselton was satisfied by issuance of 480,770 of the Company's common
shares. During the years ended June 30, 2012 and 2011, Jesselton was paid $0-
and $17,000 pursuant to the contract.
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, 2012 and 2011 by Marcum, LLP
Year Ended June 30,
2012 2011
-------------------- ------------------
Audit Fees $ 206,010 $ 195,990
Audit-related Fees $ 0 $ 0
Tax Fees $ 0 $ 0
All Other Fees $ 0 $ 0
-------------------- ------------------
Total Fees $ 206,010 $ 195,990
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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, 2012 and 2011
(b) EXHIBIT NO. DESCRIPTION
---------- -------------------------------------------------------------
3.1 Articles of Incorporation of Infinity Capital Group, Inc. (1)
3.2 Bylaws of Infinity Capital Group, Inc. (1)
31.1 Certification of Chief Executive Officer pursuant to Section
302 of the Sarbanes-Oxley Act
31.2 Certification of Chief Financial Officer pursuant to Section
302 of the Sarbanes-Oxley Act
32.1 Certification of Principal Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act
32.2 Certification of Principal Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act
101.INS XBRL Instance Document (2)
101.SCH XBRL Taxonomy Extension Schema Document (2)
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document (2)
101.LAB XBRL Taxonomy Extension Label Linkbase Document (2)
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document (2)
-----------
(1) Incorporated by reference from the exhibits included in the Company's Form
8K12g3 filed with the Securities and Exchange Commission (www.sec.gov),
dated May 5, 2005. A copy can be provided by mail, free of charge, by
sending a written request to 30DC, Inc., 80 Broad Street, 5th Floor, NY, NY
10004.
(2) Pursuant to Rule 406T of Regulation S-T, this interactive data file is
deemed not filed or part of a registration statement or prospectus for
purposes of sections 11 or 12 of the Securities Act of 1933, is deemed not
filed for purposes of section 18 of the Securities Exchange Act of 1934,
and otherwise is not subject to liability under these sections.
-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: June 3, 2013
By: /s/ Edward Dale
------------------------------------------
Edward Dale, President, Chief Executive
Officer and Director
By: /s/ Theodore A. Greenberg
------------------------------------------
Theodore A. Greenberg, Chief Financial
Officer (Principal Accounting Officer),
Secretary and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Dated: June 3, 2013
30DC , Inc.
--------------------------------------
/s/ Edward Dale
--------------------------------------
Edward Dale, Director
/s/ Theodore A. Greenberg
--------------------------------------
Theodore A. Greenberg, Director
/s/ Henry Pinskier
--------------------------------------
Henry Pinskier, Director
/s/ Gregory Laborde
--------------------------------------
Gregory Laborde, Director
/s/ Pierce McNally
--------------------------------------
Pierce McNally, Director
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