UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended June 30, 2015
Or
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TRANSITION REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from _________ to
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Commission file number: 000-30999
30DC, INC.
(Exact name of registrant as specified in its
charter)
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Maryland
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16-1675285
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State or other jurisdiction of incorporation or
organization
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I.R.S. Employer Identification No.
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80 Broad Street, 5th Floor, New York,
New York 10004
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(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code:
(212) 962-4400
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Securities registered pursuant to Section 12(b) of
the Act:
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Title of each class registered
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Name of each exchange on which registered
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Not Applicable
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Securities registered pursuant to Section 12(g) of
the Act:
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Common Stock, $0.001
(Title of class)
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Indicate by check mark if
the registrant is a well-known seasoned issuer, as defined in Rule 405 of the
Securities Act.
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.
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)
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
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[___]
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Accelerated filer
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[___]
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Non-accelerated filer
(Do not check if a smaller
reporting company)
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[___]
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Smaller reporting company
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[_X_]
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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).
The aggregate market value of voting stock held by non-affiliates of the
registrant was approximately $1,511,786 as of December 31, 2014
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There
were 60,109,783 shares outstanding of the registrant's Common Stock as of November
17, 2015.
TABLE OF CONTENTS
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PART I
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ITEM 1
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Business
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4
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ITEM 1 A.
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Risk Factors
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10
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ITEM 1 B.
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Unresolved Staff Comments
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16
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ITEM 2
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Properties
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ITEM 3
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Legal Proceedings
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ITEM 4
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Mine Safety Disclosures
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PART II
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ITEM 5
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Market for Registrant's
Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
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17
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ITEM 6
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Selected Financial Data
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ITEM 7
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Management's Discussion
and Analysis of Financial Condition and Results of Operations
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19
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ITEM 7 A.
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Quantitative and
Qualitative Disclosures About Market Risk
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26
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ITEM 8
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Financial Statements and
Supplementary Data
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ITEM 9
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Changes in and
Disagreements with Accountants on Accounting and Financial Disclosure
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ITEM 9 A.
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Controls and Procedures
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ITEM 9 B
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Other Information
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28
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PART III
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ITEM 10
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Directors, Executive
Officers, and Corporate Governance
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ITEM 11
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Executive Compensation
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ITEM 12
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Security Ownership of
Certain Beneficial Owners and Management and Related Stockholder Matters
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ITEM 13
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Certain Relationships and
Related Transactions, and Director Independence
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ITEM 14
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Principal Accounting Fees
and Services
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41
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PART IV
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ITEM 15
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Exhibits, Financial
Statement Schedules
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42
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SIGNATURES
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Note about
Forward-Looking Statements
This
Form 10-K contains forward-looking statements, such as statements relating to
our financial condition, results of operations, plans, objectives, future
performance and business operations. These statements relate to expectations
concerning matters that are not historical facts. These forward-looking
statements reflect our current views and expectations based largely upon the
information currently available to us and are subject to inherent risks and
uncertainties. Although we believe our expectations are based on reasonable
assumptions, they are not guarantees of future performance and there are a
number of important factors that could cause actual results to differ
materially from those expressed or implied by such forward-looking statements.
By making these forward-looking statements, we do not undertake to update them
in any manner except as may be required by our disclosure obligations in
filings we make with the Securities and Exchange Commission under the Federal
securities laws. Our actual results may differ materially from our
forward-looking statements.
PART I
ITEM 1. BUSINESS
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.
Summary
30DC is
a digital media solution provider. The company's principal product, the MagCast
Mobile Publishing Platform, is used for the creation of mobile magazine apps
and facilitates the monetization of digital content through advanced marketing
functions. The MagCast platform is compatible with the dominant mobile
architectures for mobile devices such as smart phones and tablet computers, Apple's
iOS and Google's Android. 30DC delivers the MagCast platform to licensees as a
software-as-a-service.
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, and such website is not incorporated into this
document.
Background
On
September 10, 2010, Infinity Capital Group, Inc., a Maryland Corporation,
("Infinity") entered into a Plan and Agreement of Reorganization (the
"Agreement") with 30DC, Inc., a Delaware corporation, ("30DC DE") and the
Shareholders of 30DC DE ("30DC DE Shareholders"). In exchange for 100% of the
issued and outstanding shares of 30DC DE, Infinity issued 60,984,000 shares of
its restricted common stock. The 30DC DE Shareholders received 13.2 shares of
common stock of Infinity for every one share of 30DC DE. Infinity, as a result
of the transaction, became the owning entity of 100% of the outstanding shares
of common stock of 30DC DE. For purposes of accounting, 30DC DE was considered
the accounting acquirer. The business of 30DC DE became the primary business
of Infinity. Infinity was renamed 30DC, Inc. (Maryland) ("30DC" and together
with its subsidiary "the Company"). 30DC DE was incorporated on October 17,
2008 in the state of Delaware, as a holding company, for the purpose of
building, acquiring and managing international web-based sales and marketing
companies. On July 15, 2009, 30DC DE completed the
acquisitions of the business and assets of 30 Day Challenge ("30 Day") and
Immediate Edge ("Immediate").
In
May of 2012 the Company signed a joint venture agreement ("JV Agreement") with
Netbloo Media, Ltd. ("Netbloo") for the joint development of the MagCast Mobile
Publishing Platform ("MagCast"). MagCast provides customers access to a
cloud-based service to create an application ("App") to publish a digital
magazine on the Apple and Google app distribution platforms and includes
executive training modules to develop and market a digital magazine. MagCast
was
-4-
launched in May 2012 and a majority of sales were the result of affiliate
marketing relationships which resulted in commission of 50% of gross revenue
for those sales to the affiliate responsible for the sale. In October 2012,
the Company reached an agreement to purchase Netbloo's 50% interest in the
MagCast JV Agreement and Market Pro Max an online marketing platform that
allows anyone to create digital products and quickly build a variety of e-commerce
marketing websites for a purchase price of 13,487,363 shares of the Company's
common stock.
Effective
February 28, 2014, the Company divested assets and liabilities related to
Immediate Edge that had previously been acquired from Raine Ventures, LLC
("Raine") in exchange for the 10,560,000 common shares of the Company which
Raine had held. Please see Note 3 for further details on the divestiture.
On
July 30, 2015, the 30DC, Inc. ("the Company") board of directors
approved two agreements, one with Marillion Partnership ("Marillion")
and one with Netbloo Media, Ltd. ("Netbloo") each of which acquired
certain Internet Marketing business assets ("IM Assets") from the
Company in exchange for a portion of the 30DC common stock that each held.
The Marillion transaction included The Challenge, rights to the
company's coaching and mentoring business and affiliate marketing rights.
Consideration for the Marillion transaction was 10 million (10,000,000) common
shares in 30DC. The Netbloo transaction included Market Pro Max and a
portfolio of e-commerce training courses. Consideration for the Netbloo
transaction was 6,743,681 common shares in 30DC. The Company
expects the net book value of the assets being divested, which consists of
intangible assets and goodwill, to exceed the fair market value of the shares
redeemed on the date the transactions were approved by approximately $200,000.
As a result of the transactions the Company's issued and outstanding shares
have been reduced from 76,853,464 to 60,109,783. Prior to the
transactions Marillion held 23.67% and Netbloo held 17.55% of the Company's
issued and outstanding common stock. After the transactions, Marillion
holds 13.62% and Netbloo holds 11.22% of the Company's issued and outstanding
common stock.
Simultaneous
with the transactions, the services agreement with Marillion, through which
Edward Dale served as the Company's chief executive officer was terminated.
The services agreement with Netbloo was revised to reflect a reduction in
annual compensation from $300,000 to $150,000 and the services to be provided
were refocused to be exclusively related to Company's digital publishing
technology.
Business Model
Following an extensive review of our technology,
market opportunities for our product portfolio and our service capabilities we
made the strategic decision to focus on our mobile publishing solutions.
Historically, 30DC offered a mix of digital media training and publishing
solutions for individuals, professionals and businesses using the Internet and
mobile media in operating their businesses and in particular in marketing
digital creations. In July 2015, we divested a portfolio of non-core assets
related to Internet marketing and training, including certain e-commerce
tools. We have now focused our resources and product development effort on
enhancing our mobile publishing technologies, extending our product line of
mobile publishing solutions and expanded our service capabilities for existing
and new customers.
At
the foundation of our mobile publishing business strategy is a proven product
with what we believe is a robust architecture. Our business had historically
been driven by the attraction of participants to our flagship e-market training
program, The Challenge, and the retention of those participants as
potential customers for other high valued-added training programs and digital
publishing solutions. Additionally, our Challenge community yielded valuable
relationships by which we acquired exceptional new product innovations. In
2012, we entered into a joint venture with NetBloo Media for the development of
a mobile publishing application. Our first product was introduced in 2012 as
the MagCast Digital Publishing Platform for publication of content to
mobile devices. We subsequently
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acquired NetBloo Media's interest in the joint
venture and continued the development activities within 30DC. In late 2014, we
estimate magazines using MagCast represented 10% of mobile magazine apps in
Apple's mobile app store, giving our platform the single largest representation
among mobile magazine apps on Apple devices. By the end of June 2015, over 2,500
magazines had been published to Apple's mobile app store with the MagCast
platform.
We
believe current market trends are especially favorable for products and
services based on our proprietary mobile publishing technology. The migration
of consumers to mobile devices and away from computers and laptops has
presented a new challenge for businesses and marketers. Consumers are
attracted to the more personal and convenient delivery of information and
commercial functionality offered by mobile devices. eMarketer reported that
by mid 2013 for the first time consumers spent more time on mobile devices than
on laptop and desktop computers. Indeed time spent on mobile devices has nearly
tripled since 2011.
Focusing
resources and product development in the large and growing market for digital
publishing tools and services could afford 30DC the greatest opportunity to
achieve long-term growth. Tablet and smart phone penetration is driving
marketers to the use of mobile applications or 'apps' to create digital
magazines and other publications that can reach target audiences. Publishing
software provider Adobe, Inc. estimated that digital content revenue will grow
by five times from $275 million in 2012 to $1.4 billion in 2017. The transition
of advertising from print to digital is also revealed by the building
importance of digital publications to advertisers. The accounting firm Price
Waterhouse Coopers estimated that digital consumer magazine advertising could
more than double in value in five years, growing to $13.6 billion by 2019 from
to $6.4 billion in 2014, and representing 37% of total global magazine
advertising.
Our
knowledge of e-marketing is built into our mobile publishing solutions. This
makes our solutions more likely to facilitate the achievement of the
publisher's goals, including the monetization of content, generation of sales,
retention of customer relationships, quality of service benchmarks or other
business functions. We believe our mobile publishing products are versatile
enough to serve a wide variety of users seeking to leverage mobile media to
reach their constituents, including e-marketers, bloggers, e-book writers,
corporate journalists, and other self-publishers.
Products and Services
The
MagCast Digital Publishing Platform is the foundation of our mobile publishing
product portfolio. The MagCast software program can be used to create an
application or 'app' to publish digital magazines on mobile devices operating
with the Applie iOS or Google Android architectures. The MagCast platform is
delivered on-demand as a software-as-a-service (SaaS). MagCast is made
available to users through an annual fee. We offered lifetime licenses to our
initial customers for a single publication title, but since have instituted
annual fees. Since inception we have issued over 4,000 licenses for the
MagCast platform, most of which were initiated in conjunction with our training
program called Digital Publishing BluePrint. Over 2,500 mobile magazines apps
have been published with the platform, most of which have been new publications
launched by entrepreneurs targeting niche consumer interests.
The
MagCast platform provides a template designer, publishing tool and HTML editor,
making it possible to add links to Internet sites as well as audio and video
overlays to a foundational document in Publishing Digital Format (PDF). Once
the design and layout are completed, the platform also submits the publication
to the Apple and Google mobile operating systems. Access to the magazine 'app'
can be managed through marketplaces maintained by the device manufacturers,
Apple's iTunes or Google's Play.
The
first version of the MagCast platform was launched in 2012 and the software has
been updated periodically to improve functionality for our customers. We
released Magcast Version 6.0 in July 2014. This update included dynamic in-app
purchasing and several other new marketing features, including a survey funnel,
e-mail sharing, push notifications and Facebook event tracking. In September
2014, Version 7.0 was released to add an in-app sales funnel. The user
interface was also improved to facilitate list building and issuance of product
or service offers. We also believe Version 7.0 was configured in such a way to
reduce preparation time for individual issues. Version 7.0 was optimized for
both the Android architecture and Apple's iOS 8 operating system.
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Little
or no programming experience or e-marketing knowledge is required to fully
utilize our technologies. Consequently, we receive interest in the MagCast
platform from a wide variety of content publishers. A video training program
called Digital Publishing Blueprint can be made available to licencees who want
additional guidance and support. The course is designed to instruct
participants in the use of the MagCast platform, content monetization
techniques using features of the MagCast platform and the use of proprietary
content in developing brand awareness and product or service sales.
We
believe that the MagCast platform could have wide appeal beyond our historic
addressable market composed of e-marketers. In addition to the e-marketer, who
we are confident will continue to have an interest in our e-market training
courses and publishing solutions, we believe a number of other groups using the
Internet and mobile devices as mediums to reach their constituents would
purchase our products. Indeed, a building volume of our business has derived
from sales to bloggers, e-book authors, corporate publishers, independent
publishers, and other special interest content creators. These groups often
monetize their creations through subscriptions, advertisement hosting or other
strategies that afford fee streams through Internet sites or mobile apps. We
believe our mobile publishing products are particularly beneficial for these
professionals who are often exceptionally creative in their field but are new
to marketing strategies and tactics.
Technology and Intellectual Property
The
Company's assets consist primarily of property and equipment, goodwill and
internally developed intangible property such as domain names, websites,
customer lists, copyrights and trademarks. We do not hold any patents or
patent applications.
The
MagCast platform is an application ("App") used to publish a digital magazine
to mobile devices. Digital Publishing Blueprint is a related training program
that can be used in guiding users in the process of publishing and marketing a mobile
publication. The software code, domain names and websites to operate the
MagCast platform and Digital Publishing Blueprint are all proprietary to 30DC.
The Company has trademarks for the names 'MagCast' and 'MagCast App.'
The Company holds the following Trademarks:
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Filed
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Trademark Application
Number
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Trademark
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Status
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United States
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85-647,512
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MAGCAST APP
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Certificate of Registration Issued
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United States
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85-724,908
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MAGCAST
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Certificate of Registration Issued
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We
offer our software products under a software-as-a-service (SaaS) or on-demand
model, where hosted software is provide on-demand to customers through a web
browser. The use of the software products is governed by either the online
terms of use or a license.
Building
on our initial success with the MagCast Digital Publishing Platform, we have
continued to develop new versions of the platform. We have also begun
development of new products that leverage elements of the technology and
programming embedded in the MagCast software application.
Market Opportunity
The
increasing availability of mobile devices and apps created for those devices
signals a seismic shift in consumer focus. Today over 50% of mobile web users
around the world rely on their mobile device as their primary or exclusive
means of going online. More importantly mobile website browsing through a
conventional Internet browser application is being supplanted by mobile apps.
The average consumer actively uses 6.5 different mobile apps during a
thirty-day period. As a consequence 80% of time on mobile devices is spent
using mobile apps. Importantly, on-line shopping is shifting from the desktop
to mobile devices. According to
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Branding Brand, a mobile commerce technology
provider, the percentage of on-line shopping sales from smartphones increased
to 4.6% by June 2013 compared to 2.6% at the same time in the prior year.
Sales from non-mobile computers decreased to 82.4% from 88.2% in the prior
year. Visits to retail sites using mobile devices tell a similar story. By
June 2013, the percentage of visits from smartphones increased to 21.5% from
12.9% the previous year. Likewise, visits from tablets increased to 12.8% from
9.5%. At the same time shopping on laptop and desktop computers is declining.
The
shift to mobile devices and apps presents a formidable challenge for business
and publishers. Mobile device penetration means computing services are now
available virtually wherever and whenever the user desires them. Thus the
mobile device is more than simply another communication channel. It also has
implications for multifaceted interaction with constituents. It brings into
question established practices about how to create, nurture and sustain
profitable, productive relationships with stakeholders, partners and customers.
Businesses,
content publishers and even governments are responding to the profound
transformation in consumer and constituent relations that is triggered by the
shift to mobile devices. In their 2012 survey of 600 respondents around the
world, Tata Consulting found that the companies in the survey planned to spend
between 0.14% and 0.24% of revenue to become mobile-consumer ready. This
includes the development of mobile apps and mobile-optimized websites for
customers, employees and other constituents.
In
addition to our historic customer base of e-marketers, who we are confident
will continue to have an interest in our digital media products and solutions,
we believe our products would be appealing to a number of other customer groups
that use mobile devices as mediums to reach their constituents. A building
volume of interest in our products has come from bloggers, e-book authors,
corporate publishers, independent publishers, and other creators of original
content. These groups are interested in monetizing their creations through
subscriptions, advertisement hosting or other fee streams. The MagCast
platform features marketing options that facilitate the initiation and
management of various content monetization strategies.
Several
of these potential customer groups have numerous populations and a market
opportunity for our mobile publishing solutions. For example, by July 2014, self-published
authors accounted for 31% of total daily e-book sales. According to eMarketer,
an industry research group, self-published authors represents a market value of
$3.4 billion in the U.S. alone. Another example is the blogger. Weblogs or
blogs run the gamut from personal on-line diaries to on-line branding vehicles
to professionally edited, multi-author publications. Statistica estimated that
there were 175 million blogs by the end of 2011 and a Nielsen/McKinsey report
cited 181 million blogs at that time. A survey completed in 2013 by
Snitchim.com found 239.3 million blogs powered by the top five blogging
platforms. WordPress, the most popular blog platform, claims over 170,000 new
blogs are created every day. Technorati Media, a research firm focused on
digital media, estimates that there are over 2.1 million blog posts published
each day.
Competition
Our
mobile digital publishing solutions and services face competition from a number
of different vendors and mobile publishing alternatives. There are a several
software programs to develop and deliver digital magazines on mobile devices,
which could be competitors to our MagCast Mobile Digital Publishing Platform. Our
competition includes companies with products intended to 1) assist in the
transition from print publication to digital publications [for example Adobe's
Digital Publishing Suite], 2) publish corporate communications [for example
mag+], 3) publish education-related materials [for example, PageSuite], 4)
create new content for mobile devcies [for example Joomag],5) publish Internet
content in the form of blogs to mobile devices {for example, Glipho] and 6) create
and share a mobile business library [for example, Publ.com]. Many of these
programs and applications are also made available on-demand as a
software-as-a-service in a similar manner as our MagCast platform.
-8-
In
addition to mobile publishing programs, an aspiring publisher can commission a
proprietary mobile application from a software program developer that provides
custom app development services. Additionally, there is a mix of 'done-for-you'
publishing services to which authors or businesses could outsource the
publication of their content through mobile apps.
We
compete on the basis of the features of our mobile publishing platform products
and the quality of our services to licensees. We believe our MagCast Digital
Publishing Platform compares favorably to alternative publication solutions through
functions built into the MagCast platform that allow publishers to plan and
execute on a strategic marketing plan directly within the platform. Notably,
several of the MagCast licensees have been among top selling mobile apps in
their categories in Apple's iTunes store. We attribute some of this success to
the unique features of the MagCast Platform that facilitate the monetization of
creative content. The combination of publishing, marketing and sales functions
built into the MagCast platform make it possible for licensees to achieve
commercial success and receive a higher return on their investment.
Executive Officers
In
July 2015, in order to deploy our human and capital resources more effectively
toward our digital publishing initiatives, we divested assets related to The
Challenge, other Internet market training programs and certain e-commerce
tools. The Challenge, rights to our coaching and mentoring services, and
affiliate marketing rights were sold to Marillion Partnership and a website
development tool called Market Pro Max and a portfolio of e-commerce training
courses were sold to NetBloo Media, Ltd. Simultaneous with the transactions,
the services agreement with Marillion, through which Edward Dale served as the
Company's chief executive officer was terminated. The services agreement with
Netbloo was revised to reflect reduced annual compensation and the services to
be provided were refocused to be exclusively related to Company's digital
publishing technology.
The
Chairman of our Board of Directors, Henry Pinskier, was appointed Interim Chief
Executive Officer pending completion of an executive search for a permanent
appointee. Edward Dale remains a Director of our Company.
Additional biographical
information on our directors, executive officer and corporate governance can be
found in Part III, Item 10.
EMPLOYEES
As
of June 30, 2015, we had approximately 11 employees and contractors. Our
employees and contractors are located both in the United States and in our
offshore offices.
ITEM 1A. RISK FACTORS
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.
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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, 2015, the Company has a working capital deficit of
approximately $2,091,000 and has accumulated losses of
approximately $4,711,000 since its inception. Its ability to
continue as a going concern is dependent upon the ability of the Company to
obtain the necessary financing to meet its obligations and pay its liabilities
arising from normal business operations when they come due. In the past few years, the Company switched its focus
to developing its own products. In May 2012, the Company launched MagCast which the
Company expects to be an integral part of its businesses on an ongoing basis. MagCast
is being sold through an affiliate network which expands the Company's selling
capability and has a broad target market beyond the Company's traditional
customer base.
Until the Company achieves sustained profitability it
does not have sufficient capital to meet its needs and continues to seek loans
or equity placements to cover such cash needs. No commitments to provide
additional funds have been made and there can be no assurance that any
additional funds will be available to cover expenses as they may be incurred.
If the Company is unable to raise additional capital or encounters unforeseen
circumstances, it may be required to take additional measures to conserve
liquidity, which could include, but not necessarily be limited to, issuance of
additional shares of the Company's stock to settle operating liabilities which
would dilute existing shareholders, curtailing its operations, suspending the
pursuit of its business plan and controlling overhead expenses. The Company cannot
provide any assurance that new financing will be available to it on
commercially acceptable terms, if at all. These conditions raise substantial
doubt about the Company's ability to continue as a going concern. These
consolidated financial statements do not include any adjustments to the amounts
and classification of assets and liabilities that may be necessary should the
Company be unable to continue as a going concern.
To fund working capital for the next twelve months,
the Company expects operations to continue to improve through increased sales
of MagCast and itsrelated training
courses, 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 $125,000, 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. In the past, 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.
-10-
We are highly dependent on
the services of key personnel.
Our
success depends and will depend on the efforts and abilities of our key
personnel, Netbloo Media,
Ltd., a contractor that co-developed
MagCast, our development team, our directors, who determine our strategic
direction. .The loss of any of them would have a material adverse effect on
us. Our success also depends upon our ability to attract and retain qualified
personnel required to fully implement our business plan. There can be no
assurance that we will be successful in these efforts.
30DC's officers and directors may have conflicts of interest which may
not be resolved favorably to the Company.
Certain
conflicts of interest may exist between 30DC and its officers and directors.
The Company's Officers and Directors have other business interests to which
they devote their attention and may be expected to continue to do so although
management time should be devoted to 30DC business. As a result, conflicts of
interest may arise that can be resolved only through exercise of such judgment
as is consistent with fiduciary duties to 30DC. See "Directors and Executive
Officers".
We may not be able to manage our growth effectively.
We
must continually implement and improve our products and/or services,
operations, operating procedures and quality controls on a timely basis, as
well as expand, train, motivate and manage our work force in order to
accommodate anticipated growth and compete effectively in our market segment.
Successful implementation of our strategy also requires that we establish and
manage a competent, dedicated work force and employ additional key employees in
corporate management, product design, client service and sales. We can give no
assurance that our personnel, systems, procedures and controls will be adequate
to support our existing and future operations. If we fail to implement and
improve these operations, there could be a material, adverse effect on our
business, operating results and financial condition.
If we do not continually update our products, they may become obsolete
and we may not be able to compete with other companies.
The
Internet and online commerce industries are characterized by rapid
technological change, changing market conditions and customer demands, and the
emergence of new industry standards and practices that could render our
existing Web site and proprietary technology obsolete. Our future success will
substantially depend on our ability to enhance our existing services, develop
new services and proprietary technology and respond to technological advances
in a timely and cost-effective manner. The development of other proprietary
technology entails significant technical and business risk. There can be no
assurance that we will be successful in developing and using new technologies
or adapt our proprietary technology and systems to meet emerging industry
standards and customer requirements. If we are unable, for technical, legal,
financial, or other reasons, to adapt in a timely manner in response to
changing market conditions or customer requirements, or if our new products and
electronic commerce services do not achieve market acceptance, our business,
prospects, results of operations and financial condition would be materially
adversely affected.
We
cannot assure you that we will be able to keep pace with technological advances
or that our products will not become obsolete. We cannot assure you that
competitors will not develop related or similar products and bring them to
market before we do, or do so more successfully, or that they will not develop
technologies and products more effective than any that we have or are
developing. If that happens, our business, prospects, results of operations and
financial condition will be materially adversely affected.
We rely on proprietary rights.
We regard substantial elements of our web sites and underlying
technology as proprietary. Despite our precautionary measures, third parties
may copy or otherwise obtain and use our proprietary information without
authorization, or develop similar technology independently. Any legal action
that we might bring or other steps we might take to protect this property could
be unsuccessful, expensive and distract management from day-to-day operations.
-11-
Legal standards relating to the validity, enforceability and scope
of protection of proprietary rights in Internet-related businesses are
uncertain and evolving, and we can give no assurance regarding the future
viability or value of any of these proprietary rights.
Systems failures could harm our business.
Temporary or permanent outages of our computers or software
equipment could have an adverse effect on our business. Although we have not
experienced any catastrophic outages to date, we currently do not have fully
redundant systems for our web sites and other services at an alternate site.
Therefore, our systems are vulnerable to damage from break-ins, unauthorized
access, vandalism, fire, earthquakes, power loss, telecommunications failures
and similar events.
Experienced computer programmers seeking to intrude or cause harm,
or hackers, may attempt to penetrate our network security from time to time.
Although we have not experienced any catastrophic security breaches to date, if
a hacker were to penetrate our network security, they could misappropriate
proprietary information, cause interruptions in our services, dilute the value
of our offerings to customers and damage customer relationships. We might be
required to expend significant capital and resources to protect against, or to
alleviate, problems caused by hackers. We also may not have a timely remedy against
a hacker who is able to penetrate our network security. In addition to
purposeful security breaches, the inadvertent transmission of computer viruses
could expose us to system damage, operational disruption, loss of data,
litigation and other risks of loss or harm.
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.
-12-
Risk of Capacity Constraints; Reliance on Internally Developed Systems;
System Development Risks.
A
key element of our strategy is to generate a high volume of traffic on, and use
of, our services across our network infrastructure and systems. Accordingly,
the satisfactory performance, reliability and availability of our software
systems, transaction-processing systems and network infrastructure are critical
to our reputation and our ability to attract and retain customers, as well as
maintain adequate customer service levels. Our revenues depend on the number of
visitors who sign up for our services. Any systems interruptions that result in
the unavailability of our software systems or network infrastructure would
reduce the volume of sign ups and the attractiveness of our service offerings.
We may experience periodic systems interruptions from time to time. Any
substantial increase in the volume of traffic on our software systems or
network infrastructure will require us to expand and upgrade further our
technology, transaction-processing systems and network infrastructure. There
can be no assurance that we will be able to accurately project the rate or
timing of increases, if any, in the use of our Web site or timely expand and
upgrade our systems and infrastructure to accommodate such increases. We will
use a combination of industry supplied software and internally developed
software and systems for our search engine, distribution network, and
substantially all aspects of transaction processing, including order
management, cash and credit card processing, and accounting and financial
systems. Any substantial disruptions or delays in any of our systems would have
a materially adverse effect on our business, prospects, financial condition and
results of operations.
There are risks associated with our domain names.
We
currently hold various Web domain names relating to our brand. The acquisition
and maintenance of domain names is generally regulated by governmental agencies
and their designees. The regulation of domain names in the United States and in
foreign countries is subject to change. Governing bodies may establish
additional top-level domains, appoint additional domain name registrars or
modify the requirements for holding domain names. As a result, there can be no
assurance that we will be able to acquire or maintain relevant domain names in
all of the countries in which it conducts business. Furthermore, the
relationship between regulations governing domain names and laws protecting
trademarks and similar proprietary rights is unclear. We, therefore, may be
unable to prevent third parties from acquiring domain names that are similar
to, infringe upon or otherwise decrease the value of our proprietary rights.
Any such inability could have a materially adverse effect on our business,
prospects, financial condition and results of operations.
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.
-13-
We have agreed to indemnify our officers and directors against lawsuits.
Our
operating subsidiary is a Delaware corporation. Delaware law permits the
indemnification of officers and directors against expenses incurred in
successfully defending against a claim. Delaware law also authorizes Delaware
corporations to indemnify their officers and directors against expenses and
liabilities incurred because of their being or having been an officer or
director. Our organizational documents provide for this indemnification to the
fullest extent permitted by law.
We
currently do not maintain any insurance coverage. In the event that we are
found liable for damage or other losses, we would incur substantial and
protracted losses in paying any such claims or judgments. We have not
maintained liability insurance in the past, but intend to acquire such coverage
immediately upon resources becoming available. There is no guarantee that we
can secure such coverage or that any insurance coverage would protect us from
any damages or loss claims filed against it.
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
-14-
purchaser and receive the
purchaser's written agreement to the transaction prior to the sale.
Effectively, this discourages broker-dealers from executing trades in penny
stocks. Consequently, the rule will affect the ability of shareholders to
sell their securities in any market that might develop therefore because it
imposes additional regulatory burdens on penny stock transactions.
In
addition, the Securities and Exchange Commission has adopted a number of rules
to regulate "penny stocks". Such rules include Rules 3a51-1, 15g-1,
15g-2, 15g-3, 15g-4, 15g-5, 15g-6, 15g-7, and 15g-9 under the Securities and
Exchange Act of 1934, as amended. Because our securities constitute "penny
stocks" within the meaning of the rules, the rules would apply to us and to our
securities. The rules will further affect the ability of owners of shares to
sell our securities in any market that might develop for them because it
imposes additional regulatory burdens on penny stock transactions.
Shareholders should be aware that, according to Securities and Exchange
Commission, the market for penny stocks has suffered in recent years from
patterns of fraud and abuse. Such patterns include (i) control of the market
for the security by one or a few broker-dealers that are often related to the
promoter or issuer; (ii) manipulation of prices through prearranged matching of
purchases and sales and false and misleading press releases; (iii) "boiler
room" practices involving high-pressure sales tactics and unrealistic price
projections by inexperienced sales persons; (iv) excessive and undisclosed
bid-ask differentials and markups by selling broker-dealers; and (v) the
wholesale dumping of the same securities by promoters and broker-dealers after
prices have been manipulated to a desired consequent investor losses. Our
management is aware of the abuses that have occurred historically in the penny
stock market. Although we do not expect to be in a position to dictate the
behavior of the market or of broker-dealers who participate in the market,
management will strive within the confines of practical limitations to prevent
the described patterns from being established with respect to our securities.
The Company will pay no foreseeable dividends in the future.
The
Company has not paid dividends on our common stock and does not anticipate
paying such dividends in the foreseeable future.
Our investors may suffer future dilution due to issuances of shares for
various considerations in the future.
There
may be substantial dilution to our shareholders a result of future decisions of
the Board to issue shares without shareholder approval for cash, services, or
acquisitions.
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 2015 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, 2015 and 2014 was approximately
$1,218 and $1,521, respectively.
REAL PROPERTY
None.
-15-
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. Our
trading symbol is "TDCH."
The
following table sets forth the range of high and low closing prices for the
common stock of each full quarterly period during the years ended June 30, 2015
and 2014. 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, 2015:
|
|
High
|
|
Low
|
|
Quarter Ended
September 30, 2014
|
|
$0.13
|
|
$0.06
|
|
Quarter Ended
December 31, 2014
|
|
$0.10
|
|
$0.03
|
|
Quarter ended
March 31, 2015
|
|
$0.06
|
|
$0.03
|
|
Quarter ended
June 30, 2015
|
|
$0.03
|
|
$0.01
|
|
|
|
|
|
|
|
Fiscal Year Ended June 30, 2014:
|
|
High
|
|
Low
|
|
Quarter Ended September 30, 2013
|
|
$0.23
|
|
$0.05
|
|
Quarter Ended December 31, 2013
|
|
$0.32
|
|
$0.08
|
|
Quarter Ended March 31, 2014
|
|
$0.15
|
|
$0.08
|
|
Quarter Ended June 30, 2014
|
|
$0.14
|
|
$0.08
|
|
|
|
|
|
|
Holders
As of June
30, 2015, the Company had approximately 132 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.
-16-
Dividend Policy
The Company
currently anticipates that it will retain all of its earnings to finance the
operation and expansion of its business, and therefore does not intend to pay
dividends on its Common Stock in the foreseeable future. Since its inception,
the Company has never declared or paid any cash dividends on its Common Stock.
Any determination to pay dividends in the future is at the discretion of the
Company's Board of Directors and will depend upon the Company's financial
condition, results of operations, capital requirements, limitations contained
in loan agreements and such other factors as the Board of Directors deems
relevant.
Recent Sales of
Unregistered Securities
We
made unregistered sales and issuances of our securities during the years ended
June 30, 2015 and 2014 as follows.
During the year ended June 30,
2015, the Company issued common stock
and stock options as follows:
|
DATE OF PURCHASE
|
|
TITLE OF SECURITIES
|
|
NO. OF SHARES
|
|
CONSIDERATION
|
|
CLASS OF PURCHASER
|
|
|
|
|
|
|
|
|
|
|
|
None
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the year ended June 30,
2014, the Company issued common stock
and stock options as follows:
|
DATE OF PURCHASE
|
|
TITLE OF SECURITIES
|
|
NO. OF SHARES
|
|
CONSIDERATION
|
|
CLASS OF PURCHASER
|
|
|
|
|
|
|
|
|
|
|
|
September 9, 2013
|
|
Common Stock
|
|
300,000
|
|
$48,000
|
|
Vendor
|
|
|
|
|
|
|
|
|
|
|
|
August 24, 2013
|
|
Common Stock
|
|
26,525
|
|
$6,101
|
|
Creditor
|
|
|
|
|
|
|
|
|
|
|
|
November 4, 2013
|
|
Common Stock
|
|
100,000
|
|
$22,000
|
|
Creditor
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
Issuer
Purchases of Equity Securities
30DC,
Inc. did not repurchase any shares of its common stock during the years ended
June 30, 2015 and 2014
During
the year ended June 30, 2014, the Company divested the Immediate Edge business
for which the consideration was 10,560,000 of the Company's commons shares
returned to the Company by Raine Ventures, LLC such shares have been canceled.
|
DATE OF PURCHASE
|
|
TITLE OF SECURITIES
|
|
NO. OF SHARES
|
|
CONSIDERATION
|
|
CLASS OF PURCHASER
|
|
|
|
|
|
|
|
|
|
|
|
February 28, 2014
|
|
Common Stock
|
|
10,560,000
|
|
$207,335 (1)
|
|
Affiliate
|
(1)
Book value of the Immediate Edge
business
Subsequent
to June 30, 2015, on July 30, 2015, the Company divested a portfolio of
Internet marketing assets, including Market Pro Max, in two separate
-17-
transaction with Marillion Partnership and Netbloo Media, Ltd. in exchange for
a total of 16,743,681 shares of the Company's common stock such shares have
been canceled.
ITEM 6. SELECTED
FINANCIAL DATA
Not applicable.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION
WITH THE FINANCIAL STATEMENTS AND NOTES THERETO AND THE OTHER FINANCIAL INFORMATION
INCLUDED ELSEWHERE IN THIS REPORT. THIS DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS
THAT INVOLVE RISKS AND UNCERTAINTIES. OUR ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD LOOKING STATEMENTS AS A
RESULT OF ANY NUMBER OF FACTORS, INCLUDING THOSE SET FORTH UNDER "RISK
FACTORS" ON PAGE 10 AND ELSEWHERE IN THIS REPORT.
OVERVIEW
30DC is
a digital media solution provider. The company's principal product, the MagCast
Mobile Publishing Platform, is used for the creation of mobile magazine apps
and facilitates the monetization of digital content through advanced marketing
functions. The MagCast platform is compatible with the dominant mobile
architectures for mobile devices such as smart phones and tablet computers, Apple's
iOS and Google's Android. 30DC delivers the MagCast platform to licensees as a
software-as-a-service. The Company's assets consist primarily of property and
equipment, goodwill and internally developed intangible property such as domain
names, websites, customer lists and copyrights.
In
May of 2012 the Company signed a joint venture agreement ("JV Agreement") with
Netbloo Media, Ltd. ("Netbloo") for the joint development of the MagCast Mobile
Publishing Platform ("MagCast"). MagCast provides customers access to a
cloud-based service to create an application ("App") to publish a digital
magazine on the Apple and Google app distribution platforms and includes
executive training modules to develop and market a digital magazine. MagCast
was launched in May 2012 and a majority of sales were the result of affiliate
marketing relationships which resulted in commission of 50% of gross revenue
for those sales to the affiliate responsible for the sale. In October 2012,
the Company reached an agreement to purchase Netbloo's 50% interest in the
MagCast JV Agreement and Market Pro Max an online marketing platform that
allows anyone to create digital products and quickly build a variety of e-commerce
marketing websites for a purchase price of 13,487,363 shares of the Company's
common stock.
Effective
February 28, 2014, the Company divested assets and liabilities related to
Immediate Edge that had previously been acquired from Raine Ventures, LLC
("Raine") in exchange for the 10,560,000 common shares of the Company which
Raine had held. Please see Note 3 for further details on the divestiture.
On
July 30, 2015, the 30DC, Inc. ("the Company") board of directors
approved two agreements, one with Marillion Partnership ("Marillion")
and one with Netbloo Media, Ltd. ("Netbloo") each of which acquired
certain Internet Marketing business assets ("IM Assets") from the
Company in exchange for a portion of the 30DC common stock that each held.
The Marillion transaction included The Challenge, rights to the
company's coaching and mentoring business and affiliate marketing rights.
Consideration for the Marillion transaction was 10 million (10,000,000) common
shares in 30DC. The Netbloo transaction included Market Pro Max and a
portfolio of e-commerce training courses. Consideration for the Netbloo
transaction was 6,743,681 common shares in 30DC. The Company
expects the net book value of the assets being divested, which consists of
intangible assets and goodwill, to exceed the fair market value of the shares
redeemed on the date the
-18-
transactions were approved by approximately $200,000.
As a result of the transactions the Company's issued and outstanding shares
have been reduced from 76,853,464 to 60,109,783. Prior to the
transactions Marillion held 23.67% and Netbloo held 17.55% of the Company's
issued and outstanding common stock. After the transactions, Marillion
holds 13.62% and Netbloo holds 11.22% of the Company's issued and outstanding
common stock.
Simultaneous
with the transactions, the services agreement with Marillion, through which
Edward Dale served as the Company's chief executive officer was terminated.
The services agreement with Netbloo was revised to reflect a reduction in
annual compensation from $300,000 to $150,000 and the services to be provided
were refocused to be exclusively related to Company's digital publishing
technology.
Following an extensive review of our technology,
market opportunities for our product portfolio and our service capabilities we
made the strategic decision to focus on our mobile publishing solutions.
Historically, 30DC offered a mix of digital media training and publishing solutions
for individuals, professionals and businesses using the Internet and mobile
media in operating their businesses and in particular in marketing digital
creations. In July 2015, we divested a portfolio of non-core assets related to
Internet marketing and training, including certain e-commerce tools. We have
now focused our resources and product development effort on enhancing our
mobile publishing technologies, extending our product line of mobile publishing
solutions and expanded our service capabilities for existing and new customers.
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 $53,681 at June 30, 2015 and the Company had a working capital deficit of $2,090,500. For the year ended June 30, 2015, the Company did not
generate sufficient cash from operations to fund current year operating and
administrative expenses. The Company has not generated consistent profits and
has significant outstanding liabilities. The Company has taken steps to reduce
its operating expenses. On July 30, 2015, the Company's contractor agreement
with Marillion Partnership, a more than 10% owner in the Company, through which
Edward Dale was serving as the Company's chief executive officer, was
terminated and by agreement of the parties no contractor fees were due
subsequent to May 15, 2015. Marillion had been one of the highest paid
contractor or employee working for the Company at an annual rate of $317,825
AUD ($239,709 USD). On July 30, 2015, Henry Pinskier, the chairman of the
Company's board of directors was elected by the board as interim chief
executive officer and is not receiving cash compensation. Effective May 15,
2015, the contractor agreement with Netbloo Media, Ltd. was revised; annual
compensation was reduced from $300,000 to $150,000 while the services Netbloo will provide to the
Company are now focused on the MagCast Publishing Platform. Until
the Company achieves sustained profitability it does not have sufficient
capital to meet its needs and continues to seek loans or equity placements to cover
such cash needs. The Company expects
increased revenue from further sales of MagCast Publishing Platform and by
marketing to customers outside its historical customer base with the goal of
recurring revenue through annual licenses. Additionally, the Company intends
to increase funds available by raising capital, though at this time the Company
has not commenced any offerings and cannot guarantee that they will be
successful in its capital raising efforts. If the results of operations and
capital raised, if any, are not sufficient to fund the company's expenses as
they come due, the Company will defer amounts due to related parties and to the
extent possible utilize shares of the Company to satisfy its liabilities.
Included
in liabilities of discontinued operations at June 30, 2015 is $51,550 in notes
payable plus related accrued interest that are in default for lack of repayment
by their due date.
During the year ended June 30, 2015, operating activities provided the Company with $66,870 from continuing
operations. During the year
ended June 30, 2014, operating
activities provided the
Company with $166,335 from continuing operations. The decrease of $99,465 in funds provided
from operating activities was due to a number of factors. For the year ended
June 30, 2015 the Company had net a net loss from continuing operations of
$1,261,232 compared to net income from
-19-
continuing operations of $121,693 during
the year ended June 30, 2014. $737,284 of the loss for the year ended June 30,
2015 was due to impairment of goodwill which was a noncash expenditure and
including in income for the year ended June 30, 2014 was $93,513 in forgiveness
of debt which is non-cash income. During the year ended June 30, 2015, the
Company had an increase in accounts payable of $78,798 while during the year
ended June 30, 2014 the Company had a decrease in accounts payable of
$179,493. During the year ended June 30, 2015, the Company had a decrease in
accrued expenses and refunds of $23,521 while during the year ended June 30,
2014 the Company had an increase in accrued expenses and refunds of $257,813.
During the year ended June 30, 2015 deferred revenue increased by $34,960 while
during the year ended June 30, 2014 deferred revenue increased by $102,196.
During the year ended June 30, 2015, the Company had an increase in due to
related parties of $379,973 while during the year ended June 30, 2014 the
Company had a decrease in due to related parties of $118,574.
During
the years ended June 30, 2015 and June 30, 2014 no funds
were provided by or used for financing
activities.
During
the year ended June 30, 2015 the Company used $110,414 for discontinued
operations compared to the year ended June 30, 2014 when the Company used
$168,288 for discontinued operations.
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, 2015
the Company had
a working capital deficit of approximately $2,090,500 and had
accumulated losses of approximately $4,683,800. The Company's ability to continue as a
going concern is dependent upon its ability to obtain the necessary financing
or to earn profits from its business operations to meet its obligations and pay
its liabilities arising from normal business operations when they come due. In the past few years, the Company switched its focus
to developing its own products. In May 2012, the Company launched MagCast has become the main focus of the Company's ongoing
businesses. MagCast is being sold directly
to customers and through an
affiliate network which expands the Company's selling capability and has a
broad target market beyond the Company's traditional customer base. 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.
-20-
RESULTS OF
OPERATIONS
FOR THE YEAR ENDED JUNE 30, 2015 COMPARED TO THE YEAR
ENDED JUNE 30, 2014
During
the year ended June 30, 2015, the Company recognized revenues of $738,174 from continuing
operations compared to $2,354,835 during the year ended June 30, 2014.
Revenues of the Company were from the following sources during the year ended June
30, 2015 compared to June 30, 2014.
|
|
|
Year Ended
June 30, 2014
|
Year Ended
June 30, 2013
|
Increase or (Decrease)
|
|
Revenue
|
|
|
|
|
|
Subscription Revenue
|
|
$ 63,451
|
$ 14,163
|
$ 49,288
|
|
Products and Services
|
|
674,723
|
2,340,672
|
(1,665,949)
|
|
Total Revenues
|
|
$ 738,174
|
$2,354,835
|
$(1,616,661)
|
|
|
|
|
|
|
The
$49,288 increase in subscription revenue was due to a new online forum
subscription product which was launched in April 2014 and has a recurring
monthly charge.
The
$1,665,949 decrease in products and services revenue was all due to a decrease of
in revenue from the MagCast Publishing Platform which resulted from a smaller
launch promotion in July 2014 than August 2013 and the release of the MagCast
Android version in February 2014.
During
the year ended June 30, 2015, the Company incurred $1,274,312 in other operational
expenses from continuing operations compared to $2,326,655 during the year
ended June 30, 2014. Operational expenses during the years ended June 30, 2015
and 2014, include the following categories:
|
|
Year Ended |
Year Ended |
Increase or |
|
|
June 30, 2015 |
June 30, 2014 |
Decrease |
|
Accounting Fees |
$ 96,750 |
$ 107,612 |
(10,862) |
|
Credit Card Processing Fees |
26,753 |
112,397 |
(85,644) |
|
Commissions |
156,200 |
752,470 |
(596,270) |
|
Independent Contractors |
229,189 |
366,240 |
(137,051) |
|
Depreciation and Amortization |
57,143 |
61,882 |
(4,739) |
|
Directors Fees |
118,855 |
143,618 |
(24,763) |
|
Internet Expenses |
21,542 |
23,930 |
(2,388) |
|
Legal Fees |
27,566 |
46,346 |
(18,780) |
|
Officer's Salaries |
140,855 |
233,619 |
(92,764) |
|
Related Party Contractors |
341,250 |
360,000 |
(18,750) |
|
Telephone and Data Lines |
17,816 |
17,736 |
80 |
|
Travel & Entertainment |
3,109 |
56,603 |
(53,494) |
|
Other Operating Expenses |
37,284 |
44,202 |
(6,918) |
|
|
|
|
|
|
Total Operating Expenses |
$ 1,274,312 |
$ 2,326,655 |
$ (1,052,343) |
The
decrease of $85,644 in credit card processing fees resulted from the $1,616,161
decrease in revenue and a decrease of approximately 1.5% in the effective
credit card processing rate.
The
decrease of $596,270 in commissions resulted from the $1,616,161 decrease in
products and services revenue, a significant portion of which were sales
through marketing affiliate relationships which result in commission expense.
-21-
The
decrease of $137,051 in independent contractors is primarily due to the Company
terminating its relationship with two long-term contractors, one at the end of
July 2014, saving the Company approximately $7,600 per month, and one at the
end of August 2014, saving the Company approximately $5,100 per month and a
reduction of $28,000 in the amount for Clinton Carey, former Chief Operating
Officer of the Company who is helping shape sales strategy to extend marketing
of MagCast outside the Company's traditional customer base. In addition the
year ended June 2014 included, $10,000 for a strategic consultant and $4,500
for a valuation analyst. These increases were offset by an increase of $3,000
per month to a contractor who has assumed additional responsibilities and
$10,000 for a contractor working on a corporate marketing program for MagCast.
The
decrease of $24,763 in directors' fees is from a reduction in the charge for
amortization of stock option expense over the vesting period, for stock options
previously issued to Henry Pinskier, the Company's board chair, in the year
ended June 2015 from the amount in the year ended June 2014, these options
fully vested January 1, 2015.
The
decrease of $92,764 in officer's salaries was due to a reduction in base salary
for Theodore A. Greenberg, the Company's CFO from $200,000 to $132,000 per year
and a reduction in the charge for amortization of stock option expense over the
vesting period, for stock options previously issued to Mr. Greenberg in the
year ended June 2015 from the amount in the year ended June 2014, these options
fully vested January 1, 2015.
The
decrease of $18,750 in Related Party Contractors was due to the Marillion
Partnership no longer earning contractor fees as of May 15, 2015.
Travel
and Entertainment decreased by $53,494 due to a company-wide group meeting and
travel to an investor conference, both in November 2013 which did not repeat
during the year ended June 2015.
During
the year ended June 30, 2015, the Company recognized a net loss from continuing
operations of $1,261,232 compared to net income of $121,693 during the year
ended June 30, 2014. The decrease of $1,382,925 was the result of a number of
factors, the $1,616,661 decrease in revenues shown above and goodwill
impairment charge of $737,284 recorded during the year ended June 2015 offset
by the $1,052,243 decrease in other operational expenses shown above, and
forgiveness of debt income of $93,513 during the year ended June 2014.
CRITICAL
ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS
GOODWILL
AND INTANGIBLE ASSETS
The
Company accounts for goodwill and intangible assets in accordance with ASC 350
"Intangibles-Goodwill and Other" ("ASC 350"). ASC 350 requires that
goodwill and other intangibles with indefinite lives be tested for impairment
annually or on an interim basis if events or circumstances indicate that the
fair value of an asset has decreased below its carrying value. The Company
completed an evaluation of goodwill at June 30, 2015 and determined that
goodwill had been impaired. The Company prepared a discounted cash flow
analysis to determine the fair value of the reporting unit and the excess of
goodwill carrying value over the fair market value was recorded as impairment
of goodwill.
At
June 30, 2015, the portfolio of assets which were subsequently divested on July
30, 2015 was classified as held for sale and the goodwill associated with those
assets was included in assets of discontinued operations and the goodwill
impairment associated with those assets was included in results of discontinued
operations.
Goodwill
represents the excess of the purchase price over the fair value of net assets
acquired in the Company's share exchange with Infinity which occurred on
September 10, 2010 and the excess of the purchase price over the fair value of
net assets acquired in the Company's purchase of Netbloo's 50% interest in the
MagCast JV Agreement and Market Pro Max on October 24, 2012. Goodwill
associated with the Immediate Edge business was one of the assets divested
-22-
February 28, 2014. Since the Company is one reporting unit for goodwill purposes, ASC 350-20-40, which requires a calculation of the relative fair values of the
disposed business and retained business, was followed to determine the amount
of goodwill allocated to the Immediate Edge. ASC 350 requires that goodwill
be tested for impairment at the reporting unit level (operating segment or one
level below an operating segment) on an annual basis and between annual tests
when circumstances indicate that the recoverability of the carrying amount of
goodwill may be in doubt. Application of the goodwill impairment test requires
judgment, including the identification of reporting units; assigning assets and
liabilities to reporting units, assigning goodwill to reporting units, and
determining the fair value.
Significant
judgments required to estimate the fair value of reporting units include
estimating future cash flows, determining appropriate discount rates and other
assumptions. Changes in these estimates and assumptions or the occurrence of
one or more confirming events in future periods could cause the actual results
or outcomes to materially differ from such estimates and could also affect the
determination of fair value and/or goodwill impairment at future reporting
dates.
REVENUE
RECOGNITION
The Company generally applies revenue recognition
principles in accordance with ASC 605, "Revenue Recognition". Accordingly,
revenue is generally recognized when persuasive evidence of an agreement
exists, services have been rendered or product delivery has occurred, the
selling price to the customer is fixed or determinable and collectability is
reasonably assured.
The Company generates revenues in three categories, (i) commissions, (ii) subscriptions and (iii)
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. Subscription revenue is primarily from
monthly online subscriptions for information on Internet marketing. All
subscriptions are paid in advance and subscription revenue is recognized
ratably over the term of the subscription. Products and services revenues are
from sales of online educational courses and productivity tools which customers
use in their Internet marketing businesses. Revenue from products and services
is recognized in accordance with the specific guidance for
recognizing software revenue, where applicable, the Company recognizes revenue
from perpetual software licenses at the inception of the license term, assuming
all revenue recognition criteria have been met. Term-based software license
revenue is recognized on a subscription basis over the term of the license
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 as of the
financial statement date.
DISCONTINUED
OPERATIONS
The
Company accounts for discontinued operations in accordance with ASC
205-20-45-1. For the year ended June 30, 2015, the Company has included two
businesses in discontinued operations; the portfolio of Internet marketing
assets which were divested on July 30, 2015 and were classified as held for
sale at June 30, 2015 and the business of Infinity which was discontinued after
the share exchange with 30DC DE on September 10, 2010. For the year
ended June 30, 2014,
the Company included three businesses in discontinued operations; the portfolio
of Internet marketing assets which were divested on July 30, 2015, the
Immediate Edge business which was divested effective February 28, 2014 (see
note 3) and the business of Infinity which was discontinued after the share
exchange with 30DC DE on September 10, 2010.
-23-
EQUITY-BASED
PAYMENTS
The
Company accounts for equity instruments issued to non-employees in accordance
with the provisions of ASC 505-50, "Equity-Based Payments to Non-Employees",
which requires that such equity instruments are recorded at their fair value on
the measurement date, with the measurement of such compensation being subject
to periodic adjustment as the underlying equity instruments vest.
The Company account for equity instruments issued to
employees in accordance with ASC 718 "Stock Compensation". Under this guidance,
stock compensation expense is measured at the grant date, based on the fair
value of the award, and is recognized as an expense over the estimated service
period (generally the vesting period) on the straight-line attribute method.
FOREIGN
CURRENCY TRANSLATION AND REMEASUREMENT
The functional currency of the Company's 30 Day
Challenge division switched to the United States dollar from the Australian
dollar on July 1, 2012. All other Company operations have and continue to use
the United States dollar as their functional currency. For all accounting
periods prior to July 1, 2012, the Company followed ASC 830 "Foreign Currency
Matters", under which functional currency assets and liabilities are translated
into the reporting currency, US Dollars, using period end rates of exchange and
the related translation adjustments are recorded as a separate component of
accumulated other comprehensive income. Functional statements of operations
amounts expressed in functional currencies are translated using average
exchange rates for the respective periods. Re-measurement adjustments and
gains or losses resulting from foreign currency transactions are recorded as
foreign exchange gains or losses in the Statement of Operations. The
historical foreign currency translation loss remains on the Balance Sheet at
$(102,858) which was the balance at June 30, 2012.
FORGIVENESS OF DEBT
The
company has settled some debts for cash and/or payment in stock for less than
the full amount due to the creditor. The Company records the difference
between the amount that was owed and the amount which was paid as other
income. During the year ended June 30, 2014, the Company settled three amounts
owed to vendors from prior years for a total amount of $93,513 less than the
full amount owed. During the year ended June 30, 2014, discontinued operations
includes $796 for the amount a note payable was settled for less than the
amount due, inclusive of accrued interest. During the year ended June 30, 2015
the Company did not settle any debts for less than the amount owed but the
Company did write-off $12,190 for continuing operations and $52,826 in
discontinued operations for amounts owed which have exceeded the statute of
limitations.
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, 2015 and
2014 appear as pages F-1 through F-23.
-24-
|
30DC, INC. AND SUBSIDIARY CONSOLIDATED FINANCIAL
STATEMENTS
|
|
|
|
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
|
-F-1-
|
INDEX
|
|
|
|
|
Page F-3
|
Report of Independent
Registered Public Accounting Firm
|
|
|
|
|
Page F-4
|
Consolidated Balance
Sheets
|
|
|
|
|
Page F-5
|
Consolidated Statements of
Operations
|
|
|
|
|
Page F-6
|
Consolidated Statements of
Changes in Stockholders' Equity (Deficiency)
|
|
|
|
|
Page F-7
|
Consolidated Statements of
Cash Flows
|
|
|
|
|
Page F-8
|
Notes of Consolidated
Financial Statements
|
-F-2-
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of
30DC, Inc.
New York, New York
We
have audited the accompanying consolidated balance sheets of 30DC, Inc. and its
subsidiaries (collectively the "Company") as of June 30, 2015 and 2014, and the
related consolidated statements of operations, changes in stockholders' equity
(deficiency) and cash flows for each of 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 an audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is not required
to have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In
our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of 30DC,
Inc. and its subsidiaries as of June 30, 2015 and 2014 and the results of their
consolidated operations and their cash flows for each of the years then ended
in conformity with accounting principles generally accepted in the United
States of America.
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 1 to the financial
statements, the Company has accumulated losses from operations since inception
and has a working capital deficit as of June 30, 2015. These conditions raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in this regard are described in Note 1. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
/s/ MaloneBailey, LLP
www.malonebailey.com
Houston, Texas
November 17, 2015
-F-3-
|
30DC, INC. AND SUBSIDIARY |
|
Consolidated Balance Sheets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June |
|
June |
|
|
|
|
|
|
|
|
|
|
30, 2015 |
|
30, 2014 |
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents |
|
|
|
|
$ 53,681 |
|
$ 102,684 |
|
|
|
Restricted Cash |
|
|
|
|
|
70,000 |
|
83,730 |
|
|
|
Accrued Commissions Receivable |
|
|
|
4,094 |
|
12,706 |
|
|
|
Accounts Receivable |
|
|
|
|
11,583 |
|
38,313 |
|
|
|
Prepaid Expenses |
|
|
|
|
15,419 |
|
24,291 |
|
|
|
Assets of Discontinued Operations |
|
|
|
80,771 |
|
116,313 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current Assets |
|
|
|
|
235,548 |
|
378,037 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and Equipment, Net |
|
|
|
|
16,113 |
|
19,066 |
|
|
Intangible Assets, Net |
|
|
|
|
|
118,320 |
|
169,028 |
|
|
Goodwill |
|
|
|
|
|
|
799,383 |
|
1,536,667 |
|
|
Assets of Discontinued Operations |
|
|
|
|
291,175 |
|
541,869 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets |
|
|
|
|
$ 1,460,539 |
|
$ 2,644,667 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders' Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts Payable |
|
|
|
|
$ 256,836 |
|
$ 190,228 |
|
|
|
Accrued Expenses and Refunds |
|
|
|
602,044 |
|
625,565 |
|
|
|
Deferred Revenue |
|
|
|
|
122,007 |
|
87,047 |
|
|
|
Due to Related Parties |
|
|
|
|
1,185,456 |
|
805,483 |
|
|
|
Liabilities of Discontinued Operations |
|
|
|
159,657 |
|
220,217 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current Liabilities |
|
|
|
2,326,000 |
|
1,928,540 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities |
|
|
|
|
2,326,000 |
|
1,928,540 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' Equity (Deficit) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock, Par Value $0.001, 10,000,000 Authorized, -0- Issued |
- |
|
- |
|
|
|
Common Stock, Par Value $0.001, 100,000,000 authorized, |
|
|
|
|
|
|
|
|
76,853,464 issued and outstanding |
|
|
76,853 |
|
76,853 |
|
|
|
Paid in Capital |
|
|
|
|
|
3,844,315 |
|
3,826,606 |
|
|
|
Accumulated Deficit |
|
|
|
|
(4,683,771) |
|
(3,084,474) |
|
|
|
Accumulated Other Comprehensive Loss |
|
|
(102,858) |
|
(102,858) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Stockholders' Equity (Deficit) |
|
|
(865,461) |
|
716,127 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders' Equity (Deficit) |
|
|
$ 1,460,539 |
|
$ 2,644,667 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015 |
|
2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscription Revenue |
|
|
|
|
|
$ 63,451 |
|
$ 14,163 |
|
|
|
Products and Services |
|
|
|
|
|
674,723 |
|
2,340,672 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenue |
|
|
|
|
|
738,174 |
|
2,354,835 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill Impairment |
|
|
|
|
|
|
737,284 |
|
- |
|
|
|
Other Operating Expenses |
|
|
|
|
|
1,274,312 |
|
2,326,655 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Operating Expenses |
|
|
|
|
|
2,011,596 |
|
2,326,655 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income (Loss) |
|
|
|
|
|
|
(1,273,422) |
|
28,180 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Extinguishment of liabilities |
|
|
|
|
|
12,190 |
|
- |
|
|
|
Forgiveness of Debt |
|
|
|
|
|
|
- |
|
93,513 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Other Income |
|
|
|
|
|
12,190 |
|
93,513 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) From Continuing Operations |
|
|
|
|
|
(1,261,232) |
|
121,693 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss From Discontinued Operations |
|
|
|
|
|
(338,065) |
|
(62,775) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) |
|
|
|
|
|
|
$ (1,599,297) |
|
$ 58,918 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Common Shares Outstanding |
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
|
|
|
|
|
76,853,464 |
|
83,758,982 |
|
|
Diluted |
|
|
|
|
|
|
|
76,853,464 |
|
84,616,125 |
|
|
Income (Loss) Per Common Share (Basic and Diluted) |
|
|
|
|
|
|
|
|
Continuing Operations |
|
|
|
|
|
|
$ (0.02) |
|
$ 0.00 |
|
|
Discontinued Operations |
|
|
|
|
|
|
(0.00) |
|
(0.00) |
|
|
Net Income (Loss) Per Common Share |
|
|
|
|
|
$ (0.02) |
|
$ 0.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the consolidated financial
statements. |
|
-F-5-
|
30DC, INC. And Subsidiary |
|
Consolidated Statements of Changes in Stockholders' Equity (Deficit) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
Total |
|
|
|
|
|
|
|
|
|
|
Other |
|
Stockholders' |
|
|
|
|
|
|
|
Common Stock |
Additional |
Comprehensive |
Accumulated |
Equity |
|
|
|
|
|
|
|
Shares |
Par Value |
Paid In Capital |
Income (Loss) |
Deficit |
(Deficit) |
|
|
Balance - June 30, 2013 |
|
|
86,986,939 |
$ 86,987 |
$ 3,880,469 |
$ (102,858) |
$ (3,143,392) |
$ 721,206 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
|
|
- |
- |
- |
- |
58,918 |
58,918 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Immediate Edge Divestiture |
|
(10,560,000) |
(10,560) |
(196,775) |
|
|
(207,335) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of Stock Options to Employees |
|
|
67,237 |
- |
- |
67,237 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of Common Stock to Settle Liabilities |
426,525 |
426 |
75,675 |
- |
- |
76,101 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance - June 30, 2014 |
|
|
76,853,464 |
$ 76,853 |
$ 3,826,606 |
$ (102,858) |
$ (3,084,474) |
$ 716,127 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss |
|
|
|
- |
- |
- |
- |
(1,599,297) |
(1,599,297) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of Stock Options to Employees |
- |
- |
17,709 |
- |
- |
17,709 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance - June 30, 2015 |
|
|
76,853,464 |
$ 76,853 |
$ 3,844,315 |
$ (102,858) |
$ (4,683,771) |
$ (865,461) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, |
|
|
|
|
|
|
|
|
|
|
|
2015 |
|
2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Operating Activities: |
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) |
|
|
|
|
|
|
$ (1,599,297) |
|
$ 58,918 |
|
|
Loss From Discontinued Operations |
|
|
|
|
|
338,065 |
|
62,775 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to Reconcile Income (Loss) from Continuing Operations |
|
|
|
|
|
|
to Net Cash Provided By (Used In) Operating Activities |
|
|
|
|
|
|
|
|
|
Depreciation and Amortization |
|
|
|
|
|
57,145 |
|
61,883 |
|
|
|
Equity Based Payments To Employees |
|
|
|
|
17,709 |
|
67,237 |
|
|
|
Extinguishment of liabilities |
|
|
|
|
|
(12,190) |
|
- |
|
|
|
Gain on Debt Forgiveness |
|
|
|
|
|
- |
|
(93,513) |
|
|
|
Goodwill Impairment |
|
|
|
|
|
|
737,284 |
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in Operating Assets and Liabilities |
|
|
|
|
|
|
|
|
|
|
Restricted Cash |
|
|
|
|
|
|
13,730 |
|
(35,746) |
|
|
|
Accrued Commissions Receivable |
|
|
|
|
8,612 |
|
19,329 |
|
|
|
Accounts Receivable |
|
|
|
|
|
|
26,730 |
|
(12,199) |
|
|
|
Prepaid Expenses |
|
|
|
|
|
|
8,872 |
|
(24,291) |
|
|
|
Accounts Payable |
|
|
|
|
|
|
78,798 |
|
(179,493) |
|
|
|
Accrued Expenses and Refunds |
|
|
|
|
|
(23,521) |
|
257,813 |
|
|
|
Deferred Revenue |
|
|
|
|
|
|
34,960 |
|
102,196 |
|
|
|
Due to Related Parties |
|
|
|
|
|
379,973 |
|
(118,574) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by Operating Activities |
|
|
|
66,870 |
|
166,335 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities |
|
|
|
|
|
|
|
|
|
|
|
Purchases of Property and Equipment |
|
|
|
|
(5,459) |
|
(10,766) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Used in Investing Activitities |
|
|
|
(5,459) |
|
(10,766) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Discontinued Operations |
|
|
|
|
|
|
|
|
|
|
Cash Flows From Operating Activities |
|
|
|
|
(110,414) |
|
(168,288) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Used in Discontinued Operations |
|
|
|
(110,414) |
|
(168,288) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease in Cash and Cash Equivalents |
|
|
|
|
(49,003) |
|
(12,719) |
|
|
Cash Transferred In Divestiture |
|
|
|
|
|
- |
|
(969) |
|
|
Cash and Cash Equivalents - Beginning of Period |
|
|
|
|
102,684 |
|
116,372 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents - End of Period |
|
|
|
|
$ 53,681 |
|
$ 102,684 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosures of Non Cash Financing Activity |
|
|
|
|
|
|
|
|
|
Common Stock Issued to Settle Liabilities |
|
|
|
|
$ - |
|
$ 76,101 |
|
|
|
Common Stock Redeemed For Divestiture |
|
|
|
|
- |
|
207,335 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosures of Cash Flow Information: |
|
|
|
|
|
|
|
|
|
Cash paid during the year for: |
|
|
|
|
|
|
|
|
|
|
|
Interest |
|
|
|
|
|
|
|
$ 6,843 |
|
$ 36,924 |
|
|
|
Income taxes |
|
|
|
|
|
|
1,514 |
|
2,936 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, 2015
NOTE 1. DESCRIPTION OF BUSINESS, BASIS OF
PRESENTATION AND LIQUIDITY
30DC,
Inc., Delaware, ("30DC DE") was incorporated on October 17, 2008 in the state
of Delaware, as a holding company, for the purpose of building, acquiring and
managing international web-based sales and marketing companies. On July 15, 2009, 30DC DE completed the acquisitions of the
business and assets of 30 Day Challenge ("30 Day") and Immediate Edge
("Immediate").
On
September 10, 2010, shareholders of 30DC DE exchanged 100% of their 30DC DE
shares for 60,984,000 shares of Infinity Capital Group, Inc. ("Infinity"), a
publicly traded company which trades over the counter ("OTC") on the OTC Pink
market operated by OTC Market Group, Inc. 30DC DE became a wholly owned
subsidiary of Infinity Capital Group, Inc. which subsequently changed its name
to 30DC, Inc. ("30DC" and together with its subsidiary "the Company"). 30DC
DE was the accounting acquirer in the transaction and its historical financial
statements became the historical financial statements of 30DC.
In
May of 2012 the Company signed a joint venture agreement ("JV Agreement") with
Netbloo Media, Ltd. ("Netbloo") for the MagCast Publishing Platform ("MagCast")
which was jointly developed. MagCast provides customers access to a
cloud-based service to create an application ("App") to publish a digital
magazine on the digital distribution platforms Apple Newsstand and Google Play
and includes executive training modules to develop and market a digital
magazine. MagCast was launched in May 2012 and a majority of sales were the
result of affiliate marketing relationships which result in commission of 50%
of gross revenue for those sales to the affiliate responsible for the sale. In
October 2012 the Company reached an agreement to purchase Netbloo's 50%
interest in the MagCast JV Agreement and Market Pro Max an online marketing
platform that allows anyone to create digital products and quickly build a
variety of eCommerce marketing websites for a purchase price of 13,487,363
shares of the Company's common stock. Please see Note 4 for further details on
the acquisition.
Effective
February 28, 2014, the Company divested assets and liabilities that made up the
Immediate Edge to Raine Ventures, LLC ("Raine") in exchange for the 10,560,000
common shares of the Company which Raine had held. Please see Note 3 for
further details on the divestiture.
On
July 30, 2015, the Company divested a portfolio of Internet marketing assets,
including Market Pro Max, in two separate transaction with Marillion
Partnership and Netbloo Media, Ltd. in exchange for return of a total of
16,743,681 shares of the Company's common stock to the Company.
30DC's
main product is the MagCast Publishing Platform, cloud-based digital publishing
software which enables customers to publish a digital magazine in the Apple App
Store and on Google Play. The Company also offers related training courses and
support services. The Company's assets consist primarily of property and
equipment, goodwill and internally developed intangible property such as domain
names, websites, customer lists and copyrights.
BASIS OF PRESENTATION
The accompanying consolidated financial statements
have been prepared in accordance with United States generally accepted
accounting principles ("GAAP") and include the accounts of 30DC, Inc., (f/k/a
Infinity Capital Group, Inc.) and its subsidiary 30DC DE.
-F-8-
30DC, INC. AND
SUBSIDIARY
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2015
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, 2015 and 2014, the Company had
a working capital deficit of approximately $2,090,500
and $1,550,500, respectively, and had accumulated losses of approximately $4,683,800
and $3,084,500, respectively, since its inception. The Company's ability
to continue as a going concern is dependent upon its ability to obtain the
necessary financing or to earn profits from its business operations to meet its
obligations and pay its liabilities arising from normal business operations
when they come due. In the past few
years, the Company switched its focus to developing its own products. In May 2012, the Company
launched MagCast which the Company expects to be an integral part of its
businesses on an ongoing basis. MagCast is being sold directly to customers and through an affiliate network which expands the
Company's selling capability and has a broad target market beyond the Company's
traditional customer base. Until the Company achieves sustained profitability
it does not have sufficient capital to meet its needs and continues to seek
loans or equity placements to cover such cash needs. No commitments to provide
additional funds have been made and there can be no assurance that any
additional funds will be available to cover expenses as they may be incurred.
If the Company is unable to raise additional capital or encounters unforeseen
circumstances, it may be required to take additional measures to conserve
liquidity, which could include, but not necessarily be limited to, issuance of
additional shares of the Company's stock to settle operating liabilities which
would dilute existing shareholders, curtailing its operations, suspending the
pursuit of its business plan and controlling overhead expenses. The Company
cannot provide any assurance that new financing will be available to it on
commercially acceptable terms, if at all. These conditions raise substantial
doubt about the Company's ability to continue as a going concern. These
consolidated financial statements do not include any adjustments to the amounts
and classification of assets and liabilities that may be necessary should the
Company be unable to continue as a going concern.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments
with an original maturity of three months or less as cash equivalents.
The
Company maintains its cash in bank deposit accounts which, at times, may exceed
federally insured limits. The Company has not experienced any losses in such
accounts. The Company believes it is not exposed to any significant credit
risk related to cash and cash equivalents.
The
vendor which processes the Company's credit card sales requires a reserve
account the balance of which is classified as restricted cash. The reserve
balance is a fixed amount that is periodically reviewed and was $70,000 at June
30, 2015. Previously, the reserve was 10% of sales on a rolling six month
basis and was $83,730 at June 30, 2014.
ACCOUNTS RECEIVABLE
Accounts receivable are recognized and carried at original invoice amount less an
allowance for any uncollectible amounts. An estimate
for doubtful accounts is made when collection of the full amount becomes
questionable. For products which
customers will lose functionality if they miss a payment, the estimated amount
for which collectability is in question has been adjusted to accounts
receivable and revenue.
-F-9-
30DC, INC. AND
SUBSIDIARY
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2015
The allowance
for doubtful accounts was based on a review of all outstanding
amounts. We analyze the aging of receivable balances,
historical bad debts, customer concentrations, customer credit-worthiness,
current economic trends and changes in our
customer payment terms. Significant changes in customer concentration or
payment terms, deterioration of customer creditworthiness or weakening in economics trends could have a
significant impact on the collectability of receivables and the allowance. If the financial condition of our customers were to
deteriorate, resulting in an impairment of their ability to make payments,
additional allowances will be made.
Allowances are applied to accounts receivable where events or changes in circumstance indicate that the
balances may not be collectible. The identification of
doubtful debts requires the use of judgment and estimates as mentioned above.
Where the expectation on or the actual
recoverability of commissions and other receivables is different from the
original estimate, such difference will impact the carrying value of
commissions and other receivables and doubtful debts expenses in the periods in
which such estimate is changed or the receivable are
collected.
PROPERTY AND EQUIPMENT
Equipment
is recorded at cost less accumulated depreciation and amortization.
Maintenance and repairs are charged to operations as incurred. Asset and
related accumulated depreciation amounts are relieved from the accounts for
retirements or dispositions. Depreciation on equipment is computed using the
straight-line method. Estimated useful lives of three to ten years are used
for equipment, while leasehold improvements are amortized, using the straight
line method, over the shorter of either their economic useful lives or the term
of the leases.
GOODWILL
AND INTANGIBLE ASSETS
The
Company accounts for goodwill and intangible assets in accordance with ASC 350
"Intangibles-Goodwill and Other" ("ASC 350"). ASC 350 requires that
goodwill and other intangibles with indefinite lives be tested for impairment
annually or on an interim basis if events or circumstances indicate that the
fair value of an asset has decreased below its carrying value. The Company
completed an evaluation of goodwill at June 30, 2015 and determined that
goodwill had been impaired. The Company prepared a discounted cash flow
analysis to determine the fair value of the reporting unit and the excess of
goodwill carrying value over the fair market value was recorded as impairment
of goodwill.
At
June 30, 2015, the portfolio of assets which were subsequently divested on July
30, 2015 was classified as held for sale and the goodwill associated with those
assets was included in assets of discontinued operations and the goodwill
impairment associated with those assets was included in results of discontinued
operations.
Goodwill
represents the excess of the purchase price over the fair value of net assets
acquired in the Company's share exchange with Infinity which occurred on
September 10, 2010 and the excess of the purchase price over the fair value of
net assets acquired in the Company's purchase of Netbloo's 50% interest in the
MagCast JV Agreement and Market Pro Max on October 24, 2012. Goodwill
associated with the Immediate Edge business was one of the assets divested
February 28, 2014. Since the Company is one reporting unit for goodwill
purposes, ASC 350-20-40, which requires a calculation of the relative fair
values of the disposed business and retained business, was followed to
determine the amount of goodwill allocated to the Immediate Edge. ASC 350
requires that goodwill be tested for impairment at the reporting unit level
(operating segment or one level below an operating segment) on an annual basis
and between annual tests when circumstances indicate that the recoverability of
the carrying amount of goodwill may be in doubt. Application of the goodwill
impairment test requires judgment, including the identification of reporting
units; assigning assets and liabilities to reporting units, assigning goodwill
to reporting units, and determining the fair value.
-F-10-
30DC, INC. AND
SUBSIDIARY
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2015
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.
Intangible assets are amortized over their estimated useful lives. Included in
these financial statements are intangible assets being amortized over five years.
Recoverability
of long-lived assets is measured by comparison of its carrying amount to the
undiscounted cash flows that the asset or asset group is expected to generate.
If such assets are considered to be impaired, the impairment to be recognized
is measured by the amount by which the carrying amount of the property, if any,
exceeds its fair market value.
ACCUMULATED OTHER
COMPREHENSIVE LOSS
Accumulated
Other Comprehensive Loss consists of cumulative adjustments of foreign currency
translation which is further discussed in the foreign currency translation and
measurement below.
DISCONTINUED
OPERATIONS
The
Company accounts for discontinued operations in accordance with ASC
205-20-45-1. For the year ended June 30, 2015, the Company has included two
businesses in discontinued operations; the portfolio of Internet marketing
assets which were divested on July 30, 2015 and were classified as held for
sale at June 30, 2015 and the business of Infinity which was discontinued after
the share exchange with 30DC DE on September 10, 2010. For the year
ended June 30, 2014,
the Company included three businesses in discontinued operations; the portfolio
of Internet marketing assets which were divested on July 30, 2015, the
Immediate Edge business which was divested effective February 28, 2014 (see
note 3) and the business of Infinity which was discontinued after the share
exchange with 30DC DE on September 10, 2010.
REVENUE
RECOGNITION
The Company generally applies revenue recognition
principles in accordance with ASC 605, "Revenue Recognition". Accordingly,
revenue is generally recognized when persuasive evidence of an agreement
exists, services have been rendered or product delivery has occurred, the
selling price to the customer is fixed or determinable and collectability is
reasonably assured.
The Company generates revenues in
three categories, (i) commissions, (ii) subscriptions and (iii) 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. Subscription revenue is primarily from monthly online
subscriptions for information on Internet marketing. All subscriptions are
paid in advance and subscription revenue is recognized ratably over the term of
the subscription. Products and services revenues are from sales of online
educational courses and productivity tools which customers use in their Internet
marketing businesses. Revenue from products and services is recognized in
accordance with the specific guidance for recognizing software revenue, where
applicable, the
-F-11-
30DC, INC. AND
SUBSIDIARY
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2015
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 as of the financial statement date.
EQUITY-BASED
PAYMENTS
The
Company accounts for equity instruments issued to non-employees in accordance
with the provisions of ASC 505-50, "Equity-Based Payments to Non-Employees",
which requires that such equity instruments are recorded at their fair value on
the measurement date, with the measurement of such compensation being subject
to periodic adjustment as the underlying equity instruments vest.
The Company account for equity instruments issued to
employees in accordance with ASC 718 "Stock Compensation". Under this guidance,
stock compensation expense is measured at the grant date, based on the fair
value of the award, and is recognized as an expense over the estimated service
period (generally the vesting period) on the straight-line attribute method.
FOREIGN
CURRENCY TRANSLATION AND REMEASUREMENT
The functional currency of the Company's 30 Day
Challenge division switched to the United States dollar from the Australian
dollar on July 1, 2012. All other Company operations have and continue to use
the United States dollar as their functional currency. For all accounting
periods prior to July 1, 2012, the Company followed ASC 830 "Foreign Currency
Matters", under which functional currency assets and liabilities are translated
into the reporting currency, US Dollars, using period end rates of exchange and
the related translation adjustments are recorded as a separate component of
accumulated other comprehensive income. Functional statements of operations
amounts expressed in functional currencies are translated using average
exchange rates for the respective periods. Re-measurement adjustments and
gains or losses resulting from foreign currency transactions are recorded as
foreign exchange gains or losses in the Statement of Operations. The
historical foreign currency translation loss remains on the Balance Sheet at
$(102,858) which was the balance at June 30, 2012.
USE OF ESTIMATES
The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and use assumptions that affect certain
reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of income and expenses during the reporting period. Significant
estimates in these financial statements are the bad debt allowance charged against accounts receivable, estimated useful lives used to calculate
depreciation of property and equipment and the estimate of the Company's future
taxable income used to calculate the Company's deferred tax valuation
allowance. The Company evaluates all of its estimates on an on-going basis.
-F-12-
30DC, INC. AND
SUBSIDIARY
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2015
FORGIVENESS
OF DEBT
The
company has settled some debts for cash and/or payment in stock for less than
the full amount due to the creditor. The Company records the difference
between the amount that was owed and the amount which was paid as other
income. During the year ended June 30, 2014, the Company settled three amounts
owed to vendors from prior years for a total amount of $93,513 less than the
full amount owed. During the year ended June 30, 2014, discontinued operations
includes $796 for the amount a note payable was settled for less than the
amount due, inclusive of accrued interest. During the year ended June 30, 2015
the Company did not settle any debts for less than the amount owed but the
Company did write-off $12,190 for continuing operations and $52,826 in
discontinued operations for amounts owed which have exceeded the statute of
limitations.
NET INCOME OR LOSS PER SHARE
The Company computes net
loss per share in accordance with ASC 260 "Earnings per Share." Under ASC 260,
basic net loss per share is computed by dividing net loss per share available
to common stockholders by the weighted average number of shares outstanding for
the period and excludes the effects of any potentially dilutive securities.
Diluted earnings per share, if presented, would include the dilution that would
occur upon the exercise or conversion of all potentially dilutive securities
into common stock using the "treasury stock" and/or "if converted" methods as
applicable. In
computing diluted earnings per share for the year ended June 30, 2014, the
Company included as outstanding 2,000,000 options which are exercisable and
have an exercise price below the market price for the Company's shares. For
the year ended June 30, 2015, inclusion of additional shares would be anti-dilutive and no adjustment to outstanding shares has been made to
compute diluted earnings per share.
RELATED PARTIES
The Company follows ASC 850, "Related Party
Disclosures" for reporting activity with related parties. A party is considered to be related to
the Company if the party directly or indirectly or through one or more
intermediaries, controls, is controlled by, or
is under common control with the Company. Related parties also include
principal owners of the Company, its management, members of the immediate families of principal owners of the Company
and its management and other parties with which the Company may deal if one
party controls or can significantly influence the
management or operating policies of the other to an extent that one of the
transacting parties might be prevented from fully
pursuing its own separate interests. A party which can significantly influence
the management or operating policies of the transacting parties or if it has an ownership interest in one of the
transacting parties and can significantly influence the other to an extent that
one or more of the transacting
parties might be prevented
from fully pursuing its own separate interests is also a related party.
RECENT ACCOUNTING PRONOUNCEMENTS
Management does not believe that any recently issued,
but not effective, accounting standards, if currently adopted, would have a
material effect on the Company's financial statements.
NOTE 3. DIVESTITURE
Effective February 28, 2014,
the Company divested assets and liabilities that made up its Immediate Edge
subscription business ("Edge") to Raine Ventures, LLC ("Raine") in exchange for
the 10,560,000 common shares of the Company which Raine had held. Included
with the Edge business was cash of approximately $1,000 and intangible assets
including goodwill of approximately $225,000. To determine the amount goodwill
for the Edge, the Company followed ASC 350-20-40-3 which states that goodwill
allocated to a business to be disposed of is to be allocated based on the
relative goodwill of the business to be disposed of and the
-F-13-
30DC, INC. AND
SUBSIDIARY
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2015
portion of the reporting unit
that will be retained. The Company prepared a discounted cash flow
analysis for the Edge and for the business retained by 30DC to determine the
$225,000 in goodwill allocated to the Edge. Raine assumed liability for deferred
revenue of approximately $19,000. The Company recorded zero gain or loss
on the divestiture. Operating results for the Edge have been reclassified
as discontinued operations for each period presented in these financial
statements (see note 5). Raine had been party to a contractor agreement
with the Company which had expired in 2012 and was extended on a month to month
basis and was terminated concurrent with the divestiture.
NOTE 4. GOODWILL IMPAIRMENT
The
Company accounts for goodwill and intangible assets in accordance with ASC 350
"Intangibles-Goodwill and Other" ("ASC 350") which requires that goodwill and
other intangibles with indefinite lives be tested for impairment meaning that
the fair value of an asset has decreased below its carrying value. The Company
completed an evaluation of goodwill at June 30, 2015 and determined that
goodwill had been impaired. At June 30, 2015, the portfolio of assets which
were subsequently divested on July 30, 2015, including related goodwill, was
classified as held for sale and reported as discontinued operations. The
Company prepared a discounted cash flow analysis to determine the fair value of
the reporting unit and the relative fair value of retained assets and the
assets held for sale. For the reporting unit as a whole, fair value of
goodwill was determined to be $1,054,878 which compared to carrying value for
goodwill of $2,027,564 resulted in impairment of $972,686. Retained assets
made up 75.78% of fair value and asset held for sale 24.22% of fair value. The
proportionate share of fair value for retained assets, which is $799,383, is
shown as goodwill on the Balance Sheet. The proportionate share of impairment
for retained assets, which is $737,284, is included in operating expense on the
Statement of Operations. The proportionate share of fair value for assets held
for sale, which is $255,495, is included in assets of discontinued operations
and the proportionate share of impairment for assets held for sale, which is
$235,402, is included in results of discontinued operations.
NOTE 5. DISCONTINUED OPERATIONS
For
the year ended June 30, 2015, the Company had two businesses in discontinued
operations; the portfolio of Internet marketing assets which were divested July
30, 2015 and were classified as held for sale at June 30, 2015 and the business
of Infinity which was discontinued after the share exchange with 30DC DE on
September 10, 2010. For the year ended June 30, 2014, the Company has three
businesses in discontinued operations; the portfolio of Internet marketing
assets which were divested July 30, 2015, the Immediate Edge business which was
divested effective February 28, 2014 (see note 3) and the business of Infinity
which was discontinued after the share exchange with 30DC DE on September 10,
2010. Prior to the share exchange, Infinity withdrew its election to operate
as a Business Development Company ("BDC") under the Investment Company Act of
1940 ("1940 Act"). Infinity historically operated as a non-diversified,
closed-end management investment company and prepared its financial statements
as required by the 1940 Act. 30DC is no longer actively operating the BDC and
the assets, liabilities and results of operations of Infinity's former business
are shown as discontinued operations in the Company's financial statements
subsequent to the share exchange with 30DC. Investment companies report assets
at fair value and the Company has continued to report investment assets in
discontinued operations on this basis.
-F-14-
30DC, INC. AND
SUBSIDIARY
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2015
|
Results of Discontinued Operations for the |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended June 30, 2015 |
|
Year Ended June 30, 2014 |
|
|
IM Business |
Infinity |
Total |
|
IM Business |
Immediate Edge |
Infinity |
Total |
|
Revenues |
$ 333,824 |
$ - |
$ 333,824 |
|
$ 440,798 |
$ 266,495 |
$ - |
$ 707,293 |
|
Operating expenses |
448,336 |
5,435 |
453,771 |
|
517,173 |
287,017 |
10,528 |
814,718 |
|
Income (Loss) from operations |
(114,512) |
(5,435) |
(119,947) |
|
(76,375) |
(20,522) |
(10,528) |
(107,425) |
|
Forgiveness of debt |
- |
- |
- |
|
- |
- |
796 |
796 |
|
Extinguishment of liabilities |
- |
52,826 |
52,826 |
|
- |
- |
- |
- |
|
Unrealized gain (loss) on marketable securities |
- |
(35,542) |
(35,542) |
|
- |
- |
43,854 |
43,854 |
|
Goodwill Impairment |
(235,402) |
|
(235,402) |
|
- |
- |
- |
- |
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) |
$ (349,914) |
$ 11,849 |
$ (338,065) |
|
$ (76,375) |
$ (20,522) |
$ 34,122 |
$ (62,775) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets and Liabilities of Discontinued Operations as of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2015 |
|
June 30, 2014 |
|
|
IM Business |
Infinity |
Total |
|
IM Business |
Immediate Edge |
Infinity |
Total |
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable securities |
$ - |
$ 80,771 |
$ 80,771 |
|
$ - |
$ - |
$ 116,313 |
$ 116,313 |
|
|
|
|
|
|
|
|
|
|
|
Total Current Assets |
- |
80,771 |
80,771 |
|
- |
- |
116,313 |
116,313 |
|
|
|
|
|
|
|
|
|
|
|
Intangible Assets |
35,680 |
- |
35,680 |
|
50,972 |
- |
- |
50,972 |
|
Goodwill |
255,495 |
- |
255,495 |
|
490,897 |
- |
- |
490,897 |
|
|
|
|
|
|
|
|
|
|
|
Total Assets of Discontinued Operations |
$ 291,175 |
$ 80,771 |
$ 371,946 |
|
$ 541,869 |
$ - |
$ 116,313 |
$ 658,182 |
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
$ - |
$ 19,375 |
19,375 |
|
$ - |
$ - |
$ 72,201 |
$ 72,201 |
|
Accrued expenses |
- |
67,732 |
67,732 |
|
- |
- |
62,297 |
62,297 |
|
Deferred revenue |
- |
- |
- |
|
3,669 |
- |
- |
3,669 |
|
Notes payable |
- |
51,550 |
51,550 |
|
- |
- |
61,050 |
61,050 |
|
Due to related parties |
- |
21,000 |
21,000 |
|
- |
- |
21,000 |
21,000 |
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities of Discontinued Operations |
$ - |
$ 159,657 |
$ 159,657 |
|
$ 3,669 |
$ - |
$ 216,548 |
$ 220,217 |
Notes
Payable
Included
in liabilities of discontinued operations at June 30, 2015 and June 30, 2014 are
$51,550 and $61,050, respectively, in notes payable plus related accrued interest
of which are all in default for lack of repayment by their due date.
For
the year ended June 30, 2015 and June 30, 2014 the Company incurred interest
expense on notes payable of $5,435 and $9,344 respectively which is included in
the Statement of Operations under income (loss) from discontinued operations.
Marketable
Securities
At
June 30, 2015 the fair value of marketable securities held for sale was $80,771
which included cumulative net unrealized gains of $14,361. At June 30, 2014
the fair value of marketable securities held for sale was $116,313 which
included cumulative net unrealized gains of $49,873.
NOTE 6. RELATED PARTY TRANSACTIONS
The
Company entered into a three-year Contract for Services Agreement commencing
July 2009 ("Commencement Date") with the Marillion Partnership ("Marillion")
for services which included managing
marketing and development for the Company and provides the services of Mr. Edward Dale as the Company's Chief Executive
Officer. The Marillion contract expired June 30, 2012 and continued on a month
to month basis under the same terms through May 15, 2015. On July 30,
2015 the Company divested a portfolio of Internet marketing assets in two
separate transactions including one with Marillion. At that time, the
Marillion agreement was terminated including the services of Ed Dale as the
Company's Chief Executive Officer. Cash remuneration under the Marillion
agreement was
-F-15-
30DC, INC. AND
SUBSIDIARY
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2015
$317,825 Australian Dollars ("AUD") per year. If
in any year starting from the Commencement Date, revenues of 30DC, Inc. doubled
then a bonus equal to 50% of cash remuneration was to be due in shares of 30DC,
Inc. as additional compensation. The bonus was not earned in the fiscal
years ended June 30, 2015 and June 30, 2014. During the term of the
agreements Marillion was prohibited from engaging in any other business activity
that competed with 30DC, Inc. without written consent of the 30DC, Inc. Board of
Directors.
Through May 15, 2015, the Company paid Marillion $2,500 AUD ($1,927 USD at the June 30, 2015 exchange rate) per month to cover office related expenses which is included in operating expenses.
Effective
July 15, 2012, the Company entered into a Consulting Services Agreement with
GHL Group, Ltd., whose President, Gregory H. Laborde is a Director for services
including but not limited to evaluation of financial forecasts, assisting in the
development of business and financial plans and assisting in the identification
of potential acquisitions and financial sources. The contract has expired but
continued through June 30, 2015 under the same service terms at a monthly
amount of $5,000.
Effective
October 1, 2012, the Company entered into a three year contractor agreement
with Netbloo Media, Ltd., joint developer of the MagCast Publishing Platform,
with annual compensation of $300,000 which was payable in monthly installments
of $25,000. A revised contractor agreement has been entered into with Netbloo
that reduced annual compensation to $150,000 per year effective May 15, 2015.
The revised agreement is for two years but may be terminated with six months'
notice.
On
October 11, 2012, Henry Pinskier, a Director of the Company received an option
to purchase 1,500,000 of the Company's common shares details of which are in
Note 11. During the years ended June 30, 2015 and June 30, 2014, the Company
recorded $8,855 and $33,619 respectively in expense for the option which is
reflected as Directors' Fees in the supplemental schedule of operating expenses
(see Note 12).
On
October 11, 2012, Theodore A. Greenberg, Chief Financial Officer and a Director
of the Company received an option to purchase 1,500,000 of the Company's common
shares details of which are in Note 11. During the years ended June 30, 2015
and June 30, 2014, the Company recorded $8,855 and $33,619 respectively in
expense for the option which is included in Officer's Salary in the supplemental
schedule of operating expenses (see Note 12).
At June 30, 2014, due to related parties totaled $805,483. This consisted of $6,843 due to Netbloo for earnings from the collaborative arrangement prior to 30DC acquiring Netbloo's 50% interest in the MagCast JV (note 4), $25,000 due to Netbloo under their contractor agreement, $94,000 accrued for directors' fees for services of non-executive directors, $5,640 due to GHL under their contractor agreement and $674,000 due to Theodore A. Greenberg, CFO and director, for compensation.
At June 30, 2015, due to related parties totaled $1,185,456. This primarily consists of $47,600 due to Marillion Partnership under its contractor agreement, $142,750 due to Netbloo, Ltd. under its contractor agreement, $204,000 accrued for directors' fees for services of non-executive directors, $28,575 due to GHL under their contractor agreement and $756,000 due to Theodore A. Greenberg for compensation.
-F-16-
30DC, INC. AND
SUBSIDIARY
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2015
NOTE
7. PROPERTY AND EQUIPMENT
Property and
equipment consists of the following:
|
|
|
June 30, 2015
|
|
June 30, 2014
|
|
Computer and Audio Visual
Equipment
|
|
$464,800
|
|
$459,341
|
|
Office equipment and
Improvements
|
|
70,167
|
|
70,167
|
|
|
|
534,967
|
|
529,508
|
|
Less accumulated
depreciation and amortization
|
|
(518,854)
|
|
(510,442)
|
|
|
|
$16,113
|
|
$19,066
|
Depreciation
expense was $6,437 for continuing operations for the year ended June 30, 2015
and $11,175 for the year ended June 30, 2014.
NOTE
8. INTANGIBLE ASSETS
Intangible assets consists
of the following:
|
|
|
|
June 30, 2015
|
June 30, 2014
|
|
Customer Lists
|
|
|
$15,000
|
$15,000
|
|
Software
|
|
|
238,542
|
238,542
|
|
|
|
|
253,542
|
253,542
|
|
Less accumulated amortization
|
|
|
(135,222)
|
(84,514)
|
|
|
|
|
$118,320
|
$169,028
|
Customer
lists and software were acquired as part of the MagCast and Market Pro Max
asset acquisitions in October 2012 and were being amortized over their
estimated useful lives of five years. Market Pro Max is part of the portfolio
of Internet marketing assets which was divested July 30, 2015 and was
classified as held for sale at June 30, 2015. Accordingly, the intangible
assets associated with Market Pro Max are in included in assets of discontinued
operations and amortization associated with Market Pro Max is included in
results of discontinued operations. Amortization expense for continuing
operations was $50,708 for each of the years ended June 30, 2015 and June 30,
2014.
NOTE 9. INCOME TAXES
The Company's income tax provision (benefit) consists
of the following:
|
|
|
Year Ended
|
Year Ended
|
|
|
|
June 30, 2015
|
June 30, 2014
|
|
Federal
|
|
|
|
|
Current
|
|
$-
|
$-
|
|
Deferred
|
|
(219,400)
|
30,450
|
|
|
|
|
|
|
State and Local
|
|
|
|
|
Current
|
|
$-
|
$-
|
|
Deferred
|
|
(13,100)
|
1,950
|
|
|
|
|
|
|
Change in valuation allowance
|
|
232,500
|
(32,400)
|
|
|
|
|
|
|
Income tax provision (benefit)
|
|
$-
|
$-
|
-F-17-
30DC, INC. AND
SUBSIDIARY
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2015
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, 2015 and June 30, 2014
are as follows:
|
|
|
Year Ended
|
Year Ended
|
|
|
|
June 30, 2015
|
June 30, 2014
|
|
|
|
|
|
|
Deferred tax asset
|
|
|
|
|
Net operating loss carryforward - Federal
|
|
$457,600
|
$314,600
|
|
Net operating loss carryforward - State
|
|
11,000
|
2,400
|
|
Intangible Asset Amortization
Fixed asset depreciation
|
|
40,400
1,700
|
24,900
4,100
|
|
Accrued expenses
|
|
377,500
|
309,700
|
|
Total deferred tax asset
|
|
888,200
|
655,700
|
|
Less valuation allowance
|
|
(888,200)
|
(655,700)
|
|
|
|
|
|
|
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, 2015
|
June 30, 2014
|
|
|
|
|
|
|
U.S. statutory rate
|
|
(34.0%)
|
34.0%
|
|
State and local taxes net of federal benefit
|
|
(1.3)
|
1.3
|
|
Change in valuation allowance
Stock option expense
|
|
14.5
0.4
|
(71.5)
52.4
|
|
Goodwill Impairment
Other permanent differences
|
|
21.5
(1.1)
|
0.0
(16.2)
|
|
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 $888,200 has been established.
For the years ended June 30, 2015 and June 30, 2014, the change in valuation allowance was an increase of $232,500 and a
decrease of $32,400 respectively.
ASC
740 also clarifies the accounting for uncertainty in income taxes recognized in
an enterprise's financial statements and prescribes a recognition threshold and
measurement process for financial statement recognition and measurement of a
tax position taken or expected to be taken in a tax return. For those benefits
to be recognized, a tax position must be more-likely-than-not to be sustained
upon examination by taxing authorities. ASC 740 also provides guidance on
derecognition,
-F-18-
30DC, INC. AND
SUBSIDIARY
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2015
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.
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, 2015 and 2014.
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, 2015 and June 30, 2014, the Company had approximately $1,346,000 and $925,300 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.
In addition to the net operating
losses since the 30DC share transaction on September 10, 2010, Infinity had net
operatiing losses that predate the share transaction. At the time of the share
transaction, Infinity had approximately $936,300 in U.S. federal net operating
loss carryovers and $170,500 U.S. capital loss carryovers which expire
beginning in 2023 and are not included in the net operating loss carryover above.
The business of Infinity is included in discontinued operations, pursuant to
limitations under Internal Revenue Code Section 382 these carryovers cannot be
utilized to offset future taxable income from continuing operations.
NOTE 10. STOCKHOLDERS' EQUITY
Common Stock
During the year ended June 30,
2015, the Company did
not issue any common stock.
During the year ended June 30,
2015, the Company did
not redeem any common stock.
Only
July 30, 2015, the Company redeemed 16,743,681 shares of common stock as part
of the divestiture of a portfolio of Internet marketing assets. 10,000,000
shares were redeemed from Marillion Partnership which owns more than 10% of the
Company's outstanding shares and was a contractor to the Company including the
services of Edward Dale as Chief Executive Officer of the Company. 6,743,681
shares were redeemed from Netbloo Media. Ltd. which owns more than 10% of the
Company's outstanding shares and is a contractor to the Company.
-F-19-
30DC, INC. AND
SUBSIDIARY
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2015
During the year ended June 30,
2014, the Company issued common stock as follows:
300,000
shares of common stock to Michael A. Littman as payment for $78,000 included in
accounts payable. The fair value of these shares was $48,000 and the Company
recorded $30,000 of forgiveness of debt for this transaction which is included
as other income in the Statement of Operations. Mr. Littman is an attorney who
has provided services to the Company and who provided services to Infinity
prior to the share exchange.
The
Company also recorded $57,253 of forgiveness of debt for reduced cash payment
of $95,453 ($96,500 AUD) over a 10 month period to settle an outstanding
liability of $152,706 to an Australian law firm which originated prior to
30DC's transaction with Infinity in 2010 and was previously included in
accounts payable. The Company also recorded $6,260 of forgiveness of debt for
reduced cash payment to settle final payment due the Company's prior
independent auditing firm. The prior auditing firm also performed services to
enable issuing an opinion for the June 30, 2012 comparative year included with
the Company's June 30, 2013 Form 10K for which, as part of the settlement of
the amount due, no fees were charged.
26,525
shares of common stock to a creditor as full payment for a note payable and
accrued interest totaling $6,896. The fair value of these shares was $6,100 and the Company
recorded $796 of forgiveness of debt for this transaction which is
included in the Discontinued Operations
section of the Statement of
Operations.
100,000
shares of common stock to a creditor as full payment for a note payable and
accrued interest totaling $19,794. The fair value of these shares was $22,000 and the
Company recorded $2,206 in additional
interest expense for this
transaction which is included in the Discontinued
Operations section of the Statement
of Operations.
During the year ended June 30,
2014, the Company redeemed
common stock as follows:
Effective
February 28, 2014, the Company divested assets and liabilities that made up its
Immediate Edge subscription business ("Edge") to Raine Ventures, LLC ("Raine")
in exchange for the 10,560,000 common shares of the Company which Raine had
held and which the Company has retired. The Company reported no gain or loss
on the divestiture, accordingly the redeemed shares were valued at the $207,335
net book value of the divested assets and liabilities.
Warrants and Options
Pursuant to a private placement memorandum
("PPM") issued in August 2010 the Company offered units consisting of
one share of common stock, one warrant at 37 cents per share exercisable until
March 15, 2011 ("37-Cent Warrant") and one warrant at 50 cents per share
exercisable five years from the date of issuance ("50-Cent Warrant") for a
price of 26 cents per unit. A first closing was held on September 22, 2010
under which 2,554,205 37-Cent Warrants were issued along with 2,554,205 50-Cent
Warrants expiring September 22, 2015. From November 2010 through March 2011,
an additional 847,317 37-Cent Warrants were issued and 847,317 50-Cent Warrants
were issued. All of the 37-Cent Warrants expired March 15, 2011 unexercised.
-F-20-
30DC, INC. AND
SUBSIDIARY
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2015
Further information relating
to warrants is as follows:
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Weighted
|
|
Average
|
|
|
|
|
Number
|
|
Average
|
|
Remaining
|
|
|
|
|
of
|
|
Exercise
|
|
Contract
|
|
|
|
|
Shares
|
|
Price
|
|
Life (years)
|
|
|
Outstanding warrants at 6/30/13
|
|
|
3,401,522
|
|
|
$0.50
|
|
|
2.30
|
|
|
Granted
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
Exercised
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
Forfeited/expired
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
Outstanding warrants at 06/30/14
|
|
|
3,401,522
|
|
|
$ 0.50
|
|
|
1.30
|
|
|
Granted
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
Exercised
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
Forfeited/expired
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
Outstanding warrants at 6/30/15
|
|
|
3,401,522
|
|
|
0.50
|
|
|
0.30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable on 6/30/14
|
|
|
3,401,522
|
|
|
0.50
|
|
|
1.30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable on 6/30/15
|
|
|
3,401,522
|
|
|
0.50
|
|
|
0.30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The aggregate intrinsic value of warrants outstanding and exercisable was $-0- and $-0- at June 30, 2015
and June 30, 2014, respectively.
On October 11, 2012, the Company's board of directors
approved the Company's 2012 stock option plan (see Note 11) and
grants of 3,000,000 options to purchase the Company's common stock with an
exercise price of $0.08 per share expiring on October 10, 2022. 1,500,000 of
these options were granted to Theodore A. Greenberg, the Company's Chief
Financial Officer and a Director of the Company and 1,500,000 of these options
were granted to Henry Pinskier who joined the Company as a Director in October
2012 and became Chairman in January 2013.
NOTE 11 - STOCK BASED COMPENSATION PLANS
The Company follows FASB Accounting Standards Codification No. 718
- Compensation - Stock Compensation for share based payments to employees. The
Company follows FASB Accounting Standards Codification No. 505 for share based
payments to Non-Employees.
The
Company recognized expense in the amount of $17,709 and $67,237 respectively for
the years ended June 30, 2015 and June 30, 2014. 3,000,000 options were
granted on October 11, 2012 of which 1,000,000 vested January 1, 2013,
1,000,000 vested January 1, 2014 and 1,000,000 vested January 1, 2015. The
cost of options vesting January 1, 2013 was recorded in the year ended June 30,
2013 and the cost of options vesting in 2014 and 2015 are being recorded on a
straight-line basis over the vesting period. There was no impact on the
Company's cash flow.
The
Company's stock incentive plan is the 30DC, Inc. 2012 Stock Option and Award
Plan (the "Plan"). The Plan provides for the grant of non-qualified stock
options to selected employees and directors. The Plan is administered by the
Board and authorizes the grant of options 7,500,000. The Board determines which
eligible individuals are to receive options or other awards under the Plan, the
terms and conditions of those awards, the applicable vesting schedule, the option
price and term for any granted options, and all other terms and conditions
governing the option grants and other awards made under the Plans.
-F-21-
30DC, INC. AND
SUBSIDIARY
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2015
The
fair value of each option award was estimated on the date of grant using the
Black-Scholes option valuation model using the assumptions noted as follows:
expected volatility was based on historical trading in the company's stock from
the September 10, 2010 date of the Infinity/30DC transaction through the
October 11, 2012 date the options were issued. The expected term of options
granted was determined using the simplified method under SAB 107 and represents
one-half the exercise period. The risk-free rate is calculated using the U.S.
Treasury yield curve, and is based on the expected term of the option. The Company
has estimated there will be no forfeitures.
Further
information relating to stock options is as follows:
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
Weighted
|
|
Average
|
|
|
|
|
|
Number
|
|
Average
|
|
Remaining
|
|
|
|
|
|
Of
|
|
Exercise
|
|
Contract
|
|
|
|
|
|
Shares
|
|
Price
|
|
Life (years)
|
|
|
|
Outstanding options at 06/30/13
|
|
|
3,600,000
|
|
|
$0.18
|
|
|
8.61
|
|
|
Granted
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
Exercised
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
Forfeited/expired
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
Outstanding options at 06/30/14
|
|
|
3,600,000
|
|
|
$ 0.18
|
|
|
7.61
|
|
|
Granted
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
Exercised
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
Forfeited/expired
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
Outstanding options at 6/30/15
|
|
|
3,600,000
|
|
|
0.18
|
|
|
6.61
|
|
|
Exercisable on 6/30/14
|
|
|
2,600,000
|
|
|
0.22
|
|
|
7.35
|
|
|
Exercisable on 6/30/15
|
|
|
3,600,000
|
|
|
0.18
|
|
|
6.61
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
options have a contractual term of ten years. The aggregate intrinsic value of
shares outstanding and exercisable was $-0- and $100,000 at June 30, 2015 and
June 30, 2014 respectively. Total intrinsic value of options exercised was $0
for the year ended June 30, 2015 as no options were exercised during this
period.
At
June 30, 2015, shares available for future stock option grants to employees and
directors under the 2012 Stock Option Plan were 4,500,000.
-F-22-
30DC, INC. AND
SUBSIDIARY
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2015
NOTE 12. SUPPLEMENTAL SCHEDULE OF OPERATING
EXPENSES
|
|
|
Year Ended
June 30, 2015
|
|
Year Ended
June 30, 2014
|
|
Related Party
Contractor Fees (1)
|
|
$341,250
|
|
$360,000
|
|
Officer's Salary
|
|
140,855
|
|
233,619
|
|
Directors' Fees
|
|
118,855
|
|
143,618
|
|
Independent Contractors
|
|
229,189
|
|
366,240
|
|
Commissions
Professional Fees
|
|
156,200
124,316
|
|
752,470
153,958
|
|
Credit Card Processing Fees
Telephone and Data Lines
|
|
26,753
17,816
|
|
112,397
17,736
|
|
Other Operating Costs
|
|
119,078
|
|
186,617
|
|
|
|
|
|
|
|
Total Operating Expenses
|
|
$1,274,312
|
|
$2,326,655
|
|
|
|
|
|
|
(1) Related party
contractors include Marillion an
affiliate of the Company that manages marketing and development for the Company and provides the services of Edward Dale as Chief Executive Officer
of the Company, GHL Group, Ltd., whose President, Gregory H. Laborde is a
Director and Netbloo which
was the joint developer of the MagCast Publishing Platform
NOTE 13. SUBSEQUENT EVENTS
On July 30, 2015, the Company divested a portfolio of
Internet marketing assets, including Market Pro Max, in two separate transactions, in exchange for a total of 16,743,681 shares
of the Company's common stock. 10,000,000
shares were redeemed from Marillion Partnership which owns more than 10% of the
Company's outstanding shares and was a contractor to the Company including the
services of Edward Dale as Chief Executive Officer of the Company. 6,743,681
shares were redeemed from Netbloo Media. Ltd. which owns more than 10% of the
Company's outstanding shares and is a contractor to the Company. After these
transactions, both Marillion and Netbloo remain shareholders and each owns in
excess of 10% of the Company's outstanding common stock. The portfolio of
Internet marketing assets divested were classified as held for sale at June 30,
2015. Assets associated with the Internet marketing assets were included in
assets of discontinued operations and results of the Internet marketing assets
were included in results of discontinued operations.
On
July 30, 2015, Marillion Partnership's contractor agreement with the Company
was terminated, this had included Edward Dale serving as Chief Executive
Officer of the Company. Henry Pinskier, Chair of 30DC, Inc.'s Board of
Directors was elected by the board as interim Chief Executive Officer of the
Company. Mr. Dale remains a director of the Company.
On July 30, 2015, Netbloo
Media, Ltd.'s existing contractor agreement with the Company was superseded by
a new contractor agreement with an effective date of May 15, 2015. The new
contractor agreement reduces annual compensation from $300,000 to $150,000 per
year and reduces the services Netbloo will provide to the Company's which is
now focused on the MagCast Publishing Platform.
-F-23-
ITEM
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
Not applicable.
ITEM 9A. CONTROLS AND
PROCEDURES
EVALUATION
OF DISCLOSURE CONTROLS AND PROCEDURES
Disclosure
controls and procedures are controls and other procedures that are designed to
ensure that information required to be disclosed by our Company is recorded,
processed, summarized and reported, within the time periods specified in the
rules and forms of the SEC. Our Chief Executive Officer and Chief Financial
Officer are responsible for establishing and maintaining disclosure controls
and procedures for our Company.
Management, consisting of the Company's Chief Executive Officer and
Chief Financial Officer, after evaluating the effectiveness of the Company's
disclosure controls and procedures as defined in Exchange Act Rules 13a-14(c)
as of June 30, 2015 (the "Evaluation Date") concluded that as of the
Evaluation Date, the Company's disclosure controls and procedures were
ineffective to ensure that material information relating to the Company would
be made known to them by individuals within those entities, particularly during
the period in which this annual report was being prepared and that information
required to be disclosed in the Company's SEC reports has not been recorded, processed,
summarized, and reported within the time periods specified in the SEC's rules
and forms. As further detailed in the financial reporting controls section
below, the Company has limited resources and staff which impacts timeliness and
effective of disclosure controls.
REPORT
OF MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our
management, with the participation of our Chief Executive Officer and Chief
Financial Officer, carried out an evaluation of the effectiveness of our "internal
control over financial reporting" (as defined in the Securities Exchange Act of
1934 (the "Exchange Act") Rules 13a-15(e) and 15d-15(e)) as of the end of the
period covered by this annual report on Form 10-K (the "Evaluation Date").
Based upon that evaluation, our Chief Executive Officer and Chief Financial
Officer concluded that, as of the Evaluation Date, our "internal control over
financial reporting" is not effective to ensure that information required to be
disclosed by us in the reports that we file or submit under the Exchange Act
(i) is recorded, processed, summarized and reported, within the time periods
specified in the SEC rules and forms and (ii) is accumulated and communicated
to our management, including our Chief Executive Officer and Chief Financial
Officer, as appropriate to allow timely decisions regarding required
disclosure. Specifically, management's evaluation was based on the following
material weaknesses, which existed as of June 30, 2015:
(1) Financial Reporting Systems: We did not maintain a
fully integrated financial consolidation and reporting system throughout the
period and as a result, extensive manual analysis, reconciliation and
adjustments were required in order to produce financial statements for external
reporting purposes.
(2) Segregation of Duties: We do not currently have a
sufficient complement of technical accounting and external reporting personal
commensurate to support standalone external financial reporting under public
company or SEC requirements. Specifically, the Company did not effectively
segregate certain accounting duties due to the small size of its accounting
staff, and maintain a sufficient number of adequately trained personnel
necessary to anticipate and identify risks critical to financial reporting and
the closing process. In addition, there were inadequate reviews and approvals
by the Company's personnel of certain reconciliations and other processes in
day-to-day operations due to the lack of a full complement of accounting staff.
-27-
We
believe that our weaknesses in internal control over financial reporting and
our disclosure controls relate in part to the fact that we are an emerging
business with limited personnel. Management and the Board of Directors believe
that the Company must allocate additional human and financial resources to
address these matters. Throughout the year, the Company has been continuously
improving its monitoring of current reporting systems and its personnel. The
Company intends to continue to make improvements in its internal controls over
financial reporting and disclosure controls until its material weaknesses are
remediated.
Remediation of Material Weakness
As our current financial condition allows, we are in the process of analyzing and developing our processes for the establishment of formal policies and procedures with necessary segregation of duties, which will establish mitigating controls to compensate for the risk due to lack of segregation of duties. In July 2014, the Company contracted an e-commerce accounting firm to automate a number of our accounting processes and to provide outsourced bookkeeping services that provide for segregation of duties which previously had not been.
Disclosure Controls and
Procedures
Our
management, including our Chief Executive Officer and Chief Financial Officer,
does not expect that our disclosure controls and procedures or our internal
controls will prevent all errors and all fraud. A control system, no matter how
well conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system are met. Further, the
design of a control system must reflect the fact that there are resource
constraints and the benefits of controls must be considered relative to their
costs. Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues
and instances of fraud, if any, within the Company have been detected, at this
time.
CHANGES
IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There
was no change in the Company's internal control over financial reporting that
occurred during the fiscal quarter ended June 30, 2015, that has materially
affected, or is reasonably likely to materially affect, its internal control
over financial reporting.
The Company is not an "accelerated filer"
for the fiscal year ended June 30, 2015 because it is qualified as a "small
business issuer". Hence, under current law, the internal controls
certification and attestation requirements of Section 404 of the Sarbanes-Oxley
act will not apply to the Company. This Annual report on Form 10-K does not
include an attestation report of our registered public accounting firm
regarding internal control over financial reporting. Management's report was
not subject to attestation by our registered public accounting firm pursuant to
temporary rules of the Securities and Exchange Commission that permit us to
provide only management's report in this Annual Report on Form 10-K.
ITEM 9B. OTHER INFORMATION
Not
applicable.
-28-
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The
following table sets forth information as to persons who currently serve as 30DC,
Inc., directors or executive officers, including their ages as of October 20,
2015.
|
Name
|
Age
|
Position
|
|
|
|
|
|
|
|
|
|
Theodore A. Greenberg
|
55
|
CFO, Secretary and
Director
|
|
|
|
|
|
Henry Pinskier
|
55
|
Chairman of the Board
|
|
|
|
|
|
Edward Dale
|
45
|
Director (1)
|
|
|
|
|
|
Gregory H. Laborde
|
50
|
Director
|
|
Pierce McNally
|
66
|
Director
|
|
|
|
|
|
(1) Resigned as
President and CEO as of July 30, 2015
|
|
|
|
|
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 Former President and Chief Executive Officer
Mr.
Dale, age 45, 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
resigned his positions as President and Chief Executive Officer on July 30,
2015. Mr. Dale was a founding shareholder of 30DC DE and served as its
President, Chief Executive Officer and a director from October 2008 until
September 10, 2010. From 2005 to 2008, Mr. Dale developed the 30 Day Challenge
business, which he ran for 4 years as part of the Marillion Partnership and was
sold to 30DC DE in July 2009.
HENRY PINSKIER, Chairman of the Board and Interim Chief Executive
Officer
Mr. Pinskier, age 55, joined the Company's board of
directors on October 11, 2012, was elected Chairman of the Board on January 31,
2013 and Interim CEO on July 30, 2015. Mr. Pinskier serves as Chair and Joint
Owner (1993- current) of Medi7 Pty Ltd., a General Practice medical services
company with 100 Doctors and staff across multiple clinics in Melbourne
Australia. Mr. Pinskier also currently serves as Chair for Spondo P/L an
unlisted Public Company, which
-29-
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.
THEODORE A. GREENBERG, Director and Chief Financial
Officer
Mr. Greenberg, age 55, has served as a Director,
Chief Financial Officer and Secretary of 30DC and Infinity since November 15, 2005.
Mr. Greenberg is a senior financial executive with more than 30 years experience
in private equity, consulting, industry and public accounting. He was a General
Partner and co-founder of Park Avenue Equity Partners, LP, a $110 million private
equity fund focused on the middle market. In his five years with Park Avenue, Mr.
Greenberg, sourced, evaluated and negotiated deals and worked extensively with
portfolio companies post acquisition. Prior to founding Park Avenue, he worked
with Development Capital, LLC on direct equity investments and served as
consulting CFO to one of Development Capital's portfolio companies. Previously,
Ted directed the financial services practice at Marcum & Kliegman, LLP, a
New York Metropolitan area accounting and consulting firm where he advised on
merger and acquisition transactions, as well as operations and taxation. Mr.
Greenberg graduated with a BS in Accounting, Cum Laude, from the State University
of New York at Albany in 1980 and received an MBA in Finance & Business
Policy from the University of Chicago in
1987. Mr. Greenberg earned certification
as a Certified Public Accountant in New York State.
GREGORY
H. LABORDE, Director
Mr. Laborde, age 50, has served as a Director of 30DC
since September 10, 2010. Prior to the transaction between Infinity and 30DC
DE, Mr. Laborde served as President, Chief Executive Officer
and Chairman of the Board of Infinity. Mr. Laborde currently serves as
President and Chief Executive Officer of 21st Century Investor
Relations and has over 22 years experience on Wall Street in the areas of
investment banking, trading, sales and financial consulting. From 1986 to 1997,
Mr. Laborde worked in corporate finance at a number of prestigious NYC based
investment banks, including: Drexel Burnham Lambert, Lehman Brothers, Gruntal
& Co., and Whale Securities. During his Wall Street tenure, Mr. Laborde was
involved in over 20 public and private financing transactions totaling over 100
million dollars. In 1999 he founded and took public Origin Investment Group, a
business development company that was involved in investing in IT related businesses.
Mr. Laborde earned a Bachelor of Science degree in Engineering
from Lafayette College in 1986.
PIERCE
MCNALLY, Director
Mr. McNally, age 66, 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
outside general counsel of Cielostar, Inc. a healthcare and benefits technology
payments solutions company located in Minneapolis, MN. He has served as
Chairman and Director of Lockermate Corporation of Minnetonka, Minnesota, a
company that provides locker organizing systems and fashion accessories to the
retail trade. He served as Minnesota American's Chairman of the Board, Chief
Executive Officer and Secretary from October 1994 until January 2000, when
Minnesota American merged with CorVu Corporation
-30-
(OTC: CRVU). He served as
Chairman and Director of Corporate Development of Nicollet Process Engineering,
Inc. from May 1995 until April 1999, when he retired from the board. He also
served on the board of directors of Digital Town (OTC:BB DGTW) and Outsell, LLC.
In December, 1983, Pierce was elected to the board of directors of his family
company, Midwest Communications, Inc., owner of numerous broadcast properties
including WCCO-TV, WCCO-AM and WLTE in the Twin Cities. In 1989, he was
subsequently also elected an officer of the company and he served in both
capacities until the company merged with CBS, Inc. (NYSE:CBS) in 1992. Mr.
McNally completed his undergraduate studies at Stanford University. He received
his law degree from the University of Wisconsin Law School in 1978. He is a
member of Order of the Coif.
No appointee for a director position has been found
guilty of any civil regulatory or criminal offense or is currently the subject
of any civil regulatory proceeding or any criminal proceeding.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934
(the "Exchange Act") requires that the Company's officers and directors,
and persons who own more than ten percent of a registered class of the
Company's equity securities, file reports of ownership and changes in ownership
with the Securities and Exchange Commission. Officers, directors and greater than
ten percent stockholders are required by regulation to furnish to the Company
copies of all Section 16(s) forms they file.
The following persons failed to file forms during the
past two fiscal years as required under Section 16(a) as follows:
CONFLICTS OF INTEREST
Members of the Company's management are associated with
other firms involved in a range of business activities. Consequently, there are
potential inherent conflicts of interest in their acting as officers and
directors of the Company. Insofar as the officers and directors are engaged in
other business activities, management anticipates it will devote only a minor
amount of time to the Company's affairs.
The Company's Board of Directors has adopted a policy
that the Company will not seek a merger with, or acquisition of, any entity in
which any officer or director serves as an officer or director or in which they
or their family members own or hold a controlling ownership interest. Although the
Board of Directors could elect to change this policy, the Board of Directors has
no present intention to do so.
There can be no assurance that management will
resolve all conflicts of interest in favor of the Company.
Committees of the Board
of Directors
30DC
is managed under the direction of its board of directors.
Executive
Committee
30DC does not
have an Executive Committee at this time.
Audit
Committee
30DC does not have an Audit Committee, at
this time but plans to institute an audit committee in the future.
-31-
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.
ITEM
11. EXECUTIVE COMPENSATION
The following table sets
forth the compensation paid and accrued to officers during the fiscal years
ended June 30, 2015, 2014 and 2013. 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, 2015.
SUMMARY EXECUTIVES COMPENSATION TABLE
|
Name & Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock awards
($)
|
Option awards
($)
|
Non-equity incentive plan comp-ensa-tion
($)
|
Non-qualified deferred compensa-tion
earnings
($)
|
All other compensa-tion
($)
|
Total
($)
|
|
Edward
Dale, Former President & CEO (1)
|
2015
|
239,886
|
0
|
0
|
0
|
0
|
0
|
0
|
239,886
|
|
2014
|
294,653
|
0
|
0
|
0
|
0
|
0
|
0
|
294,653
|
|
2013
|
338,596
|
40,000
|
0
|
0
|
0
|
0
|
0
|
378,596
|
|
|
|
|
|
|
|
|
|
|
|
|
Theodore
A. Greenberg, CFO and Secretary (2)
|
2015
|
132,000
|
0
|
0
|
8,855
|
0
|
0
|
0
|
140,855
|
|
2014
|
200,000
|
0
|
0
|
33,619
|
0
|
0
|
0
|
233,619
|
|
2013
|
200,000
|
0
|
0
|
76,814
|
0
|
0
|
0
|
276,814
|
|
|
|
|
|
|
|
|
|
|
|
|
Dan Raine,
Former VP
Business
Development
(3)
|
2015
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
2014
|
166,667
|
0
|
0
|
0
|
0
|
0
|
0
|
166,667
|
|
2013
|
251,785
|
0
|
0
|
0
|
0
|
0
|
0
|
251,785
|
-32-
(1) Marillion
Partnership ("Marillion"), an
affiliate of the Company that managed
marketing and development for the Company provided the services of Edward Dale as CEO of the Company. In
connection with the divestiture of a portfolio of Internet Marketing assets on
July 30, 2015, Marillion's contractor agreement was terminated and Edward Dale
resigned as CEO of the Company. A portion of Marillion's contractor fees
during the year ended June 30, 2015 are included in results from discontinued
operations.
By contract Marillion received contractor fees at an
annual rate of $317,825 AUD
Dollars which was paid periodically
throughout the year and was stopped effective May 15, 2015. The Company
converts US Dollars to AUD on the date of each payment and records the USD
amount as related party contractor fees. The USD
amount for the year is dependent on the fluctuation in the USD/AUD exchange
rate.
During
the year ended June 30, 2013 the board awarded Marillion a one-time bonus of
$40,000 upon completion of
the asset acquisition which included the remaining 50% of the MagCast
Publishing Platform.
(2) Theodore A. Greenberg earned an annual salary of $200,000 during the
years ended June 30, 2013 and 2014 and an annual salary of $132,000 during the
year ended June 30, 2015, for
his services as an officer of the Company
which was included in officers' salaries. During the year ended June 30, 2013 his salary was accrued but not paid, during
the year ended June 30, 2014, only $47,000 was paid and during the year ended
June 30, 2015 only $50,000 was paid. The unpaid amount for each of these years is included
in due to related parties.
(3) During the year ended June 30, 2013 Raine Ventures, LLC., a company affiliated with Dan Raine
earned $251,785 which was included in related party contractor
fees. On February 28, 2014, in
connection with the Immediate Edge divestiture, Mr. Raine resigned as the
Company's VP of Business Development and Rained Ventures resigned from its
contract. Raine Ventures earned $166,667 during the eight months ended
February 28, 2014. All amounts earned by Raine Ventures in the years ended
June 30, 2013 and 2014 are included in results from discontinued operations.
OPTION/SAR GRANTS IN THE LAST FISCAL YEAR
Compensation
Pursuant to Stock Option Plan
No
options were issued under the Company's 2008 stock option plan.
No
options were issued under the Company's 2012 stock option plan however options
issued in a previous year continued to vest.
On
October 11, 2012 our directors approved the Company's 2012 Stock Option Plan
(the "Plan") authorizing the plan to grant options to purchase up to 7,500,000
shares of our common stock.
The
board's responsibility will include the selection of option recipients, as well
as, the type of option granted and the number of shares covered by the option
and the exercise price.
Plan
options may either qualify as non-qualified options or incentive stock options
under Section 422 of the Internal Revenue Code. Any incentive stock option
granted under the plan must provide for an exercise price of at least 100% of
the fair market value on the date of such grant and a maximum term of ten
years.
All
of our officers, directors, key employees and consultants will be eligible to
receive non-qualified options under the plan. Only officers, directors and employees
who are formally employed by the Company are eligible to receive incentive options.
-33-
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.
On
October 11, 2012, 1,500,000 options to purchase shares of the Company's common
stock were issued to Theodore A. Greenberg the Company's Chief Financial
Officer and a Director and 1,500,000 options to purchase shares of the Company's
common stock were issued to Henry Pinskier who is a Director and who
subsequently became Chairman of the Board.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END
|
|
Option Awards
|
Stock Awards
|
|
Name
|
No. of Securities underlying
unexercised options (#) exercisable
|
No. of securities underlying
unexercised options (#) unexercisable
|
Equity incentive plan awards:
number of securities underlying unexercised unearned options (#)
|
Option Exercise Price ($)
|
Option Expiration Date
|
No. of shares or units of stock
that have not vested (#)
|
Market value of shares or units of
stock that have not vested (#)
|
Equity incentive plan awards:
number of unearned shares, units or other rights that have not vested (#)
|
Equity incentive plan awards:
market or payout value of unearned shares, units or other rights that have
not vested ($)
|
|
Theodore A. Greenberg (1)
|
1,500,000
|
|
|
$0.08
|
10/10/22
|
|
|
|
|
|
Henry Pinskier (1)
|
1,500,000
|
|
|
$0.08
|
10/10/22
|
|
|
|
|
(1)
Options awarded under 2012 stock
option plan.
Contractor
Agreements and Termination of Contractor and Change-In-Control Arrangements
Marillion
Partnership
The
Company entered into a three-year Contract for Services Agreement commencing
July 2009 with Marillion an affiliate of the Company that manages marketing and
development for the Company and provides the services of Edward Dale as CEO of
the Company for among other things, the payment of $250,000 in cash
remuneration per year.
On December 12, 2011 cash remuneration under the
Marillion contractor agreement was amended for the year ended June 30, 2012 to
the Australian Dollar equivalent of the originally contracted amount at the
exchange rate on the contract start date of July 15, 2009. The original annual
contract amount of $250,000 was amended to $317,825 AUD Dollars Effective July
1, 2012 the United States Dollar equivalent amount varies with the exchange
rate.
The Marillion contractor agreement expired June 30,
2012 and has continued on a month to
month basis under the terms
of the expired agreement. During the years
ended June 30, 2015 and June 30, 2014, Marillion received contractor fees of $239,886 and $294,653
respectively. In connection with the divestiture of a
-34-
portfolio
of Internet Marketing assets on July 30, 2015, Marillion's contractor agreement
was terminated and Edward Dale resigned as CEO of the Company. A portion of
Marillion's contractor fees during the year ended June 30, 2015 are included in
results from discontinued operations.
Raine Ventures, LLC
The
Company entered into a three-year Contract For Services Agreement commencing
July 2009 with 23V Industries, Ltd. ("23V") for services which include Mr. Dan
Raine acting as the Company's Vice President of Business Development providing
for among other things, the payment of $250,000 in cash remuneration per year.
Effective April 1, 2010, Raine Ventures, LLC ("Raine Ventures") replaced 23V
Industries, Ltd in providing consulting services to the Company including Mr.
Raine acting as the Company's Vice President of Business Development.
The Raine Ventures contractor agreement expired June
30, 2012 and continued on a month to month basis under similar terms through February 28, 2014 when the Company divested the Immediate Edge
and Mr. Raine resigned as the Company's VP of Business Development and Rained
Ventures resigned from its contract. Raine Ventures received $166,667 in
contractor fees during the year ended June 30, 2014 which is included in
results of discontinued operations.
If
in any year starting from the commencement date of the Marillion and Raine
Ventures contractor agreements, revenues of 30DC, Inc. doubles, compared to the
preceding year, then a bonus equal to 50% of cash remuneration will be due in
shares of 30DC, Inc. as additional compensation. This threshold was not
achieved for the fiscal years ending June 30, 2015 and 2014.
Description
of 30 DC DE Contractor Agreements
The
Marillion and Raine Ventures contractor agreements were with 30DC DE, a
subsidiary of 30DC. The agreements provided the following terms:
Bonuses: Performance bonuses and milestones for such bonus
are to be determined by the Board of Directors.
Salary: Annual reviews of compensation are to be performed
by the Board of Directors. At such review the Board of 30DC shall consider:
the responsibilities of the contractor, the performance of the company, the
performance of the contractor's division, the performance of the contractor,
the remuneration available in the workforce outside the 30DC for persons with
responsibilities and experience equivalent to those of the contractor and the
benefits which have accrued and will accrue under the agreement.
Takeover
Event: If, a Trade Sale or a
Takeover Event occurs and the Executive providing services through one of the
contractor agreements is required to resign as Officer of the Company, and the
Agreement is effectively terminated, then in addition to any other entitlements
due to the contractor in accordance with the terms of this Agreement, the contractor
will be entitled to:
-
be paid a lump sum equal to at least the total
of all amounts that, if the contract had continued until the end of the term,
30DC would have become liable to pay to the contractor during that period; and
-
be issued with that number of shares in
30DC comprising 50% of the cash remuneration.
-35-
None
of the Executives providing services through the contractor agreements were
required to resign their positions with 30DC as a result of the transaction
with Infinity so this provision did not apply. When the Company divested
Immediate Edge, on February 28, 2014, Raine Ventures resigned its contractor
agreement and is due no further compensation under its contract. When the
Marillion contractor agreement was terminated July 30, 2015 it was connection
with the divestiture of the portfolio of Internet marketing assets and no further
compensation is due under the contract.
Netbloo
Media, Ltd.
Effective
October 1, 2012, Netbloo received a three year contractor agreement with annual
compensation of $300,000 which was payable in monthly installments of $25,000
and could be terminated after two years subject to a six month termination
payment. On July 30, 2015, Netbloo
Media, Ltd.'s existing contractor agreement with the Company was superseded by
a new contractor agreement with an effective date of May 15, 2015. The new
contractor agreement reduces annual compensation from $300,000 to $150,000 per
year and reduces the services Netbloo will provide to the Company's which is
now focused on the MagCast Publishing Platform.
Compensation
Committee Interlocks and Insider Participation
In
August 2008, the Board of Directors approved and created a compensation
committee. The committee consisted of the independent directors of the
Company. Contemporaneous with the Infinity/30DC transaction, two of the
independent directors resigned and the compensation committee ceased to exist.
The Company plans to form a new compensation committee when new independent
directors join the board.
Director Compensation
Historically,
the Company had not paid any Directors fees for meeting attendance. In
September 2013, the Company approved annual fees to non-executive directors of
$30,000 per year and $50,000 per year for the board chairman. At the Company's
option, director's fees may be paid in stock.
(REMAINDER OF PAGE LEFT BLANK INTENTIONALLY)
-36-
DIRECTORS COMPENSATION
The
following table sets forth certain information concerning compensation paid to
the Company's directors during the year ended June 30, 2015:
|
Name
|
Fees earned or paid in cash
($)
|
Stock awards ($)
|
Option awards ($)
|
Non-equity incentive plan
compensation ($)
|
Non-qualified deferred compensation
earnings
($)
|
All other compensation ($)
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
Edward
Dale (1)
|
$ -0-
|
$ -0-
|
$ -0-
|
$ -0-
|
$ -0-
|
$-0-
|
$-0-
|
|
|
|
|
|
|
|
|
|
|
Theodore
A. Greenberg (2)
|
$ -0-
|
$ -0-
|
$ -0-
|
$ -0-
|
$ -0-
|
$-0-
|
$-0-
|
|
|
|
|
|
|
|
|
|
|
Gregory H.
Laborde (3)
|
$30,000
|
$ -0-
|
$ -0-
|
$ -0-
|
$ -0-
|
$-0-
|
$30,000
|
|
|
|
|
|
|
|
|
|
|
Pierce
McNally (4)
|
$30,000
|
$ -0-
|
$-0-
|
$ -0-
|
$-0-
|
$ -0-
|
$30,000
|
|
Henry
Pinskier (5)
|
$50,000
|
$-0-
|
$8,855
|
$-0-
|
$-0-
|
$ -0-
|
$58,855
|
|
|
|
|
|
|
|
|
|
(1)
During the year ended
June 30, 2015, Marillion Partnership, an
affiliate of the Company that managed marketing and development for the Company and provided the
services of Edward Dale as CEO of the Company was paid $239,886,
a portion of which was included in related party contractor fees and a portion
of which was included in results of discontinued operations.
(2)
During the year ended
June 30, 2015, Theodore A. Greenberg earned salary of $132,000 and received a stock option award for which $8,855 was
charged to officers' salaries
for his services as an officer of the Company, $82,000 of this amount was accrued but not actually paid.
(3)
During the year ended
June 30, 2014, GHL Group, whose President, Gregory H. Laborde is a Director, earned $60,000 which was included in related party
contractor fees. $30,000 of the director fees due Mr. Laborde remain unpaid
and the Company has the option to pay this in stock.
(4)
$30,000 of the director fees due
Pierce McNally remain unpaid and the Company has the option to pay this in
stock.
(5)
$50,000 of the director fees due
Henry Pinskier remain unpaid and the Company has the option to pay this in
stock.
All
of the Company's officers and/or directors will continue to be active in other
companies. All officers and directors have retained the right to conduct their
own independent business interests.
INDEMNIFICATION
OF DIRECTORS AND OFFICERS
30DC's officers and directors are indemnified as
provided by the Maryland Revised Statutes and the bylaws.
Under the Maryland Revised
Statutes, director immunity from liability to a company or its shareholders for
monetary liabilities applies automatically unless it is specifically limited by
a company's Articles of Incorporation. The Company's Articles of Incorporation
do not specifically limit the directors' immunity. Excepted
-37-
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 a majority vote of a quorum consisting of directors who
were not parties to the proceeding, or (b) if such quorum is not obtainable,
or, even if obtainable, a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion, that the facts known to the
decision‑making party at the time such determination is made demonstrate
clearly and convincingly that such person acted in bad faith or in a manner
that such person did not believe to be in or not opposed to the best interests
of 30DC, Inc.
EQUITY COMPENSATION PLAN INFORMATION
Stock Option Plan
The
Company has two stock Option Plans. As of June 30, 2014, 600,000
options are outstanding under the 2008 Option Plan of which all 600,000 are
exercisable. During the year ended June 30, 2014, we did not issue any shares
under the option plan. We have reserved a total of 970,934 shares of common
stock for issuance under the 2008 Option Plan.
On
October 11, 2012 our directors approved the Company's 2012 Stock Option Plan
(the "Plan") authorizing the plan to grant options to purchase up to 7,500,000
shares of our common stock. On October 11, 2012, 1,500,000 options to purchase
shares of the Company's common stock were issued to Theodore A. Greenberg the
Company's Chief Financial Officer and a Director and 1,500,000 options to
purchase shares of the Company's common stock were issued to Henry Pinskier who
is a Director and who subsequently became Chairman of the Board. At June 30,
2015 all of these options are exercisable.
-38-
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
The following table sets forth
information with respect to the beneficial ownership of 30DC, Inc. outstanding
common stock by:
-
each person who
is known by 30DC to be the beneficial owner of five percent (5%) or more of 30DC's
common stock;
-
30DC's chief
executive officer, its other executive officers, and each director as
identified in the "Management - Executive Compensation" section; and
-
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, 2015, including options exercisable within 60 days. This
information does not reflect the July 30, 2015 divestiture of a portfolio of
Internet marketing assets in exchange for the redemption of 10,000,000 shares
from Marillion Partnership and 6,743,861 shares from Netbloo.
|
Title of Class
|
Name and Address of Beneficial Owner (1)
|
Amount and Nature of Beneficial Owner
|
Percent of Class (2)
|
|
Common
|
Edward Dale, Director, and
Former President and CEO (Directly and Beneficially through Marillion
Partnership)
|
20,036,440
|
26.07%
|
|
|
|
|
|
|
Common
|
Gregory H. Laborde,
Director, (Beneficially through GHL Group, Ltd.)
|
3,507,250
|
4.56%
|
|
|
|
|
|
|
Common
|
Theodore A. Greenberg,
CFO, Secretary and Director (3)
|
3,180,770
|
2.19%
|
|
|
|
|
|
|
Common
|
Pierce McNally, Director (4)
|
292,500
|
0.13%
|
|
|
|
|
|
|
|
|
|
|
-39-
|
Title of Class
|
Name and Address of Beneficial Owner (1)
|
Amount and Nature of Beneficial Owner
|
Percent of Class (2)
|
|
Common
|
Henry Pinskier, Director
and Chairman of the Board (5)
|
1,747,000
|
0.32%
|
|
Common
|
Jonathan Lint
(Beneficially through Netbloo Media, Ltd.)
|
6,743,682
|
11.22%
|
|
|
|
|
|
|
Common
|
Clinton Carey
|
3,432,000
|
17.55%
|
|
|
|
|
|
|
Common
|
All Directors and
Executive Officers as a Group (5 persons)
|
18,763,960
|
33.27%
|
(1)
All directors can be reached at
the address of the Company.
(2)
At June 30, 2015, the Company had
76,853,464 shares of its common stock issued and outstanding. The Company had 3,600,000
options issued and outstanding which were exercisable, but these options are
not included in this calculation as the Company considers them to be "out of
the money" and does not expect the status to change in the next 60 days.
(3)
Mr. Greenberg's ownership total
includes 1,500,000 options which were exercisable at June 30, 2015 but not in
the money and not included in his percentage.
(4)
Mr. McNally's ownership total
includes 192,500 options which were exercisable at June 30, 2015 but not
included in his percentage.
(5)
Mr. Pinskier's ownership total
includes 1,500,000 options which were exercisable at June 30, 2015 but not
included in his percentage.
Rule
13d-3 under the Securities Exchange Act of 1934 governs the determination of
beneficial ownership of securities. That rule provides that a beneficial owner
of a security includes any person who directly or indirectly has or shares
voting power and/or investment power with respect to such security. Rule 13d-3
also provides that a beneficial owner of a security includes any person who has
the right to acquire beneficial ownership of such security within sixty days,
including through the exercise of any option, warrant or conversion of a
security. Any securities not outstanding which are subject to such options,
warrants or conversion privileges are deemed to be outstanding for the purpose
of computing the percentage of outstanding securities of the class owned by
such person. Those securities are not deemed to be outstanding for the purpose
of computing the percentage of the class owned by any other person.
-40-
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
RELATED PARTY
TRANSACTIONS
Officers and Directors
During the years ended June 30, 2015
and 2014, Marillion Partnership ("Marillion"), an
affiliate of the Company that manages marketing and development for the Company and provides the
services of Edward Dale as CEO was paid contractor fees of $239,886
and $294,653
respectively. Mr. Dale is CEO, President and a Director of the
Board of the Company.
During
the years ended June 30, 2015 and 2014, Theodore A. Greenberg earned salary of
$132,000 and $200,000 respectively. Mr. Greenberg is CFO and a Director of the
Company. On October 11, 2012 Mr. Greenberg was issued 1,500,000 options to
purchase shares of the Company's common stock. The company computed the cost
of these options using the Black-Scholes option pricing formula which resulted
in total cost of $119,288 of which $8,855, and $33,619 were recorded as expense
during the years ended June 30, 2015 and 2014 respectively.
During
the years ended June 30, 2015 and 2014, Henry Pinskier earned directors' fees of
$50,000 each year. Mr. Pinskier is a Director and Chairman of the Board of the
Company. On October 11, 2012 Mr. Pinskier was issued 1,500,000 options to
purchase shares of the Company's common stock. The company computed the cost
of these options using the Black-Scholes option pricing formula which resulted
in total cost of $119,288 of which $8,855 and $33,618 were recorded as expense
during the years ended June 30, 2015 and 2014 respectively.
During
the years ended June 30, 2015 and 2014, Gregory Laborde earned directors' fees of
$30,000 each year. During the years ended June 30, 2015 and 2014 GHL Group,
Ltd. whose President, Gregory H. Laborde is a Director, earned contractor fees
of $60,000 each year.
During
the years ended June 30, 2015 and 2014, Pierce McNally earned directors' fees of
$30,000 each year.
Other Shareholders
During the year ended June 30, 2014,
Raine Ventures, LLC , a company affiliated
with Dan Raine earned contractor
fees of $166,667. Mr. Raine
had beneficial ownership of greater than 5% of the Company
until February 28, 2014. On February 28, 2014, the Company divested the
Immediate Edge in return for 10,560,000 of the Company shares which was all of
the Company shares owned by Raine Ventures.
During the years ended June 30, 2015
and 2014 Netbloo earned contractor fees of $281,250 and $300,000. Netbloo
is a greater than 5% shareholder.
ITEM 14. PRINCIPAL
ACCOUNTING FEES AND SERVICES
GENERAL.
Malone Bailey, LLP is the Company's principal auditing accountant firm. The
Company's Board of Directors has considered whether the provisions of audit
services is compatible with maintaining independence.
-41-
The
following table represents aggregate fees billed to the Company for the years
ended June 30, 2015 and 2014 by Malone Bailey, LLP
|
|
|
Year Ended June 30,
|
|
|
|
2015
|
|
2014
|
|
Audit Fees
|
|
$67,500
|
|
$71,600
|
|
|
|
|
|
|
|
Audit-related Fees
|
|
$0
|
|
$0
|
|
|
|
|
|
|
|
Tax Fees
|
|
$0
|
|
$0
|
|
|
|
|
|
|
|
All Other Fees
|
|
$0
|
|
$0
|
|
|
|
|
|
|
|
Total Fees
|
|
$67,500
|
|
$71,600
|
-42-
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, 2015 and 2014
|
|
|
|
|
|
|
|
|
|
(b)
|
Exhibit No.
|
Description
|
|
|
|
|
|
|
|
|
|
|
3.1
|
Articles of Incorporation of
Infinity Capital Group, Inc. (1)
|
|
|
|
|
|
|
3.2
|
Bylaws of Infinity Capital
Group, Inc. (1)
|
|
|
|
|
|
|
31.1
|
Certification of Chief
Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act
|
|
|
|
|
|
|
31.2
|
Certification of Chief Financial
Officer pursuant to Section 302 of the Sarbanes-Oxley Act
|
|
|
|
|
|
|
32.1
|
Certification of Principal
Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act
|
|
|
|
|
|
|
32.2
|
Certification of Principal
Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act
|
|
|
|
|
|
|
101.INS
|
XBRL Instance Document (2)
|
|
|
|
|
|
|
101.SCH
|
XBRL Taxonomy Extension
Schema Document (2)
|
|
|
|
|
|
|
101.CAL
|
XBRL Taxonomy Extension
Calculation Linkbase Document (2)
|
|
|
|
|
|
|
101.DEF
|
XBRL Taxonomy Extension
Definition Linkbase Document (2)
|
|
|
|
|
|
|
101.LAB
|
XBRL Taxonomy Extension
Label Linkbase Document (2)
|
|
|
|
|
|
|
101.PRE
|
XBRL Taxonomy Extension
Presentation Linkbase Document (2)
|
(1)
Incorporated by reference from the exhibits included in the Company's Form
8K12g3 filed with the Securities and Exchange Commission (www.sec.gov), dated
May 5, 2005. A copy can be provided by mail, free of charge, by sending a
written request to 30DC, Inc., 80 Broad Street, 5th Floor, NY, NY 10004.
(2)
Pursuant to Rule 406T of Regulation S-T, this interactive data file is deemed
not filed or part of a registration statement or prospectus for purposes of
sections 11 or 12 of the Securities Act of 1933, is deemed not filed for
purposes of section 18 of the Securities Exchange Act of 1934, and otherwise is
not subject to liability under these sections.
-43-
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:
November 17, 2015
|
|
|
By:
|
/s/
Henry Pinskier
|
|
|
Henry Pinskier, President
and Chief Executive Officer (Principal Executive Officer)
|
|
|
|
|
|
|
|
By:
|
/s/
Theodore A. Greenberg
|
|
|
Theodore A. Greenberg,
Chief Financial Officer (Principal Accounting Officer), Secretary and
Director
|
|
|
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
|
Dated:
November 17, 2015
|
|
|
|
30DC , Inc.
|
|
|
|
|
|
|
|
|
/s/
Theodore A. Greenberg
|
|
|
Theodore
A. Greenberg, Director
|
|
|
|
|
|
/s/
Henry Pinskier
|
|
|
Henry
Pinskier, Director
|
|
|
|
|
|
/s/
Gregory Laborde
|
|
|
Gregory
Laborde, Director
|
|
|
|
-44-
EXHIBIT 31.1
SECTION 302 CERTIFICATION
EXHIBIT 31.1
CERTIFICATION OF PERIODIC REPORT
I, Henry
Pinskier, certify that:
1. I have reviewed this annual report on Form 10-K of
30DC, Inc.;
2. Based on my knowledge, this report does not
contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period
covered by this report;
3. Based on my knowledge, the financial statements,
and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I
are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))and
internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f)) for the registrant and have:
a. Designed such disclosure controls and
procedures, or caused such disclosure controls and procedures to be designed
under our supervision to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this
report is being prepared;
b. Designed such internal control over
financial reporting, or caused such internal control over financial reporting
to be designed under our supervision, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles;
c. Evaluated the effectiveness of the
registrant's disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures,
as of the end of the period covered by this report based on such evaluation;
and
d. Disclosed in this report any change in
the registrant's internal control over financial reporting that occurred during
the registrant's most recent fiscal quarter (the registrant's 4th quarter in
the case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over financial
reporting.
5. The registrant's other certifying officer and I
have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant's auditors and the audit committee of
the registrant's board of directors (or persons performing the equivalent
functions):
a. All significant deficiencies and
material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the
registrant's ability to record, process, summarize and report financial
information; and
b. Any fraud, whether or not material,
that involves management or other employees who have a significant role in the
registrant's internal control over financial reporting.
Date: November
17, 2015
/s/ Henry
Pinskier_______________
Henry
Pinskier,
Chief Executive Officer, President
& Principal Executive Officer
EXHIBIT 31.2
SECTION 302 CERTIFICATION
EXHIBIT 31.2
CERTIFICATION OF PERIODIC REPORT
I, Theodore A. Greenberg, certify that:
1. I have reviewed this annual report on Form 10-K of
30DC, Inc.;
2. Based on my knowledge, this report does not
contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period
covered by this report;
3. Based on my knowledge, the financial statements,
and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I
are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))and
internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f)) for the registrant and have:
a. Designed such disclosure controls and
procedures, or caused such disclosure controls and procedures to be designed
under our supervision to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this
report is being prepared;
b. Designed such internal control over
financial reporting, or caused such internal control over financial reporting
to be designed under our supervision, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles;
c. Evaluated the effectiveness of the
registrant's disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such
evaluation; and
d. Disclosed in this report any change in
the registrant's internal control over financial reporting that occurred during
the registrant's most recent fiscal quarter (the registrant's 4th quarter in
the case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over financial
reporting.
5. The registrant's other certifying officer and I
have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant's auditors and the audit committee of
the registrant's board of directors (or persons performing the equivalent
functions):
a. All significant deficiencies and
material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the
registrant's ability to record, process, summarize and report financial
information; and
b. Any fraud, whether or not material,
that involves management or other employees who have a significant role in the
registrant's internal control over financial reporting.
Date: November 17, 2015
/s/ Theodore A. Greenberg__________
Theodore A. Greenberg,
Chief Financial Officer
& Principal Accounting Officer
EXHIBIT 32.1
SECTION 906 CERTIFICATION
Exhibit 32.1
CERTIFICATION OF DISCLOSURE PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of 30DC, Inc.
(the "Company") on Form 10-K for the period ending June 30, 2015 as
filed with the Securities and Exchange Commission on the date hereof (the
"Report") I, Henry Pinskier, Principal Executive Officer, President,
and Chief Executive Officer of the Company, certify, pursuant to 18 USC section
1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002,
that to the best of my knowledge and belief:
(1) The Report fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934;
and
(2) The information contained in the
Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.
Dated: November 17, 2015
/s/ Henry Pinskier
_____________________________________________________
Henry Pinskier,
Principal
Executive Officer, and President
This certification accompanies the Report pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the
extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the
Company for purposes of Section 18 of the Securities Exchange Act of 1934, as
amended.
EXHIBIT 32.2
SECTION 906 CERTIFICATION
Exhibit 32.2
CERTIFICATION OF DISCLOSURE PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of 30DC, Inc.
(the "Company") on Form 10-K for the period ending June 30, 2015, as
filed with the Securities and Exchange Commission on the date hereof (the
"Report") I, Theodore A. Greenberg, Principal Accounting Officer and
Chief Financial Officer of the Company, certify, pursuant to 18 USC section
1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002,
that to the best of my knowledge and belief:
(1) The Report fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934;
and
(2) The information contained in the
Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.
Dated: November
17, 2015
/s/ Theodore
A. Greenberg
_____________________________________________
Theodore A.
Greenberg
Principal
Accounting Officer and Chief Financial Officer
This certification accompanies the Report pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent
required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for
purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
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