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EX-32 - 30DC, INC.ex322.txt
EX-32 - 30DC, INC.ex321.txt
EX-31 - 30DC, INC.ex312.txt
EX-31 - 30DC, INC.ex311.txt

                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549



                                    FORM 10-K


[X]     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
        ACT OF 1934

        For the fiscal year ended June 30, 2012
                                      Or

[ ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934

        For the transition period from _________ to _____________


                        Commission file number: 000-30999

                                   30DC, INC.
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             (Exact name of registrant as specified in its charter)


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


              80 Broad Street, 5th Floor, New York, New York 10004
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               (Address of principal executive offices) (Zip Code)

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

           Securities registered pursuant to Section 12(b) of the Act:


                                                      Name of each exchange
 Title of each class registered                        on which registered
----------------------------------                   ------------------------
         Not Applicable                                   Not Applicable


           Securities registered pursuant to Section 12(g) of the Act:

                              COMMON STOCK, $0.001
                              --------------------
                                (Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes |_| No |X| Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. |_| Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes |_| No |X| Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data file required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files) Yes |X| No |_| Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (ss. 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. |_| Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check One). ---------------------------------- ----- ------------------------- ----- Large accelerated filer [___] Accelerated filer [___] ---------------------------------- ----- ------------------------- ----- Non-accelerated filer [___] Smaller reporting company [_X_] (Do not check if a smaller reporting company) ---------------------------------- ----- ------------------------- ----- Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes |_| No |X| The aggregate market value of voting stock held by non-affiliates of the registrant was approximately $8,306,558 as of December 31, 2011. There were 86,931,169 shares outstanding of the registrant's Common Stock as of June 3, 2013.
TABLE OF CONTENTS PART I ITEM 1 Business 4 ITEM 1 A. Risk Factors 10 ITEM 1 B. Unresolved Staff Comments 17 ITEM 2 Properties 17 ITEM 3 Legal Proceedings 17 ITEM 4 Mine Safety Disclosures 17 PART II ITEM 5 Market for Registrant's Common Equity, Related Stockholder Matters and 18 Issuer Purchases of Equity Securities ITEM 6 Selected Financial Data 20 ITEM 7 Management's Discussion and Analysis of Financial Condition and Results of 20 Operations ITEM 7 A. Quantitative and Qualitative Disclosures About Market Risk 24 ITEM 8 Financial Statements and Supplementary Data 24 ITEM 9 Changes in and Disagreements with Accountants on Accounting and Financial 25 Disclosure ITEM 9 A. Controls and Procedures 25 ITEM 9 B Other Information 26 PART III ITEM 10 Directors, Executive Officers, and Corporate Governance 26 ITEM 11 Executive Compensation 30 ITEM 12 Security Ownership of Certain Beneficial Owners and Management and Related 37 Stockholder Matters ITEM 13 Certain Relationships and Related Transactions, and Director Independence 39 ITEM 14 Principal Accounting Fees and Services 40 PART IV ITEM 15 Exhibits, Financial Statement Schedules 41 SIGNATURES 42 -3-
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, 30DC, INC. F/K/A INFINITY CAPITAL GROUP, INC. On September 10, 2010, Infinity Capital Group, Inc., a Maryland Corporation, ("Infinity") entered into a Plan and Agreement of Reorganization (the "Agreement") with 30DC, Inc., a Delaware corporation, ("30DC DE") and the Shareholders of 30DC DE ("30DC DE Shareholders.") Infinity was incorporated on July 8, 2003, in Maryland. Until September 10, 2010, Infinity operated as a non-diversified closed-end management investment company which filed a notice of election to be regulated as a business development company under the 1940 Act, when it filed a Notification of Withdrawal of Election to be Subject to Sections 55 through 65 of the Investment Company Act of 1940 on Form N-54C and as a result was no longer subject to the provisions of the 1940 Act. In exchange for 100% of the issued and outstanding shares of 30DC DE, Infinity issued 60,984,000 shares of its restricted common stock. The 30DC DE Shareholders received 13.2 shares of common stock of Infinity for every one share of 30DC DE. Infinity, as a result of the transaction, became the owning entity of 100% of the outstanding shares of common stock of 30DC DE. For purposes of accounting, 30DC DE was considered the accounting acquirer. The business of 30DC DE became the primary business of Infinity. Infinity was renamed 30DC, Inc. (Maryland) ("30DC" and together with its subsidiary "the Company."). The Company has its principal office located at 80 Broad Street, 5th Floor, New York, New York 10004, and its telephone number is (212) 962-4400. The Company maintains a website at WWW.30DCINC.COM, such website is not incorporated into this document. 30DC DE was incorporated on October 17, 2008 in the state of Delaware, as a holding company, for the purpose of building, acquiring and managing international web-based sales and marketing companies. On July 15, 2009, 30DC DE completed the acquisitions of the business and assets of 30 Day Challenge ("30 Day") and Immediate Edge ("Immediate"). 30 Day was acquired from the Marillion Partnership and Edward Wells Dale, both of Victoria, Australia, in consideration -4-
for the issuance of 2,820,000 shares of Common Stock of 30DC DE. Immediate was acquired from Dan Raine of Cheshire, United Kingdom, in consideration for the issuance of 600,000 shares of Common Stock of 30DC DE. The acquired businesses were sold subject to specific liabilities which included accounts payable, accrued expenses and deferred revenue. The acquisitions were pursuant to an agreement dated November 14, 2008. Mr. Dale and Mr. Raine were part of the founding group of shareholders of 30DC DE and in conjunction with the acquisitions, Mr. Dale was named the Chief Executive Officer of 30DC DE. 30 Day Challenge and Immediate Edge are 30DC's two business divisions Historically, the 30 Day Challenge division has offered a free online ecommerce training program, an online education subscription service, periodic live seminars and a one to one mentoring program. Within the past few years the Company started selling individual marketing information products each focused on a particular marketing strategy. As further described below, in May 2012, the MagCast Publishing Platform, a cloud-based digital publishing platform was launched. Immediate Edge is an online education program subscription service offering high-end internet marketing instruction and strategies for experienced online commerce practitioners. On August 24, 2011 the Company entered into a Share Sale and Purchase Agreement (the "Purchase") with RivusTV Ltd, ("Rivus") which was organized and exists in Victoria, Australia. Rivus offers a solution to broadcast digital content across the Internet on a revenue share basis. The Purchase is subject to both 30DC and Rivus completing satisfactory due diligence on each other and a minimum capital raise of $5 million Australian Dollars (AUD) (currently approximately $5.15 million) by January 16, 2012 or such other date that the parties shall agree. In March 2012 the Purchase expired before all terms and conditions could be met. In May of 2012 the Company signed a joint venture agreement ("JV Agreement") with Netbloo Media, Ltd. ("Netbloo") for the MagCast Publishing Platform ("MagCast") which was jointly developed. MagCast provides customers access to a cloud-based service to create an application ("App") to publish a digital magazine on Apple Corporation's online marketplace Apple Newsstand and includes executive training modules as well as a three-month trial subscription to the Company's Immediate Edge subscription product and other bonus products. Under the terms of the JV Agreement the Company is responsible for marketing, sales and administration and Netbloo is responsible for product development. MagCast was launched in May 2012 and a majority of sales were the result of affiliate marketing relationships which result in commission of 50% of gross revenue for those sales to the affiliate responsible for the sale. All MagCast sales revenue has been recorded by the Company and commission expense has been recorded for the amount due to Netbloo which is 50% of revenue reduced by affiliate commissions and other allowable costs. On December 31, 2012 the Company and Netbloo entered into an asset purchase agreement for the Company to purchase Netbloo's 50% interest in the MagCast JV Agreement and Market Pro Max a product which helps companies run online information businesses for a purchase price of 13,487,363 shares of the Company's common stock. Netbloo received a three year contractor agreement with annual compensation of $300,000 which is payable in monthly installments of $25,000 and may be terminated after two years subject to a six month termination payment. The contractor agreement was effective October 1, 2012. BUSINESS MODEL The Company's long-term strategy is to increase the number of products it sells and services it offers while expanding the audience to which it markets those products and services. Historically, 30DC's approach has been to build its community of members through the Challenge, a free online internet marketing program which has been taken by nearly 200,000 people and continues to be available today. The course content in the Challenge is geared for anyone with an interest in internet marketing; participants might be interested in starting a brand new business, in extending an existing business to the online platform -5-
or to make improvements to an existing online business. Challenge participants become part of 30DC's base of customers to whom products and services are marketed. Offerings include: o subscription products ranging in price from $30 - $100 per month, o individual courses covering a range of topics such as valuing web sites, o MagCast Publishing Platform, and o one to one mentoring and private business consulting programs. 30DC also generates revenue by promoting third party internet marketing products and services to its base of customers during and after the Challenge. To expand the market for its products 30DC began a more comprehensive program of selling through affiliate marketing relationships during the year ended June 30, 2012. Approximately one-third of revenues were generated through affiliate sales. Affiliates promote 30DC's products to their own customer base and receive a commission from 30DC as a percentage of gross revenue which varies by product and subscription from 20% to 50%. For the MagCast launch, the Company focused on affiliates with large customer bases by conducting private webinars to promote sales to individual affiliate groups of customers. To expand the number of products the Company sells and services it offers while limiting its upfront investment, 30DC has developed a number of collaborative arrangement product development relationships. In a typical collaborative arrangement, the cost and human resources devoted to product development will be borne by the collaborative arrangement partner and 30DC will provide marketing, sales, customer training and support. For MagCast Publishing Platform the idea was jointly developed and Netbloo oversaw product development with input from 30DC. Revenue generated from a collaborative arrangement is split 50-50 after allowed costs such as affiliate commissions and processing fees. In addition to marketing and the other responsibilities noted above, 30DC manages the financial aspect of sales; managing merchant processor relationships, collecting funds and issuing refunds. The Company records all sales proceeds as gross revenue with payment to the collaborative arrangement partner reflected as a cost in operating expenses. BUSINESS DIVISIONS THE 30 DAY CHALLENGE OVERVIEW On July 15, 2009, 30DC DE acquired the net assets making up the 30 Day Challenge ("30 Day") from the Marillion Partnership and Edward Dale, an officer of 30DC DE. In exchange for the net assets, 30DC DE issued 2,820,000 shares of common stock to Marillion Partnership which became 30DC DE's majority shareholder and subsequently the largest shareholder of the Company. The net assets included cash, accrued receivables, intellectual property and property and equipment, and outstanding liabilities consisting of accounts payable, accrued expenses and deferred revenues. The 30 Day Challenge division started in 2005 by offering a free internet marketing educational program that was originally known as the 30 Day Challenge and has evolved into the Company's current Challenge program. The Challenge program is an interactive education program which includes 30 days of instruction and incorporates weekly breaks for participants to put into practice the concepts they learn from the course. Participants are given the framework and guidance to design and develop an Internet business with modules on a range of topics including researching markets (including competition and opportunity), identifying and sustaining niche markets, utilizing social media to build your business and many other subjects pertinent to Internet marketing. There are no -6-
prerequisites to taking the course and participants come from around the globe. The Challenge has predominately grown through its own viral marketing campaign whereby members of its existing community spread word of the 30 Day Challenge through email and social media, including Twitter, Facebook, FriendFeed and blogs focused on internet marketing. The growth in participants has resulted in a targeted community to which the 30 Day markets products and services such as individual content specific courses, third party products, one to one mentoring and consulting and most recently the MagCast Publishing Platform which was launched in May 2012. As a third party affiliate, 30 Day Challenge earns commissions ranging between 20% and 75% on sales of internet marketing products and services. Specific products include the Dominiche `Buying and Selling Websites' instruction program ("Dominiche"), Online Local Hero instruction program and the Marillion Project which includes intensive consulting and training for up to $10,000 per year. The MagCast Publishing Platform, launched in May 2012 resulted from the collaboration of 30DC and Netbloo, an existing Marillion Project customer of the Company, and fits the model of joint venture product development with limited cost and risk to the Company. MagCast is also an example of a product which is relevant to the Company's historical internet marketing customer base but is also of interest to a much broader audience and increases the potential number of customers. Since the Challenge originated, 30DC has marketed third party products for a number of other producers of information products for the internet marketing industry and for service providers to internet-based businesses such as hosting companies. 30DC has developed a working relationship with a number of these companies that they are now serving as affiliates for 30DC by marketing 30DC's products to their own customer bases. The Company signed a joint venture agreement ("JV Agreement") with Netbloo for the MagCast Publishing Platform ("MagCast") which was jointly developed. MagCast provides customers access to a cloud-based service to create an application ("App") to publish a digital magazine on Apple Corporation's online marketplace Apple Newsstand and includes executive training modules as well as a three-month trial subscription to the Company's Immediate Edge subscription product and other bonus products. On December 31, 2012 the Company and Netbloo entered into an asset purchase agreement for the Company to purchase Netbloo's 50% interest in the MagCast JV Agreement and Market Pro Max, an online marketing platform that allows anyone to create digital products and quickly build a variety of eCommerce marketing websites for a purchase price of 13,487,363 shares of the Company's common stock. 30 DAY TECHNOLOGY AND INTELLECTUAL PROPERTY 30 Day employs proprietary technologies to support the viral growth of the community and membership numbers and to support sales of proprietary and third party products. The platform includes a significant amount of self designed and developed content and software/code solutions for both internal and subscriber use. The free Challenge program has been taped and the video content had been distributed to a hosted platform (YouTube) to widen the awareness of the Company and to increase the potential for search engine optimization (leading to better search engine rankings) and ultimately increased website traffic. The intellectual property of 30 Day includes the Challenge community database, containing nearly 100,000 contacts with interests in internet marketing and e-commerce topics, the content library developed over the past six years and multiple web sites including the principal web site of the Challenge which is www.Challenge.co. The MagCast Publishing Platform is a cloud-based service to create an application ("App") to publish a digital magazine and includes executive training modules. The software code, domain names and websites to operate MagCast and the executive training modules are all proprietary to 30DC. The -7-
Company has filed a trademark application for the name MagCast. THE IMMEDIATE EDGE OVERVIEW On July 15, 2009, 30DC DE acquired the net assets making up the Immediate Edge ("Immediate") from Dan Raine, a founding shareholder of 30DC DE. In exchange for the net assets, 30DC DE issued 600,000 shares of common stock. The net assets include cash and an outstanding liability consisting of deferred revenues. Immediate provides a subscription-based Internet education program offering high-end internet marketing instruction and strategies for online commerce practitioners. Such education includes advice on selling digital products and services, how to run membership sites, affiliate management systems, rewards programs and search engine optimization among other services. Immediate also generates revenue from standalone products and affiliate marketing of targeted third-party products to its customer base. BUSINESS MODEL Immediate charges subscribers $97 per month for its flagship product the Immediate Edge which includes information on topics like social bookmarking, web 2.0, Facebook marketing and Twitter strategies. This can represent value for subscribers because it enables them to avoid paying search engine optimizers fees for their services. Immediate also offers standalone products including software plug-ins that enhance the capabilities of commercially available software designed to drive more traffic to customer web sites. Prior to the acquisition of Immediate' operations by 30DC DE, Immediate was a customer of 30 Day. IMMEDIATE EDGE TECHNOLOGY AND INTELLECTUAL PROPERTY The Immediate Edge intellectual property includes proprietary content developed over the past five years on varying aspects of internet marketing as well as a number of web sites including the primary web site Immediate Edge.com. The member only web site contains self contained training programs ("blueprints") on specific topics, including but not limited to, creating apps, AdSense, Sniper Traffic, Flippa, Facebook, business building, product execution and content clusters which are implementation guides. Members are invited participate in question and answer session with internet marketing industry leaders and the sessions are archived on the member only web site. Members can submit their web site for a thorough site analysis and these are made available for other members to access. Members have access to the training center which contains sections on subjects including, but not limited to, finding a niche, market research, search engine optimization, social marketing, copywriting, outsourcing and selling your web site. Members have access to a variety of tools and shortcuts that a geared to managing an online business. GROWTH OPPORTUNITIES The Challenge affords Immediate with a platform for reaching new subscribers. The Immediate Edge subscription product is promoted to the 30 Day community as a service for online business operators who have gone beyond the initial stage of learning, wanting to take their business to the next level and wanting to stay on-top of trends and ensure their Internet marketing strategies employ the latest tools and techniques. Immediate also runs $1 for one week trial subscriber promotions a few times a year to attract new subscribers. The MagCast Publishing Platform was launched in May 2012 and targets customers who want to market to the growing base of Apple I-Pad users, MagCast has initially been sold to the Company's historical customer base in the internet marketing industry and the Company believes there is strong future growth to -8-
additional customers in the internet marketing industry as well as to customers in new market segments. The Company started generating significant revenue through affiliate marketing relationships during the fiscal year ended June 30, 2012 and plans to expand the use of affiliate marketing going forward. THE MARKET The worldwide demand for online information and products has grown with the increasing availability of high speed internet, mobile communications and general increase of computing across the globe. New online businesses are starting every day and these entrepreneurs are potential customers with the more sophisticated and successful online businesses being potential customers for the offerings of 30 Day and Immediate. With the May 2012 launch of the MagCast Publishing Platform, the Company has begun selling products which are applicable not only to its historical customer base in the internet marketing industry but to a much wider audience of potential customers. Anyone looking to market to the growing number of Apple I-Pad users, sales of which per Apple Inc.'s financial statements now exceed 100 million, is a potential customer for MagCast. To penetrate this market, the Company initially launched MagCast by selling through affiliate arrangements with other marketing companies that have introduced MagCast to their customer bases through custom webinars and bonus products specifically tailored to the target audience. Other ways for the Company to expand its marketing include paying for traffic generation to its web sites or for leads to promote its products through targeted e-mails. The Company has not historically taken this approach but as this type of marketing becomes more sophisticated and segmenting of target customers more precise, the Company expects the benefits will increase relative to cost and is exploring this avenue to further increase its customer base. COMPETITION As internet commerce has grown at a double digit rate in the past decade, internet marketing and education companies have helped fuel this growth. 30DC is one of a number of companies that offer training to newcomers as well as experienced sellers in "how to grow a business by more effectively marketing on the Internet." While some general education companies offer courses in Internet marketing, 30DC's primary competition comes from small Internet marking companies focused on building a loyal following of customers. 30DC has built relationships with a number of its competitors whereby they cross promote each other's offerings which sometimes overlap and sometimes cover different aspects of Internet marketing. 30DC's free Challenge program is the largest offering of this type from any company we know of and has helped to build the Company's customer base. The Company earns revenue from customers in its database purchasing products and services from third parties, some of whom are competitor Internet marketing companies. There are a number of competitors for the Company's MagCast Publishing Platform product including software companies who sell do it yourself products and competitors with similar cloud-based offerings as the Company. The Company sees the market for digital publishing consisting of a number of segments including large companies with sizable internal resources, the historical non-digital publishing market and smaller entrepreneurial businesses. The Company believes MagCast can a dominant product for the entrepreneurial market, including Internet self- publishers and other creators of user generated content and believes its executive training modules and support are key selling points to customers who have limited resources. Additionally, the Company believes its affiliate marketing network is a valuable competitive advantage in reaching potential customers and utilizes the Company's historical marketing expertise. -9-
When MagCast was launched the Company made a strategic decision to offer an attractive price for a lifetime license to gain some initial traction in the market and proof of concept for the product. Going forward the company plans to offer MagCast on a subscription basis which will produce and ongoing annuity revenue stream. The Company believes they offer customers good value in terms of features and price compared to competitor offerings. INTELLECTUAL PROPERTY The Company's recorded and unrecorded assets consist primarily of property and equipment, goodwill and internally developed intangible property such as domain names, websites, customer lists, copyrights and trademarks. We do not hold any patents or patent applications. EMPLOYEES As of June 30, 2012, we had approximately 10 employees and contractors. Our employees and contractors are located both in the United States and in our offshore offices. ITEM 1A. RISK FACTORS --------------------- RISKS RELATING TO OUR BUSINESS AND STRUCTURE RISKS RELATED TO OUR BUSINESS AND INDUSTRY THE COMPANY HAS A LIMITED OPERATIONAL HISTORY. We have a limited history upon which an evaluation of our prospects and future performance can be made. Our proposed operations are subject to all business risks associated with new enterprises. The likelihood of our success must be considered in light of the problems, expenses, difficulties, complications, and delays frequently encountered in connection with the expansion of a business operation in an emerging industry, and the continued development of advertising, promotions, and a corresponding customer base. There is a possibility that we could sustain losses in the future, and there are no assurances that we will ever operate profitably. GOING CONCERN The consolidated financial statements included herein have been prepared using accounting principles generally accepted in the United States of America applicable for a going concern which assumes that the Company will realize its assets and discharge its liabilities in the ordinary course of business. As of June 30, 2012, the Company has a working capital deficit of approximately $1,703,000 and has accumulated losses of approximately $2,736,000 since its inception. Its ability to continue as a going concern is dependent upon the ability of the Company to obtain the necessary financing to meet its obligations and pay its liabilities arising from normal business operations when they come due. In May 2012, the Company launched MagCast which the Company expects to be an integral part of its businesses on an ongoing basis. MagCast is being sold through an affiliate network which expands the Company's selling capability and has a broad target market beyond the Company's traditional customer base. Until the Company achieves sustained profitability it does not have sufficient capital to meet its needs and continues to seek loans or equity placements to cover such cash needs. No commitments to provide additional funds have been made and there can be no assurance that any additional funds will be available to cover expenses as they may be incurred. If the Company is unable to raise additional capital or encounters unforeseen circumstances, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, issuance of additional shares of the Company's stock to settle operating liabilities which would dilute existing shareholders, curtailing its operations, suspending the pursuit of its business plan and -10-
controlling overhead expenses. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all. These conditions raise substantial doubt about the Company's ability to continue as a going concern. These consolidated financial statements do not include any adjustments to the amounts and classification of assets and liabilities that may be necessary should the Company be unable to continue as a going concern. To fund working capital for the next twelve months, the Company expects operations to continue to improve through increased sales of MagCast, to reduce costs due to 100% ownership of MagCast, to settle additional liabilities using the Company's stock and to raise additional capital. THE COMPANY MAY NEED ADDITIONAL FINANCING FOR WHICH 30DC HAS NO COMMITMENTS, AND THIS MAY JEOPARDIZE EXECUTION OF THE COMPANY'S BUSINESS PLAN. 30DC has limited funds, and such funds may not be adequate to carry out the business plan. The Company's ultimate success depends upon its ability to raise additional capital. The Company has not investigated the availability, source, or terms that might govern the acquisition of additional capital and will not do so until it determines a need for additional financing. If the Company needs additional capital, it has no assurance that funds will be available from any source or, if available, that they can be obtained on terms acceptable to the Company. If not available, 30DC's operations will be limited to those that can be financed with its modest capital. WE WILL INCUR EXPENSES IN CONNECTION WITH OUR SEC FILING REQUIREMENTS AND WE MAY NOT BE ABLE TO MEET SUCH COSTS, WHICH COULD JEOPARDIZE OUR FILING STATUS WITH THE SEC. As a public reporting company we are required to meet the filing requirements of the SEC. We estimate accounting and legal expenses on an annualized basis to be approximately $200,000, which includes both the annual audit and the review of the quarterly reports by our auditors. These costs can increase significantly if the Company is subject to comment from the SEC on its filings and/or we are required to file supplemental filings for transactions and activities. During the last two years, we have been unable to meet our filing requirements on a timely basis. If we continue to be unable to meet our filing requirements or are not compliant in meeting the filing requirements of the SEC, we could lose our status as a 1934 Act Company, which could compromise our ability to raise funds. WE ARE HIGHLY DEPENDENT ON THE SERVICES OF KEY PERSONNEL. Our success depends and will depend on the efforts and abilities of Edward Dale, our President, Chief Executive Officer and a Director, and Dan Raine, our Executive VP of Business Development. The loss of either of them would have a material adverse effect on us. Our success also depends upon our ability to attract and retain qualified personnel required to fully implement our business plan. There can be no assurance that we will be successful in these efforts. 30DC'S OFFICERS AND DIRECTORS MAY HAVE CONFLICTS OF INTEREST WHICH MAY NOT BE RESOLVED FAVORABLY TO THE COMPANY. Certain conflicts of interest may exist between 30DC and its officers and directors. The Company's Officers and Directors have other business interests to which they devote their attention and may be expected to continue to do so although management time should be devoted to 30DC business. As a result, conflicts of interest may arise that can be resolved only through exercise of such judgment as is consistent with fiduciary duties to 30DC. See "Directors and Executive Officers". -11-
WE MAY NOT BE ABLE TO MANAGE OUR GROWTH EFFECTIVELY. We must continually implement and improve our products and/or services, operations, operating procedures and quality controls on a timely basis, as well as expand, train, motivate and manage our work force in order to accommodate anticipated growth and compete effectively in our market segment. Successful implementation of our strategy also requires that we establish and manage a competent, dedicated work force and employ additional key employees in corporate management, product design, client service and sales. We can give no assurance that our personnel, systems, procedures and controls will be adequate to support our existing and future operations. If we fail to implement and improve these operations, there could be a material, adverse effect on our business, operating results and financial condition. IF WE DO NOT CONTINUALLY UPDATE OUR PRODUCTS, THEY MAY BECOME OBSOLETE AND WE MAY NOT BE ABLE TO COMPETE WITH OTHER COMPANIES. The Internet and online commerce industries are characterized by rapid technological change, changing market conditions and customer demands, and the emergence of new industry standards and practices that could render our existing Web site and proprietary technology obsolete. Our future success will substantially depend on our ability to enhance our existing services, develop new services and proprietary technology and respond to technological advances in a timely and cost-effective manner. The development of other proprietary technology entails significant technical and business risk. There can be no assurance that we will be successful in developing and using new technologies or adapt our proprietary technology and systems to meet emerging industry standards and customer requirements. If we are unable, for technical, legal, financial, or other reasons, to adapt in a timely manner in response to changing market conditions or customer requirements, or if our new products and electronic commerce services do not achieve market acceptance, our business, prospects, results of operations and financial condition would be materially adversely affected. We cannot assure you that we will be able to keep pace with technological advances or that our products will not become obsolete. We cannot assure you that competitors will not develop related or similar products and bring them to market before we do, or do so more successfully, or that they will not develop technologies and products more effective than any that we have or are developing. If that happens, our business, prospects, results of operations and financial condition will be materially adversely affected. WE RELY ON INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS. We regard substantial elements of our web sites and underlying technology as proprietary. Despite our precautionary measures, third parties may copy or otherwise obtain and use our proprietary information without authorization, or develop similar technology independently. Any legal action that we might bring or other steps we might take to protect this property could be unsuccessful, expensive and distract management from day-to-day operations. Legal standards relating to the validity, enforceability and scope of protection of proprietary rights in Internet-related businesses are uncertain and evolving, and we can give no assurance regarding the future viability or value of any of these proprietary rights. SYSTEMS FAILURES COULD HARM OUR BUSINESS. Temporary or permanent outages of our computers or software equipment could have an adverse effect on our business. Although we have not experienced any catastrophic outages to date, we currently do not have fully redundant systems for our web sites and other services at an alternate site. Therefore, our systems are vulnerable to damage from break-ins, unauthorized access, vandalism, fire, earthquakes, power loss, telecommunications failures and similar events. -12-
Experienced computer programmers seeking to intrude or cause harm, or hackers, may attempt to penetrate our network security from time to time. Although we have not experienced any catastrophic security breaches to date, if a hacker were to penetrate our network security, they could misappropriate proprietary information, cause interruptions in our services, dilute the value of our offerings to customers and damage customer relationships. We might be required to expend significant capital and resources to protect against, or to alleviate, problems caused by hackers. We also may not have a timely remedy against a hacker who is able to penetrate our network security. In addition to purposeful security breaches, the inadvertent transmission of computer viruses could expose us to system damage, operational disruption, loss of data, litigation and other risks of loss or harm. WE DEPEND ON CONTINUED PERFORMANCE OF AND IMPROVEMENTS TO OUR COMPUTER NETWORK. Any failure of our computer systems that causes interruption or slower response time of our web sites or services could result in a smaller number of users of our web sites. If sustained or repeated, these performance issues could reduce the attractiveness of our web sites to consumers and our subscription products and services. Increases in the volume of our web site traffic could also strain the capacity of our existing computer systems, which could lead to slower response times or system failures. We may not be able to project accurately the rate, timing or cost of any increases in our business, or to expand and upgrade our systems and infrastructure to accommodate any increases in a timely manner. INTERNET COMMERCE SECURITY THREATS COULD POSE A RISK TO OUR ONLINE SALES AND OVERALL FINANCIAL PERFORMANCE. A significant barrier to online commerce is the secure transmission of confidential information over public networks. We and our partners rely on encryption and authentication technology to provide the security and authentication necessary to effect secure transmission of confidential information. There can be no assurance that advances in computer capabilities; new discoveries in the field of cryptography or other developments will not result in a compromise or breach of the algorithms used by us and our partners to protect consumer's transaction data. If any such compromise of security were to occur, it could have a materially adverse effect on our business, prospects, financial condition and results of operations. A party who is able to circumvent our security measures could misappropriate proprietary information or cause interruptions in our operations. We may be required to expend significant capital and other resources to protect against such security breaches or to alleviate problems caused by such breaches. Concerns over the security of transactions conducted on the Internet and the privacy of users may also hinder the growth of online services generally, especially as a means of conducting commercial transactions. To the extent that our activities, our partners or third-party contractors involve the storage and transmission of proprietary information, such as credit card numbers, security breaches could damage our reputation and expose us to a risk of loss or litigation and possible liability. There can be no assurance that our security measures will not prevent security breaches or that failure to prevent such security breaches will not have a materially adverse effect on our business, prospects, financial condition and results of operations. RISK OF CAPACITY CONSTRAINTS; RELIANCE ON INTERNALLY DEVELOPED SYSTEMS; SYSTEM DEVELOPMENT RISKS. A key element of our strategy is to generate a high volume of traffic on, and use of, our services across our network infrastructure and systems. Accordingly, the satisfactory performance, reliability and availability of our software systems, transaction-processing systems and network infrastructure are critical to our reputation and our ability to attract and retain customers, as well as maintain adequate customer service levels. Our revenues depend on the number of visitors who sign up for our services. Any systems interruptions that result in the unavailability of our software systems or network infrastructure would reduce the volume of sign ups and the attractiveness of our service offerings. -13-
We may experience periodic systems interruptions from time to time. Any substantial increase in the volume of traffic on our software systems or network infrastructure will require us to expand and upgrade further our technology, transaction-processing systems and network infrastructure. There can be no assurance that we will be able to accurately project the rate or timing of increases, if any, in the use of our Web site or timely expand and upgrade our systems and infrastructure to accommodate such increases. We will use a combination of industry supplied software and internally developed software and systems for our search engine, distribution network, and substantially all aspects of transaction processing, including order management, cash and credit card processing, and accounting and financial systems. Any substantial disruptions or delays in any of our systems would have a materially adverse effect on our business, prospects, financial condition and results of operations. THERE ARE RISKS ASSOCIATED WITH OUR DOMAIN NAMES. We currently hold various Web domain names relating to our brand. The acquisition and maintenance of domain names is generally regulated by governmental agencies and their designees. The regulation of domain names in the United States and in foreign countries is subject to change. Governing bodies may establish additional top-level domains, appoint additional domain name registrars or modify the requirements for holding domain names. As a result, there can be no assurance that we will be able to acquire or maintain relevant domain names in all of the countries in which it conducts business. Furthermore, the relationship between regulations governing domain names and laws protecting trademarks and similar proprietary rights is unclear. We, therefore, may be unable to prevent third parties from acquiring domain names that are similar to, infringe upon or otherwise decrease the value of our proprietary rights. Any such inability could have a materially adverse effect on our business, prospects, financial condition and results of operations. STORAGE OF PERSONAL INFORMATION ABOUT OUR CUSTOMERS COULD POSE A SECURITY THREAT. Our policy is not to willfully disclose any individually identifiable information about any user to a third party without the user's consent. This policy is accessible to users of our services when they initially register. Despite this policy, however, if third persons were able to penetrate our network security or otherwise misappropriate our users' personal information or credit card information, we could be subject to liability. These could include claims for unauthorized purchases with credit card information, impersonation or other similar fraud claims. They could also include claims for other misuses of personal information, such as for unauthorized marketing purposes. These claims could result in litigation. In addition, the Federal Trade Commission and other states have been investigating certain Internet companies regarding their use of personal information. We could incur additional expenses if new regulations regarding the use of personal information are introduced or if they chose to investigate our privacy practices. WE FACE POSSIBLE LIABILITY FOR INFORMATION DISPLAYED ON OUR WEB SITES. We may be subjected to claims for defamation, negligence, copyright or trademark infringement or based on other theories relating to the information we publish on our Web site and across our distribution network. These types of claims have been brought, sometimes successfully, against online services as well as other print publications in the past. We could also be subjected to claims based upon the content that is accessible from our Web sites and distribution network through links to other Web sites. WE HAVE AGREED TO INDEMNIFY OUR OFFICERS AND DIRECTORS AGAINST LAWSUITS. We are a Delaware corporation. Delaware law permits the indemnification of officers and directors against expenses incurred in successfully defending against a claim. Delaware law also authorizes Delaware corporations to indemnify their officers and directors against expenses and liabilities incurred because of their being or having been an officer or director. Our organizational documents provide for this indemnification to the fullest extent permitted by law. -14-
We currently do not maintain any insurance coverage. In the event that we are found liable for damage or other losses, we would incur substantial and protracted losses in paying any such claims or judgments. We have not maintained liability insurance in the past, but intend to acquire such coverage immediately upon resources becoming available. There is no guarantee that we can secure such coverage or that any insurance coverage would protect us from any damages or loss claims filed against it. IF WE ENGAGE IN ANY ACQUISITION, WE WILL INCUR A VARIETY OF COSTS AND MAY NEVER REALIZE THE ANTICIPATED BENEFITS OF THE ACQUISITION. We intend to acquire businesses, technologies, services or products or license technologies that we believe are a strategic fit with our business, though none have been identified at the time of this filing, other than the Netbloo transaction. We have limited experience in identifying acquisition targets, and successfully completing and integrating any acquired businesses, technologies, services or products into our current infrastructure. The process of integrating any acquired business, technology, service or product may result in unforeseen operating difficulties and expenditures and may divert significant management attention from our ongoing business operations. As a result, we will incur a variety of costs in connection with an acquisition and may never realize our anticipated benefits. WE MAY ENGAGE IN TRANSACTIONS THAT PRESENT CONFLICTS OF INTEREST. The Company and officers and directors may enter into agreements with the Company from time to time which may not be equivalent to similar transactions entered into with an independent third party. A conflict of interest arises whenever a person has an interest on both sides of a transaction. While we believe that it will take prudent steps to ensure that all transactions between the Company and any officer or director is fair, reasonable, and no more than the amount it would otherwise pay to a third party in an "arms-length" transaction, there can be no assurance that any transaction will meet these requirements in every instance. THE COMPANY MAY IN THE FUTURE ISSUE MORE SHARES WHICH COULD CAUSE A LOSS OF CONTROL BY ITS PRESENT MANAGEMENT AND CURRENT STOCKHOLDERS. 30DC may issue further shares as consideration for the cash or assets or services out of its authorized but unissued common stock that would, upon issuance, represent a majority of the voting power and equity of the Company. The result of such an issuance would be those new stockholders and management would control the Company, and persons unknown could replace the Company's management at this time. Such an occurrence would result in a greatly reduced percentage of ownership of 30DC by its current shareholders, which could present significant risks to investors. THE REGULATION OF PENNY STOCKS BY SEC AND FINRA MAY DISCOURAGE THE TRADABILITY OF OUR SECURITIES. The Company is a "penny stock" company. Our securities currently trade over the counter ("OTC") on the OTC Pink market operated by OTC Market Group, Inc and are subject to a Securities and Exchange Commission rule that imposes special sales practice requirements upon broker-dealers who sell such securities to persons other than established customers or accredited investors. For purposes of the rule, the phrase "accredited investors" means, in general terms, institutions with assets in excess of $5,000,000, or individuals having a net worth in excess of $1,000,000 or having an annual income that exceeds $200,000 (or that, when combined with a spouse's income, exceeds $300,000). For transactions covered by the rule, the broker-dealer must make a special suitability determination for the purchaser and receive the purchaser's written agreement to the transaction prior to the sale. Effectively, this discourages broker-dealers from executing -15-
trades in penny stocks. Consequently, the rule will affect the ability of shareholders to sell their securities in any market that might develop therefore because it imposes additional regulatory burdens on penny stock transactions. In addition, the Securities and Exchange Commission has adopted a number of rules to regulate "penny stocks". Such rules include Rules 3a51-1, 15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6, 15g-7, and 15g-9 under the Securities and Exchange Act of 1934, as amended. Because our securities constitute "penny stocks" within the meaning of the rules, the rules would apply to us and to our securities. The rules will further affect the ability of owners of shares to sell our securities in any market that might develop for them because it imposes additional regulatory burdens on penny stock transactions. Shareholders should be aware that, according to Securities and Exchange Commission, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include (i) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; (ii) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; (iii) "boiler room" practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (iv) excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and (v) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired consequent investor losses. Our management is aware of the abuses that have occurred historically in the penny stock market. Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate in the market, management will strive within the confines of practical limitations to prevent the described patterns from being established with respect to our securities. THE COMPANY WILL PAY NO FORESEEABLE DIVIDENDS IN THE FUTURE. The Company has not paid dividends on our common stock and does not anticipate paying such dividends in the foreseeable future. OUR INVESTORS MAY SUFFER FUTURE DILUTION DUE TO ISSUANCES OF SHARES FOR VARIOUS CONSIDERATIONS IN THE FUTURE. There may be substantial dilution to our shareholders a result of future decisions of the Board to issue shares without shareholder approval for cash, services, or acquisitions. ITEM 1B. UNRESOLVED STAFF COMMENTS ---------------------------------- Not Applicable. ITEM 2. PROPERTIES ------------------ FACILITIES The current corporate address is 80 Broad Street, 5th Floor, New York, New York 10004. The telephone number is 212-962-4400. The Company entered into a new lease effective March 2011 for twelve months which was renewed in March 2012 for twelve months. The lease is non-cancellable with a minimum monthly payment of $99 and provision for additional charges for use of facilities and services utilized on an as-needed basis. Rent expense incurred under the lease in the years ended June 30, 2012 and 2011 was approximately $1,393 and $1,843, respectively. -16-
REAL PROPERTY None. MINERAL PROPERTIES None. ITEM 3. LEGAL PROCEEDINGS ------------------------- 30DC anticipates that it (including any future subsidiaries) will from time to time become subject to claims and legal proceedings arising in the ordinary course of business. It is not feasible to predict the outcome of any such proceedings and 30DC cannot assure that their ultimate disposition will not have a materially adverse effect on the Company's business, financial condition, cash flows or results of operations. The Company is not a party to any pending legal proceedings, nor is the Company aware of any civil proceeding or government authority contemplating any legal proceeding as of the date of this filing. ITEM 4. MINE AND SAFETY DISCLOSURES ----------------------------------- Not applicable. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES -------------------------------------------------------------------------------- The Company's common stock is presently traded over the counter ("OTC") on the OTC Pink market operated by OTC Market Group, Inc. On December 9, 2010, as result of our name change our trading symbol was changed to "TDCH." Prior to December 9, 2010, our common stock traded under the symbol "IGCP." The following table sets forth the range of high and low closing prices for the common stock of each full quarterly period during the years ended June 30, 2012 and 2011. The quotations were obtained from information published by the FINRA and reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions. MARKET INFORMATION FISCAL YEAR ENDED JUNE 30, 2012: HIGH LOW ---------- ---------- Quarter Ended September 30, 2011 $0.60 $0.17 Quarter Ended December 31, 2011 $0.53 $0.29 Quarter Ended March 31, 2012 $0.36 $0.13 Quarter Ended June 30, 2012 $0.25 $0.10 FISCAL YEAR ENDED JUNE 30, 2011: HIGH LOW ---------- ---------- Quarter Ended September 30, 2010 $0.39 $0.04 Quarter Ended December 31, 2010 $0.28 $0.05 Quarter ended March 31, 2011 $0.18 $0.08 Quarter ended June 30, 2011 $0.38 $0.17 -17-
HOLDERS As of June 30, 2012, the Company had approximately 150 holders of record of the Common Stock. Since a portion of the Company's common stock may be held in "street" or nominee name, the Company is unable to determine the exact number of beneficial holders. DIVIDEND POLICY The Company currently anticipates that it will retain all of its earnings to finance the operation and expansion of its business, and therefore does not intend to pay dividends on its Common Stock in the foreseeable future. Since its inception, the Company has never declared or paid any cash dividends on its Common Stock. Any determination to pay dividends in the future is at the discretion of the Company's Board of Directors and will depend upon the Company's financial condition, results of operations, capital requirements, limitations contained in loan agreements and such other factors as the Board of Directors deems relevant. RECENT SALES OF UNREGISTERED SECURITIES We did not make any unregistered sales and issuances of our securities from July 1, 2011 through June 30, 2012. ISSUER PURCHASES OF EQUITY SECURITIES 30DC, Inc. did not repurchase any shares of its common stock during the year ended June 30, 2012. During the year ended June 30, 2012, the Company did settle payments exceeding the amount due under the Marillion Partnership contractor agreement through the return by Marillion of 1,591,827 of the Company's common shares and such shares have been canceled. DATE OF TITLE OF NO. OF CLASS OF PURCHASE SECURITIES SHARES CONSIDERATION PURCHASER --------------- --------------- ------------- --------------- ------------------ June 28, 2012 Common Stock 1,591,827 $159,183 Affiliate ITEM 6. SELECTED FINANCIAL DATA ------------------------------- Not applicable. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -------------------------------------------------------------------------------- THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL STATEMENTS AND NOTES THERETO AND THE OTHER FINANCIAL INFORMATION INCLUDED ELSEWHERE IN THIS REPORT. THIS DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD LOOKING STATEMENTS AS A RESULT OF ANY NUMBER OF FACTORS, INCLUDING THOSE SET FORTH UNDER "RISK FACTORS" ON PAGE 11 AND ELSEWHERE IN THIS REPORT. -18-
OVERVIEW The Company has two business divisions, 30 Day Challenge and Immediate Edge. 30 Day Challenge offers a free online ecommerce training program and an online education subscription service. In addition, periodic premium live seminars are produced which are intended to target experienced Internet business operators. Immediate Edge is an online education program subscription service offering high-end internet marketing instruction and strategies for experienced online commerce practitioners. On August 24, 2011 the Company entered into a Share Sale and Purchase Agreement (the "Purchase") with RivusTV Ltd, ("Rivus") which was organized and exists in Victoria, Australia. The Purchase expired March 31, 2012 before all the terms and conditions could be met. The Company has been developing and selling more of its own products and has been reducing operating costs. As part of the cost reduction efforts, effective February 1, 2012 the Company consolidated its two subscription products; the Immediate Edge and Challenge Plus. Resources and marketing efforts for subscriptions are now exclusively for the Immediate Edge. The Company expects future growth to come from new products which are developed internally or through joint venture arrangements. There can be no assurance new products will be developed and if developed there can be no assurance that new products will produce significant revenue. In May of 2012 the Company signed a JV Agreement with Netbloo for the MagCast Publishing Platform ("MagCast") which was jointly developed. MagCast provides customers access to a cloud-based service to create an application ("App") to publish a digital magazine on Apple Corporation's online marketplace Apple Newsstand and includes executive training modules as well as a three-month trial subscription to the Company's Immediate Edge subscription product and other bonus products. Under the terms of the JV Agreement the Company is responsible for marketing, sales and administration and Netbloo is responsible for product development. MagCast was launched in May 2012 and a majority of sales were the result of affiliate marketing relationships which resulted in commissions of 50% of gross revenue for those sales to the affiliate responsible for the sale. All MagCast sales revenue has been recorded gross by the Company and commission expense has been recorded for the amount due to Netbloo which is 50% of revenue reduced by affiliate commissions and other allowable costs. On December 31, 2012 the Company and Netbloo entered into an asset purchase agreement for the Company to purchase Netbloo's 50% interest in the MagCast JV Agreement and Market Pro Max, a product which helps companies run online information businesses for a purchase price of 13,487,368 shares of the Company's common stock. Netbloo received a three year contractor agreement with annual compensation of $300,000 which is payable in monthly installments of $25,000 and may be terminated after two years subject to a six month termination payment. The contractor agreement was effective October 1, 2012. The Company has no plans at this time for purchases or sales of fixed assets which would occur in the next twelve months. The Company has no expectation or anticipation of significant changes in number of employees in the next twelve months. LIQUIDITY AND CAPITAL RESOURCES The Company had a cash balance of $1,031,167 at June 30, 2012 and the Company had a working capital deficit of $1,703,230. $684,655 of the amount included in accrued expenses at June 30, 2012 was for MagCast affiliate commissions and the amount due Netbloo under the collaborative arrangement. At April 30, 2013 the Company had a working capital deficit of approximately $1,800,000; the approximately $100,000 additional working capital deficit was funded by an increase in the amount due to related parties. Subsequent to June 30, 2012 the -19-
Company received $105,000 in cash from the sale of 300,000 shares of Strategic Environmental and Energy Resources, Inc. which were included in Assets of Discontinued Operations. To fund working capital for the remainder of the year ending June 30, 2013 and in the year ending June 30, 2014, the Company expects to raise capital and to improve the results of operations from increasing revenue as well as a reduction in operating costs. Increased revenue is expected to come from further sales of MagCast Publishing Platform, including recurring revenue as the Company transitions to monthly licenses, Market Pro Max which has not been extensively marketed and introduction of new products some of which will be extensions of existing product lines. During the year ended June 30, 2012 operating costs included significant amounts due to Netbloo under the collaborative arrangement which subsequent to the Company's acquisition of the other 50% of the collaborative arrangement from Netbloo are no longer owed.. Included in liabilities of discontinued operations at June 30, 2012 is $169,801 (including $45,031 included in due to related parties) in notes payable plus related accrued interest that are in default for lack of repayment by their due date. Approximately $50,000 of this amount has been repaid subsequent to June 30, 2012. During the year ended June 30, 2012, operating activities provided the Company with $1,033,204. During the year ended June 30, 2011, the Company used $343,319 in operating activities. The increase of $1,376,523 in funds provided from operating activities was due to a number of factors. The change to net income of $32,207 from a net loss of $1,440,046 which was primarily due to increased sales from the launch of the MagCast Publishing Platform, an increase of $644,336 in the change of accrued commissions expense which was primarily due to commissions due affiliates and payments due to Netbloo pursuant to the collaborative arrangement both of which relate to sales of the MagCast Publishing Platform and an increase of $108,018 in the change of due to related parties. These were offset by a increase of $156,104 in accounts receivable, an increase of $159,183 in the amount due from related parties which was settled by the by surrender of Company shares, a decrease of $575,988 in the amount of expenses paid or settled with shares of the Company's common stock and a decrease of $77,423 in loss from discontinued operations. During the year ended June 30, 2012, no funds were provided by or used for financing activities. During the year ended June 30, 2011, financing activities provided the Company with $349,750 which came from the Company's private placement memorandum described below. In August 2010, 30DC issued a private placement memorandum ("PPM") at 26 cents per unit which, net of expenses, raised a total of $843,840 inclusive of $501,590 which was previously recorded as a loan. In conjunction with the PPM, the Company issued 3,401,522 units consisting of one share of Common Stock of Infinity, a warrant exercisable for 90 days from the date of issuance (subsequently amended to expire March 15, 2011), to purchase one share of Common Stock of Infinity with an exercise price of 37 cents, and a warrant exercisable for five years from the date of issuance, to purchase one share of Common Stock of Infinity for 50 cents. The March 15, 2011 warrants expired with none exercised. GOING CONCERN The consolidated financial statements have been prepared using accounting principles generally accepted in the United States of America applicable for a going concern which assumes that the Company will realize its assets and discharge its liabilities in the ordinary course of business. As of June 30, 2012, the Company has a working capital deficit of approximately $1,703,000 and has accumulated losses of approximately $2,736,000 since its inception. At April 30, 2013 the Company had a working capital deficit of approximately $1,800,000; the approximately $100,000 additional working capital deficit was funded by an increase in the amount due to related parties. Subsequent to June 30, 2012 the Company received $105,000 in cash from the sale of 300,000 shares of Strategic Environmental and Energy Resources, Inc. which were included in Assets of Discontinued Operations. The Company's ability to continue as a going concern is -20-
dependent upon the ability of the Company to obtain the necessary financing or to earn profits from its business operations to meet its obligations and pay its liabilities arising from normal business operations when they come due. In May 2012 the Company launched MagCast which the Company expects to be an integral part of its businesses on an ongoing basis. MagCast is being sold through an affiliate network which expands the Company's selling capability and has a broad target market beyond the Company's traditional customer base. Until the Company achieves sustained profitability it does not have sufficient capital to meet its needs and continues to seek loans or equity placements to cover such cash needs. No commitments to provide additional funds have been made and there can be no assurance that any additional funds will be available to cover expenses as they may be incurred. If the Company is unable to raise additional capital or encounters unforeseen circumstances, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, issuance of additional shares of the Company's stock to settle operating liabilities which would dilute existing shareholders, curtailing its operations, suspending the pursuit of its business plan and controlling overhead expenses. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all. These conditions raise substantial doubt about the Company's ability to continue as a going concern. RESULTS OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 2012 COMPARED TO THE YEAR ENDED JUNE 30, 2011 During the year ended June 30, 2012, the Company recognized revenues of $2,916,341 from its operations compared to $1,893,314 during the year ended June 30, 2011. Revenues of the Company were from the following sources during the year ended June 30, 2012 compared to June 30, 2011. Year Ended Year Ended Increase or June 30, 2012 June 30, 2011 (Decrease) --------------- --------------- ------------ Revenue Commissions $ 203,188 $ 449,800 $ (246,612) Subscription Revenue 609,951 673,650 (63,699) Products and Services 1,486,719 190,837 1,295,882 Seminars and Mentoring 616,483 579,027 37,456 --------------- --------------- ------------ Total Revenues $ 2,916,341 $ 1,893,314 $ 1,023,027 --------------- --------------- ------------ The $246,612 decrease in commissions was primarily the result of two factors. Fewer new participants in the Company's Challenge program in the year ended June 30, 2012 resulted in fewer customer referrals for web site hosting and other services typically purchased by new participants. A large payer of affiliate commissions revised their policy midway through the year ended June 30, 2011 to only pay commissions for the first year of a subscription product rather than paying commissions over the life of the subscription. During the year ended June 30, 2012, there were no material amounts earned from new affiliate programs but the Company began selling more of its own products and services such as the MagCast Publishing Platform. The $63,699 decrease in subscription revenue was due to discontinuance of the Company's Challenge Plus subscription product in February 2012 offset by an increase in subscribers for the Immediate Edge which averaged 477 subscribers per month for the year ended June 30, 2012 and averaged 449 subscribers per month for the year ended June 30, 2011. When Challenge Plus was discontinued, company resources were consolidated to focus on the Immediate Edge and some Challenge Plus subscribers migrated to the Immediate Edge. -21-
The $1,295,882 increase in products and services revenue was primarily due to the launch of the MagCast Publishing Platform in May 2012 which generated revenue of 1,239,371 during the year ended June 30, 2012 of which $156,104 was receivable at June 30, 2012 as a result of sales made under a payment plan arrangement. The $37,456 increase in seminars and mentoring income reflects an increase in the average price of the mentoring program offset by a decrease in the number of mentoring students. The price of the mentoring program increased in March 2011 from $5,000 to $7,500 meaning that 2/3's of the year ending June 30, 2011 was prior to the increase. For the year ended June 30, 2012 there was an average of 80 mentoring students per month and for the year ended June 30, 2011 there was an average of 94 mentoring students per month. During the year ended June 30, 2012, the Company incurred $2,843,294 in operational expenses compared to $3,197,048 during the year ended June 30, 2011. Operational expenses during the years ended June 30, 2012 and 2011, include the following categories: Year Ended Year Ended Increase or June 30, 2012 June 30, 2011 Decrease --------------- --------------- ----------------- Accounting Fees $ 207,324 $ 296,037 $ (88,713) Paypal Fees 73,746 44,652 29,094 Commissions 833,449 97,839 735,610 Independent Contractors 370,284 556,305 (186,021) Depreciation 53,701 70,743 (17,042) Internet Expenses 59,274 64,731 (5,457) Legal Fees 84,571 60,996 23,575 Officer's Salaries 200,000 200,000 - Payroll Taxes 32,396 39,878 (7,482) Related Party Contractors 753,428 809,864 (56,436) Telephone 90,766 37,944 52,822 Transaction Fees - 670,138 (670,138) Travel & Entertainment 31,225 156,490 (125,265) Other Operating Expenses 53,130 91,431 (38,301) --------------- --------------- ----------------- Total Operating Expenses $ 2,843,294 $ 3,197,048 $ (353,754) =============== =============== ================= The $88,713 decrease in accounting fees is due to a decrease of approximately $100,000 for accounting consultants engaged to assist with the Company's initial SEC filing requirements, a decrease of approximately $34,000 for accounting consultants in Australia who are no longer required offset by an increase of approximately $35,000 in audit fees due to catch up of delinquent filings during the year ended June 30, 2012. The increase of $29,094 in Paypal fees is due to the $1,295,882 increase in products and services revenue. Paypal fees decrease as a percentage of revenue as total revenue increases and are 1% higher for sales to customers outside the United States. The increase of $735,610 in commissions is due to the $1,295,882 increase in products and services revenue. Commissions were paid to affiliates for sales referrals which led directly to a sale and commissions were paid to collaborative arrangement partners who worked with the Company in developing the products which the Company marketed and sold. The decrease of $186,021 in independent contractor fees was primarily due to decreases of approximately $56,000 for investor relations consultants, approximately $67,000 from the reduction of two contractors in the IE division -22-
and approximately $36,000 from the elimination of a contractor that worked with the discontinued Challenge Plus subscription product and the Challenge forum. The increase of $23,575 in legal fees was for fees paid to an Australian law firm for corporate counsel and tax advice during the year ended June 30, 2012. The $56,436 decrease in related party contractor fees results from Jesselton, Ltd. voluntarily withdrawing from its contract with the Company effective March 1, 2012. The increase in telephone expense of $52,822 is partly due to a premium high-volume internet package which costs approximately $4,000 per month which was not in place for most of the year ending June 30, 2011. The decrease of $670,138 in transaction fees was due to consultants advising on the process which resulted in completion of the share exchange including $250,000 to Jesselton, Ltd., $231,050 ($250,000 AUD) to Corholdings Pty Ltd and $189,088 to Prestige Financial Center, Inc. during the year ended June 30, 2011. The decrease of $125,265 in travel and entertainment reflects fewer overseas trips during the year ended June 30, 2012 than during the year ended June 30, 2011 and a reduction in the number of live seminars which had substantial travel costs. During the year ended June 30, 2012, the Company recognized net income from continuing operations of $54,285 compared to a net loss of ($1,340,545) during the year ended June 30, 2011. The net positive change of $1,394,830 was a primarily the result of the $1,023,027 increase in revenues and $353,754 decrease in operational expenses during the period shown above. ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS Significant accounting policies and recent accounting pronouncements are included in Note 2 in the Notes to the Financial Statements included herein. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ------------------------------------------------------------------- Our Company's business activities contain elements of risk. Neither our investments nor an investment in us is intended to constitute a balanced investment program. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA --------------------------------------------------- The audited financial statements of 30DC, Inc. for the years ended June 30, 2012 and 2011 appear as pages F-1 through F-21. -23-
30DC, INC. AND SUBSIDIARY CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 2012 AND 2011 F-1
INDEX Page F-3 Report of Independent Registered Public Accounting Firm Page F-4 Consolidated Balance Sheets Page F-5 Consolidated Statements of Operations Page F-6 Consolidated Statements of Changes in Stockholders' Deficiency Page F-7 Consolidated Statements of Cash Flows Page F-8 Notes to Consolidated Financial Statements F-2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of 30DC Inc. We have audited the accompanying consolidated balance sheets of 30DC Inc. and its Subsidiary (collectively the "Company") as of June 30, 2012 and 2011, and the related consolidated statements of operations and comprehensive income (loss), changes in stockholders' deficiency and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of 30DC, Inc and its Subsidiary as of June 30, 2012 and 2011, and the consolidated results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has a working capital deficit and stockholders' deficiency as of June 30, 2012. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans regarding these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ Marcum LLP New York, NY June 3, 2013 F-3
30DC, INC. AND SUBSIDIARY Consolidated Balance Sheets June June 30, 2012 30, 2011 ---------------- ------------------- Assets Current Assets Cash and Cash Equivalents $ 1,031,167 $ 33,790 Accrued Commissions Receivable 15,805 41,199 Accounts Receivable 156,104 - Assets of Discontinued Operations 95,625 99,375 ---------------- ------------------- Total Current Assets 1,298,701 174,364 Property and Equipment, Net 34,100 84,041 Goodwill 1,503,860 1,503,860 ---------------- ------------------- Total Assets $ 2,836,661 $ 1,762,265 ================ =================== Liabilities and Stockholders' Deficiency Current Liabilities Accounts Payable $ 581,775 $ 565,534 Accrued Expenses and Refunds 494,603 303,318 Accrued Commissions Expense 699,592 31,970 Deferred Revenue 244,378 273,641 Due to Related Parties 606,827 262,761 Liabilities of Discontinued Operations 374,756 381,399 ---------------- ------------------- Total Current Liabilities 3,001,931 1,818,623 ---------------- ------------------- Total Liabilities 3,001,931 1,818,623 ---------------- ------------------- Stockholders' Deficiency Preferred Stock, Par Value $0.001, 10,000,000 Authorized, -0- Issued - - Common Stock, Par Value $0.001, 100,000,000 authorized, 72,928,421 and 74,520,248 issued and outstanding respectively 72,928 74,520 Paid in Capital 2,600,410 2,758,001 Accumulated Deficit (2,735,750) (2,767,957) Accumulated Other Comprehensive Loss (102,858) (120,922) ---------------- ------------------- Total Stockholders' Deficiency (165,270) (56,358) ---------------- ------------------- Total Liabilities and Stockholders' Deficiency $ 2,836,661 $ 1,762,265 ================ =================== The accompanying notes are an integral part of the consolidated financial statements. F-4
30DC, INC. AND SUBSIDIARY Consolidated Statements of Operations and Comprehensive Loss Years Ended June 30, 2012 2011 --------------- ----------------- Revenue Commissions $ 203,188 $ 449,800 Subscription Revenue 609,951 673,650 Products and Services 1,486,719 190,837 Seminars and Mentoring 616,483 579,027 --------------- ----------------- Total Revenue 2,916,341 1,893,314 Operating Expenses 2,843,294 3,197,048 --------------- ----------------- Operating Income (Loss) 73,047 (1,303,734) Other Income (Expense) Foreign Currency Transaction Loss (18,762) (36,811) --------------- ----------------- Total Other Income (Expense) (18,762) (36,811) --------------- ----------------- Income (Loss) From Continuing Operations 54,285 (1,340,545) Loss From Discontinued Operations (22,078) (99,501) --------------- ----------------- Net Income (Loss) 32,207 (1,440,046) Foreign Currency Translation Gain (Loss) 18,064 (99,130) --------------- ----------------- Comprehensive Income (Loss) $ 50,271 $ (1,539,176) =============== ================= Weighted Average Common Shares Outstanding Basic 74,511,549 71,078,136 Diluted 74,511,549 71,078,136 Income (Loss) Per Common Share (Basic and Diluted) Continuing Operations $ 0.00 $ (0.02) Discontinued Operations (0.00) (0.00) Net Income (Loss) Per Common Share $ 0.00 $ (0.02) The accompanying notes are an integral part of the consolidated financial statements. F-5
30DC, INC. And Subsidiary Consolidated Statements of Changes in Stockholders' Deficiency Accumulated Additional Other Total Common Stock Paid In Comprehensive Accumulated Stockholders' Shares Par Value Capital Income (Loss) Deficit Deficiency ------------ --------- ------------- ------------- ------------ -------------- Balance - June 30, 2010 60,984,000 $ 60,984 $ - $ (21,792) $(1,327,911) $ (1,288,719) Net Loss - - - - (1,440,046) (1,440,046) Foreign currency translation - - - (99,130) - (99,130) Infinity Share Exchange 6,547,391 6,547 1,041,037 - - 1,047,584 Issuance of Common Stock to Non-Employees 1,842,334 1,842 474,146 - - 475,988 Issuance of Common Stock to Employee 384,615 385 99,615 - - 100,000 Issuance of Common Stock to Investors, Net 1,472,318 1,472 340,778 - - 342,250 Issuance of Common Stock to Settle Prior Subscriptions Received 1,929,204 1,929 499,661 - - 501,590 Issuance of Common Stock to Settle Liabilities 1,360,386 1,361 302,764 - - 304,125 ------------ --------- ------------- ------------- ------------ ------------- Balance - June 30, 2011 74,520,248 $ 74,520 $ 2,758,001 $(120,922) $(2,767,957) $ (56,358) Net Income - - - - 32,207 32,207 Foreign currency translation - - - 18,064 - 18,064 Settlement of Excess Payment to Related Party (1,591,827) (1,592) (157,591) - - (159,183) ------------ --------- ------------- ------------- ------------ ------------- Balance - June 30, 2012 72,928,421 $ 72,928 $ 2,600,410 $(102,858) $(2,735,750) $ (165,270) ============ ========= ============= ============= ============ ============= The accompanying notes are an integral part of the consolidated financial statements. F-6
30DC, INC. AND SUBSIDIARY Consolidated Statements of Cash Flows Year Ended June 30, June 30, 2012 2011 -------------- ----------------- Cash Flows from Operating Activities: Net Income (Loss) $ 32,207 $ (1,440,046) Loss From Discontinued Operations 22,078 99,501 Adjustments to Reconcile Income (Loss) from Continuing Operations to Net Cash Provided By (Used In) Operating Activities Depreciation and Amortization 53,701 70,743 Equity Based Payments To Non-Employees - 475,988 Equity Based Payments To Employees - 100,000 Changes in Operating Assets and Liabilities Accrued Commissions Receivable 23,561 43,784 Accounts Receivable (156,104) - Due From Related Party (Note 8) (159,183) - Accounts Payable 25,819 (3,222) Accrued Expenses and Refunds 197,825 127,117 Accrued Commissions Expense 667,622 23,286 Deferred Revenue (18,388) (76,518) Due to Related Parties 344,066 236,048 -------------- ----------------- Net Cash Provided By (Used in) Operating Activities 1,033,204 (343,319) -------------- ----------------- Cash Flows from Investing Activities Purchases of Property and Equipment (7,118) (16,554) Cash - Acquired In Acquisition of Infinity - 3,350 -------------- ----------------- Net Cash Used in Investing Activitities (7,118) (13,205) -------------- ----------------- Cash Flows from Financing Activities Sale of common stock, net - 342,250 Deferred Financing Costs - 7,500 -------------- ----------------- Net Cash Provided by Financing Activities - 349,750 -------------- ----------------- Cash Flows from Discontinued Operations Cash Flows From Operating Activities (24,971) (21,333) -------------- ----------------- Net Cash Used in Discontinued Operations (24,971) (21,333) -------------- ----------------- Effect of Foreign Exchange Rate Changes on Cash (3,738) 33,491 -------------- ----------------- Increase in Cash and Cash Equivalents 997,377 5,385 Cash and Cash Equivalents - Beginning of Period 33,790 28,405 -------------- ----------------- Cash and Cash Equivalents - End of Period $ 1,031,167 $ 33,790 ============== ================= Supplemental Disclosures of Non Cash Financing Activity Private Placement Subscriptions Received Reclassified to Equity $ - $ 501,590 Common Stock Issued to Settle Liabilities, Including $25,000 in Discontinued Operations $ - $ 304,125 Common Stock Surrendered to Settle Related Party Liability (See Note 8) $ 159,183 $ - The accompanying notes are an integral part of the consolidated financial statements. F-7
30DC, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2012 NOTE 1. DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION AND LIQUIDITY -------------------------------------------------------------------- 30DC, Inc., Delaware, ("30DC DE") was incorporated on October 17, 2008 in the state of Delaware, as a holding company, for the purpose of building, acquiring and managing international web-based sales and marketing companies. On July 15, 2009, 30DC DE completed the acquisitions of the business and assets of 30 Day Challenge ("30 Day") and Immediate Edge ("Immediate"). 30 Day was acquired from the Marillion Partnership and Edward Wells Dale, both of Victoria, Australia, in consideration for the issuance of 2,820,000 shares of Common Stock of 30DC DE. Immediate was acquired from Dan Raine of Cheshire, United Kingdom, in consideration for the issuance of 600,000 shares of Common Stock of 30DC DE. The acquired businesses were sold subject to specific liabilities which included accounts payable, accrued expenses and deferred revenue. The acquisitions were pursuant to an agreement dated November 14, 2008. Mr. Dale and Mr. Raine were part of the founding group of shareholders of 30DC DE and in conjunction with the acquisitions, Mr. Dale was named the Chief Executive Officer of 30DC DE. In accordance with the provisions of Accounting Standards Codification ("ASC") 805, "Business Combinations", the acquisitions of 30 Day and Immediate were accounted for as transactions between entities under common control, whereby the acquired assets and liabilities of 30 Day and Immediate were recognized in the financial statements at their carrying amounts. On September 10, 2010, shareholders of 30DC DE exchanged 100% of their 30DC DE shares for 60,984,000 shares of Infinity Capital Group, Inc. ("Infinity"), a publicly traded company which trades over the counter ("OTC") on the OTC Pink market operated by OTC Market Group, Inc. 30DC DE became a wholly owned subsidiary of Infinity Capital Group, Inc. which has subsequently changed its name to 30DC, Inc. ("30DC" and together with its subsidiary "the Company"). After the share exchange, the former shareholders in 30DC DE held approximately 90% of the outstanding shares in Infinity and the officers of 30DC DE became the officers of Infinity. 30DC DE was the accounting acquirer in the transaction and its historical financial statements will be the historical financial statements of 30DC. Infinity's operations were discontinued and subsequent to the share exchange are accounted for as discontinued operations. 30DC offers internet marketing services and related training that help Internet companies in operating their businesses. 30DC's core business units are 30 Day and Immediate. 30 Day, with approximately 100,000 active online participants, offers a free e-commerce training program year round along with an online education subscription service and periodic premium live seminars that are targeted to experienced internet business operators. Immediate is an online educational program subscription service offering high-end Internet marketing instruction and strategies for experienced online commerce practitioners. Other revenue streams include sales of instructional courses and software tools related to internet marketing and from commissions on third party products sold via introduction to the 30DC customer base of active online participants and subscribers which are referred to as affiliate marketing commissions. The Company's recorded and unrecorded assets consist primarily of property and equipment, goodwill and internally developed intangible property such as domain names, websites, customer lists and copyrights. In May of 2012 the Company signed a joint venture agreement ("JV Agreement") with Netbloo Media, Ltd. ("Netbloo") for the MagCast Publishing Platform ("MagCast") which was jointly developed. MagCast provides customers access to a cloud-based service to create an application ("App") to publish a digital magazine on Apple Corporation's online marketplace Apple Newsstand and includes executive training modules as well as a three-month trial subscription to the Company's Immediate Edge subscription product and other bonus products. Under the terms of the JV Agreement the Company is responsible for marketing, sales and administration and Netbloo is responsible for product development. MagCast was launched in May 2012 and a majority of sales were the result of affiliate marketing relationships which result in commission of 50% of gross revenue for those sales to the affiliate responsible for the sale. Pursuant to ASC 808-10 the joint operating activity with Netbloo is considered a collaborative arrangement. The Company has been deemed the principal participant and has recorded all revenue under the JV Agreement on a gross basis with the 50% of revenue due Netbloo, net of affiliate commissions and other allowable costs, recorded as commission expense. F-8
30DC, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2012 On December 31, 2012 the Company and Netbloo entered into an asset purchase agreement for the Company to purchase Netbloo's 50% interest in the MagCast JV Agreement and Market Pro Max an online marketing platform that allows anyone to create digital products and quickly build a variety of eCommerce marketing websites for a purchase price of 13,487,363 shares of the Company's common stock. Netbloo received a three year contractor agreement with annual compensation of $300,000 which is payable in monthly installments of $25,000 and may be terminated after two years subject to a six month termination payment. The contractor agreement was effective October 1, 2012. On August 24, 2011, the Company entered into a Share Sale and Purchase Agreement (the "Purchase") with RivusTV Ltd, ("Rivus") which was organized and exists in Victoria, Australia. The Purchase expired March 31, 2012 before all the terms and conditions could be met. GOING CONCERN The consolidated financial statements have been prepared using accounting principles generally accepted in the United States of America applicable for a going concern which assumes that the Company will realize its assets and discharge its liabilities in the ordinary course of business. As of June 30, 2012, the Company has a working capital deficit of approximately $1,703,000 and has accumulated losses of approximately $2,736,000 since its inception. At April 30, 2013 the Company had a working capital deficit of approximately $1,800,000. Subsequent to June 30, 2012 the Company received $105,000 in cash from the sale of 300,000 shares of Strategic Environmental and Energy Resources, Inc. which were included in Assets of Discontinued Operations. The Company's ability to continue as a going concern is dependent upon its ability to obtain the necessary financing or to earn profits from its business operations to meet its obligations and pay its liabilities arising from normal business operations when they come due. In May 2012, the Company launched MagCast which the Company expects to be an integral part of its businesses on an ongoing basis. MagCast is being sold through an affiliate network which expands the Company's selling capability and has a broad target market beyond the Company's traditional customer base. Until the Company achieves sustained profitability it does not have sufficient capital to meet its needs and continues to seek loans or equity placements to cover such cash needs. No commitments to provide additional funds have been made and there can be no assurance that any additional funds will be available to cover expenses as they may be incurred. If the Company is unable to raise additional capital or encounters unforeseen circumstances, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, issuance of additional shares of the Company's stock to settle operating liabilities which would dilute existing shareholders, curtailing its operations, suspending the pursuit of its business plan and controlling overhead expenses. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all. These conditions raise substantial doubt about the Company's ability to continue as a going concern. These consolidated financial statements do not include any adjustments to the amounts and classification of assets and liabilities that may be necessary should the Company be unable to continue as a going concern. NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -------------------------------------------------- BASIS OF PRESENTATION The accompanying consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles ("GAAP") and include the accounts of 30DC, Inc., (f/k/a Infinity Capital Group, Inc.) and its subsidiary 30DC DE for the period beginning September 10, 2010, the date of the share exchange with Infinity, and ending June 30, 2012. For the period beginning July 1, 2010 and ending September 10, 2010 only the accounts of 30DC DE are included in the financial statements. F-9
30DC, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2012 CASH AND CASH EQUIVALENTS The Company considers all highly liquid investments with an original maturity of three months or less as cash equivalents. The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts. The Company believes it is not exposed to any significant credit risk related to cash and cash equivalents. PROPERTY AND EQUIPMENT Equipment is recorded at cost less accumulated depreciation and amortization. Maintenance and repairs are charged to operations as incurred. Asset and related accumulated depreciation amounts are relieved from the accounts for retirements or dispositions. Depreciation on equipment is computed using the straight-line method. Estimated useful lives of three to ten years are used for equipment, while leasehold improvements are amortized, using the straight line method, over the shorter of either their economic useful lives or the term of the leases. GOODWILL AND INTANGIBLE ASSETS The Company accounts for goodwill and intangible assets in accordance with ASC 350 "Intangibles-Goodwill and Other" ("ASC 350"). ASC 350 requires that goodwill and other intangibles with indefinite lives be tested for impairment annually or on an interim basis if events or circumstances indicate that the fair value of an asset has decreased below its carrying value. The Company completed an evaluation of goodwill at June 30, 2012 and determined that there was no impairment. Goodwill represents the excess of the purchase price over the fair value of net assets acquired in the Company's share exchange with Infinity which occurred on September 10, 2010. ASC 350 requires that goodwill be tested for impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis and between annual tests when circumstances indicate that the recoverability of the carrying amount of goodwill may be in doubt. Application of the goodwill impairment test requires judgment, including the identification of reporting units; assigning assets and liabilities to reporting units, assigning goodwill to reporting units, and determining the fair value. Significant judgments required to estimate the fair value of reporting units include estimating future cash flows, determining appropriate discount rates and other assumptions. Changes in these estimates and assumptions or the occurrence of one or more confirming events in future periods could cause the actual results or outcomes to materially differ from such estimates and could also affect the determination of fair value and/or goodwill impairment at future reporting dates. LONG LIVED ASSETS In accordance with ASC 360 "Property Plant and Equipment," the Company reviews the carrying value of intangibles subject to amortization and long-lived assets for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets is measured by comparison of its carrying amount to the undiscounted cash flows that the asset or asset group is expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the property, if any, exceeds its fair market value. F-10
30DC, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2012 ACCUMULATED OTHER COMPREHENSIVE LOSS Accumulated Other Comprehensive Loss consists of cumulative adjustments of foreign currency translation which is further discussed in the foreign currency translation and measurement below. REVENUE RECOGNITION The Company generally applies revenue recognition principles in accordance with ASC 605, "Revenue Recognition". Accordingly, revenue is generally recognized when persuasive evidence of an agreement exists, services have been rendered or product delivery has occurred, the selling price to the customer is fixed or determinable and collectability is reasonably assured. The Company generates revenues in four categories, (i) commissions, (ii) seminars and mentoring (iii) subscriptions and (iv) products and services. Commissions are all affiliate marketing commissions generated when a customer is referred to a third-party via the Internet and the customer makes a purchase, which is paid for at the time of purchase. Revenue from commissions is recognized when the customer purchase is made from the third-party. Seminars and mentoring are educational in nature. Seminars are live events held in different cities throughout the world where customers will pay a fee to attend what is typically a three-day event. Seminar fees are paid in advance and classified as deferred revenue until the seminar is held. Mentoring services are offered over a period of time, typically a one-year period. Fees for mentoring are paid in advance and mentoring revenue is recognized ratably over the period of service. All subscription revenue is from monthly online subscriptions for information on Internet marketing. All subscriptions are paid in advance and subscription revenue is recognized ratably over the term of the subscription. Products and services revenues are from sales of online educational courses and productivity tools which customers use in their Internet marketing businesses. Revenue from products and services is recognized in accordance with the specific guidance for recognizing software revenue, where applicable, the Company recognizes revenue from perpetual software licenses at the inception of the license term, assuming all revenue recognition criteria have been met. Term-based software license revenue is recognized on a subscription basis over the term of the license entitlement. The Company recognizes revenue for software hosting or software-as-a-service (SaaS) arrangements as the service is delivered, generally on a straight-line basis, over the contractual period of performance. In software hosting arrangements where software licenses are sold, the associated software revenue is recognized according to whether perpetual licenses or term licenses are sold, subject to the above guidance. In SaaS arrangements where software licenses are not sold, the entire arrangement is recognized on a subscription basis over the term of the arrangement. Deferred revenue consists of the unearned portion of subscription payments, seminar fees and mentoring revenue as of the financial statement date. Pursuant to ASC 808-10, the JV Agreement with Netbloo has been classified as a collaborative arrangement. The Company is deemed to be the principal participant and has recorded all transactions under the JV Agreement on a gross basis. EQUITY-BASED PAYMENTS TO NON-EMPLOYEES The Company accounts for equity instruments issued to non-employees in accordance with the provisions of ASC 505-50, "Equity-Based Payments to Non-Employees", which requires that such equity instruments are recorded at their fair value on the measurement date, with the measurement of such compensation being subject to periodic adjustment as the underlying equity instruments vest. FOREIGN CURRENCY TRANSLATION AND REMEASUREMENT The functional currency of the Company's 30 Day Challenge division is the Australian dollar. All other Company operations use the United States dollar as their functional currency. Under ASC 830 "Foreign Currency Matters", functional currency assets and liabilities are translated into the reporting currency, US Dollars, using period end rates of exchange and the related translation F-11
30DC, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2012 adjustments are recorded as a separate component of accumulated other comprehensive income. Functional statements of operations amounts expressed in functional currencies are translated using average exchange rates for the respective periods. Re-measurement adjustments and gains or losses resulting from foreign currency transactions are recorded as foreign exchange gains or losses in the Statement of Operations. USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and use assumptions that affect certain reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Significant estimates in these financial statements are the estimated useful lives used to calculate depreciation of property and equipment and the estimate of the Company's future taxable income used to calculate the Company's deferred tax valuation allowance. The Company evaluates all of its estimates on an on-going basis. NET INCOME OR LOSS PER SHARE The Company computes net income or loss per share in accordance with ASC 260 "Earnings per Share." Under ASC 260, basic net income or loss per share is computed by dividing net income or loss per share available to common stockholders by the weighted average number of shares outstanding for the period and excludes the effects of any potentially dilutive securities. Diluted income per share would include the dilution that would occur upon the exercise or conversion of all potentially dilutive securities into common stock using the "treasury stock" and/or "if converted" methods as applicable however, options and warrants that have an exercise price in excess of the average market price during the period are not included in the computation of diluted earnings per share because they would be antidilutive. The computation of net income per share for the year ended June 30, 2012 and net loss per share for the year ended June 30, 2011 excludes potentially dilutive securities consisting of 3,401,522 warrants and 600,000 options because their inclusion would be anti-dilutive. In computing net income or loss per share, warrants with an insignificant exercise price are deemed to be outstanding common stock. RECENT ACCOUNTING PRONOUNCEMENTS In February 2013, the Financial Accounting Standards Board ("FASB") issued ASU No. 2013-02, "Reporting of Amounts Reclassified Out of Other Comprehensive Income ". ASU 2013-02 finalized the reporting for reclassifications out of accumulated other comprehensive income, which was previously deferred. The amendments do not change the current requirements for reporting net income or other comprehensive income in financial statements. However, they do require an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. An entity is also required to present on the face of the financials where net income is reported or in the footnotes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income, but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. Other amounts need only be cross-referenced to other disclosures required that provide additional detail of these amounts. The amendments in this update are effective for reporting periods beginning after December 15, 2012. The adoption of this standard is not expected to have a material impact on the Company's consolidated financial statements. NOTE 3. BUSINESS COMBINATION ---------------------------- The Company accounts for business combinations under ASC Topic 805 which establishes principles and requirements as to how acquirers recognize and measure the identifiable assets acquired, the liabilities assumed and goodwill acquired in a business combination. F-12
30DC, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2012 30DC, Inc. On September 10, 2010, Infinity exchanged 60,984,000 shares for 100% of the outstanding shares of 30DC DE. After the share exchange, the former shareholders in 30DC DE held approximately 90% of the outstanding shares in Infinity and the officers of 30DC DE became the officers of Infinity. Accordingly, the share exchange has been accounted for as a reverse business combination in which 30DC DE is deemed to be the accounting acquirer. The fair value of the assets acquired in the share exchange with Infinity was $1,689,880 based on 6,547,391 shares issued at a value of $0.16 per share and the assumption of identifiable liabilities of $642,297. As part of the share exchange 30DC DE acquired identifiable assets of $186,020 and the remaining portion of fair value has been allocated to goodwill. Pursuant to the reverse business combination, 30DC DE has restated its statements of stockholders' equity on a recapitalization basis, so that all accounts are now presented as if the reverse business combination had occurred at the beginning of the earliest period presented. NOTE 4. COLLABORATIVE ARRANGEMENT --------------------------------- In May of 2012 the Company signed a joint venture agreement ("JV Agreement") with Netbloo Media, Ltd. ("Netbloo") for the MagCast Publishing Platform ("MagCast") which was jointly developed. MagCast provides customers access to a cloud-based service to create an application ("App") to publish a digital magazine on Apple Corporation's online marketplace Apple Newsstand and includes executive training modules as well as a three-month trial subscription to the Company's Immediate Edge subscription product and other bonus products. Under the terms of the JV Agreement the Company is responsible for marketing, sales and administration and Netbloo is responsible for product development. MagCast was launched in May 2012 and a majority of sales were the result of affiliate marketing relationships which result in commission of 50% of gross revenue for those sales to the affiliate responsible for the sale. Pursuant to ASC 808-10 the joint operating activity with Netbloo is considered a collaborative arrangement. The Company has been deemed the principal participant and has recorded all transactions under the JV Agreement on a gross basis with the 50% amount net of affiliate commissions and other allowable costs due Netbloo recorded as commission expense. The following revenue and expense amounts from transactions under the JV Agreement are included in the Statement of Operations; Sales of MagCast Publishing Platform $1,239,371 Affiliate Commission Expense, including $320,081 accrued but not paid 320,081 Transaction Fees 29,412 Netbloo Commissions, including $369,582 accrued but not paid 444,939 ---------- Net Profit $ 444,939 ========== NOTE 5. DISCONTINUED OPERATIONS ------------------------------- On September 10, 2010, immediately prior to the share exchange with 30DC DE, Infinity withdrew its election to operate as a Business Development Company ("BDC") under the Investment Company Act of 1940 ("1940 Act"). Infinity historically operated as a non-diversified, closed-end management investment company and prepared its financial statements as required by the 1940 Act. 30DC is no longer actively operating the BDC and the assets, liabilities and results of operations of Infinity's former business are shown as discontinued operations in the Company's financial statements subsequent to the share exchange with 30DC. F-13
30DC, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2012 Results of Discontinued Operations for the Year Ended Year Ended June 30, 2012 June 30, 2011 -------------- -------------- Other Income $ - $ - Other expenses 18,328 16,845 Loss from operations (18,328) (16,845) Realized loss on marketable securities - (24,490) Unrealized gain (loss) on marketable securities (3,750) (58,166) -------------- -------------- Net loss $ (22,078) $ (99,501) ============== ============== Assets and Liabilities of Discontinued Operations as of June 30, 2012 June 30, 2011 ------------- ------------- ASSETS Marketable securities $ 95,625 $ 99,375 ------------- ------------- Total assets of discontinued operations $ 95,625 $ 99,375 ============= ============= LIABILITIES Accounts payable $ 94,428 $ 94,139 Accrued expenses 58,138 46,233 Notes payable 124,770 135,020 Due to related parties 97,420 106,007 ------------- ------------- Total liabilities of discontinued operations $ 374,756 $ 381,399 ============= ============= NOTES PAYABLE Included in liabilities of discontinued operations at June 30, 2012 and June 30, 2011 are $169,801 and $193,367 respectively (including $45,031 and $58,347 respectively of notes payable included in due to related parties) in notes payable plus related accrued interest of which are all in default for lack of repayment by their due date. For the year ended June 30, 2012 and for the period subsequent to the share exchange with 30DC DE through June 30, 2011 the Company incurred interest expense on notes payable of $15,884 and $14,710 respectively which is included in the Statement of Operations under income (loss) from discontinued operations. NOTE 6. PRO FORMA FINANCIAL INFORMATION --------------------------------------- The following unaudited consolidated pro forma information gives effect to the share exchange with Infinity (discussed in Note 1) as if this transaction had occurred as of July 1, 2010. The following unaudited pro forma information is presented for illustration purposes only and is not necessarily indicative of the results that would have been attained had the acquisition of this business been completed at the beginning of each period presented, nor are they indicative of results that may occur in any future periods. F-14
30DC, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2012 Year Ended June 30, 2011 (Unaudited) ----------------- Revenues $ 1,893,313 Operating Expenses 3,272,394 ----------------- Loss from Continuing Operations (1,379,081) Loss from Discontinued Operations (126,790) ----------------- Net Loss (1,505,871) Foreign Currency Translation Loss (99,130) ----------------- Comprehensive Loss $ (1,605,001) ================= Basic and Diluted Loss Per Share $ (.02) Weighted Average Shares Outstanding - Basic and Diluted 72,351,739 NOTE 7. PRIVATE PLACEMENT MEMORANDUM ------------------------------------- In August 2010, 30DC issued a private placement memorandum ("PPM") seeking to raise a maximum of $3,000,000 at a price of 26 cents per unit or 11,538,462 units if the $3,000,000 maximum is raised, the PPM ended March 15, 2011. Each unit consists of one share of Common Stock of Infinity, a warrant exercisable until March 15, 2011, to purchase one share of Common Stock of Infinity with an exercise price of 37 cents, and a warrant exercisable for five years from the date of issuance, to purchase one share of Common Stock of Infinity for 50 cents. 30DC received $501,590 between July 2009 and June 2010 under a prior PPM for which a closing did not occur and the funds were considered to be interest free loans pending closing. At June 30, 2010, the $501,590 is included as private placement subscriptions received in the liability section of the Balance Sheet. Pursuant to an agreement with the subscribers, the $501,590 became part of the August 2010 PPM. A first closing of the August 2010 PPM was held on September 22, 2010 consisting of the $501,590 received under the prior PPM and $162,500 in new investment funds, less capital raising costs of $33,100 for net proceeds of $630,990 which represents 2,554,205 units consisting of 2,554,205 shares of common stock and 2,554,205 of each of the two warrants. Second and third closings were held in November and December 2010 which raised additional net proceeds of $132,550. Fourth and fifth closings were held in February and March 2011 which raised additional net proceeds of $80,300. The March 15, 2011 warrants have expired with none exercised. NOTE 8. RELATED PARTY TRANSACTIONS ----------------------------------- The Company entered into three-year Contract For Services Agreements commencing July 2009 ("Commencement Date") with the Marillion Partnership ("Marillion") for services which includes Mr. Edward Dale acting as the Company's Chief Executive Officer, with 23V Industries, Ltd. ("23V") for services which include Mr. Dan Raine acting as the Company's Vice President of Business Development and with Jesselton, Ltd. ("Jesselton") for services which include Mr. Clinton Carey acting as the Company's Chief Operating Officer. Effective April 1, 2010, Raine Ventures, LLC replaced 23V Industries, Ltd in providing consulting services to the Company which include Mr. Raine acting as the Company's Vice President of Business Development. These agreements are non-cancelable by either party for the initial two years and then with six months notice by either party for the duration of the contract. Mr. Dale and Mr. Carey are directors of the Company, Mr. Dale and Mr. Raine are both beneficial owners of greater than 10% of the Company's outstanding common stock. Marillion Partnership is owned by affiliates of Mr. Dale. 23V and Raine Ventures are owned 100% by Mr. Raine. Jesselton voluntarily withdrew from its contract with the Company effective March 1, 2012 and Mr. Carey has continued as a director of the Company. The Marillion and Raine Ventures contracts expired June 30, 2012 and have continued on a month to month basis under the same terms. F-15
30DC, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2012 Cash remuneration under the Marillion, 23V and Raine Ventures agreements was initially $250,000 per year and $200,000 under the Jesselton agreement. On December 12, 2011 cash remuneration for the Marillion and Jesselton agreements was amended for the year ended June 30, 2012 to the Australian Dollar equivalent of the originally contracted amounts at the exchange rate on the contract start date of July 15, 2009. The Marillion original annual contract amount of $250,000 has been amended to $317,825 AUD Dollars and the Jesselton original annual contract amount of $200,000 has been amended to $254,260 AUD which has been accrued on a proportionate basis through February 29, 2012 due to Jesselton's voluntary withdrawal from its contract effective March 1, 2012 resulting in $169,507 AUD for Jesselton remuneration during the year ended June 30, 2012. During the year ended June 30, 2012 Marillion was paid $476,111 AUD ($491,690 USD) which exceeds Marillion's contracted amount by $158,139 AUD ($159,183 USD). The $159,183 was settled by Marillion surrendering 1,591,827 of the Company's common shares, which it held and the Company has canceled these shares. If in any year starting from the Commencement Date, revenues of 30DC, Inc. doubles then a bonus equal to 50% of cash remuneration will be due in shares of 30DC, Inc. as additional compensation. The bonus was not earned in the fiscal years ending June 30, 2011 and June 30, 2012. During the term of the agreements, Marillion, Jesselton and Raine Ventures were prohibited from engaging in any other business activity that competes with 30DC, Inc. without written consent of the 30DC, Inc. Board of Directors. In July, 2009 when 30DC acquired 30 Day and Immediate, Messrs. Dale and Carey signed executive services agreements with the Company and Mr. Raine signed a consulting services agreement with the Company. Pursuant to the agreements with Marillion, Jesselton and 23V (effective April 1, 2010 Raine Ventures replaced 23V), the contract for services agreements memorialized the preexisting contractual relationship and formally set the terms and conditions between the parties from July 1, 2009 and all prior understandings and agreements - oral or written were merged therein, including the respective executive services and consulting services agreements. All compensation under the contract for services agreements is identical with the respective executive services and consulting agreements. Where applicable under local law, all payroll and other taxes are the responsibility of Marillion, Jesselton, 23V and Raine Ventures and they have provided the Company with indemnification of such taxes which under the prior contracts may have been a liability of the Company. The parties acknowledged that the effective date of the agreements relates back to the contractual relationship between the parties. 30DC's Board of Directors approved a bonus to Marillion based upon the net cash flow of the Company's 30 Day Challenge division and a bonus to 23V (succeeded by Raine Ventures) based upon the net cash flow of the Company's Immediate Edge division until such time as 30DC had completed a merger or public stock listing, which occurred on September 10, 2010. For the year ended June 30, 2011 the bonus for Marillion was $79,643, all earned prior to September 10, 2010 and total compensation was $359,864 and the bonus for Raine Ventures was $-0- and total compensation was $250,000. For the year ended June 30, 2012 total compensation earned by Marillion was $317,825 AUD ($328,376 USD) and total compensation earned by Raine Ventures was $250,000. Marillion and Raine Ventures are to be paid in accordance with their annual contracted amounts and bonuses based upon net cash flow are no longer applicable. Amounts may vary from period to period due to fluctuations in foreign currency exchange rates. Beginning July 1, 2011, the Company paid Marillion $2,500 AUD ($2,582 USD) per month to cover office related expenses which is included in operating expenses. At June 30, 2011, due to related parties included $114,715 due to Jesselton which consists of $6,715 for contractor fees and $108,000 for fees related to the share exchange between 30DC DE and Infinity and $121,750 due to Theodore A. Greenberg, 30DC's CFO for compensation. Jesselton earned $250,000 upon completion of the share exchange between 30DC and Infinity on September 10, 2010 $125,000 of which was satisfied by issuance of 480,770 of the Company's common shares. On February 10, 2011 Mr. Greenberg received 480,770 common shares of the Company in settlement of $100,000 prior compensation and $25,000 due for consulting work prior to Mr. Greenberg joining the Company. F-16
30DC, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2012 At June 30, 2012, due to related parties includes $275,317 due to Jesselton, which consists of $167,317 for contractor fees and $108,000 for fees related to the share exchange between 30DC DE and Infinity, $9,815 due to Raine Ventures under its contractor agreement and $321,000 due to Theodore A. Greenberg for compensation. NOTE 9. PROPERTY AND EQUIPMENT ------------------------------- Property and equipment consists of the following: June 30, 2012 June 30, 2011 --------------- --------------- Computer and Audio Visual Equipment $ 437,659 $ 450,630 Office equipment and Improvements 68,859 71,870 --------------- --------------- 506,518 522,500 Less accumulated depreciation and amortization (472,418) (438,459) --------------- --------------- $ 34,100 $ 84,041 =============== =============== Depreciation and amortization expense was $53,701 for the year ended June 30, 2012 and $70,743 for the year ended June 30, 2011. Property and equipment, net are stated in the functional currency where located and where applicable are translated to the reporting currency of the US Dollar at each period end. Accordingly, property and equipment, net are subject to change as a result of changes in foreign currency exchange rates. NOTE 10. INCOME TAXES --------------------- The Company's income tax provision (benefit) consists of the following: Year Ended Year Ended June 30, 2012 June 30, 2011 --------------- --------------- Federal Current $ - $ - Deferred 18,200 (217,283) State and Local Current $ - $ - Deferred 1,200 (13,017) Change in valuation allowance (19,400) 230,300 --------------- --------------- Income tax provision (benefit) $ - $ - =============== =============== F-17
30DC, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2012 Deferred taxes are provided for the tax effects of temporary differences between the financial reporting basis and the tax basis of assets and liabilities. Significant temporary differences at June 30, 2012 and June 30, 2011 are as follows: Year Ended Year Ended June 30, 2012 June 30, 2011 --------------- --------------- Deferred tax asset Net operating loss carryforward - Federal $ $384,400 $ 518,300 Net operating loss carryforward - State 6,600 14,600 Fixed asset depreciation 21,500 21,200 Accrued expenses 158,200 36,000 --------------- --------------- Total deferred tax asset 570,700 590,100 Less valuation allowance (570,700) (590,100) --------------- --------------- Total net deferred tax asset $ - $ - =============== =============== The following is a reconciliation of the U.S. tax statutory income tax rate to the effective tax rate from continuing operations: Year Ended Year Ended June 30, 2012 June 30, 2011 --------------- --------------- U.S. statutory rate 34.0% (34.0%) State and local taxes net of federal benefit 1.3 (2.0) Change in valuation allowance -35.7 17.2 Nondeductible transaction fees 10.6 Other Permanent differences 0.4 8.2 --------------- --------------- Effective income tax rate (0.0%) (0.0%) =============== =============== The Company applies the provisions of ASC 740, which prescribes the recognition and measurement criteria related to tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers projected future taxable income and tax planning strategies in making this assessment. Management has concluded that it is more likely than not that the Company will not be able to realize all of its tax benefits and therefore a valuation allowance of approximately $570,700 has been established. For the years ended June 30, 2012 and June 30, 2011, the change in valuation allowance was a decrease of $19,400 and an increase of $230,300 respectively. ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. ASC 740 also provides guidance on derecoginition, classification, interest and penalties, accounting in interim period, disclosure and transition. The Company is required to file income tax returns in the United States (federal) and in various state and local and foreign jurisdictions. Based on the Company's evaluation, it has been concluded that there are no significant uncertain tax positions requiring recognition in the Company's financial statements. The Company does not expect any significant changes in its unrecognized tax benefits in the next year. F-18
30DC, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2012 The Company's policy for recording interest and penalties associated with uncertain tax positions is to record such expense as a component of income tax expense. There were no amounts accrued for penalties or interest as of or years ended June 30, 2012 and 2011. As a corporation formed in the United States, the Company is subject to the United States corporation income tax on worldwide net income. Since majority ownership of the Company's shares are held by Australian residents, the Company is deemed to be an Australian resident corporation and is subject to Australian corporate income tax on worldwide net income. Corporate income taxes paid to Australia will generally be available as a credit against United States corporation income tax. The 30DC DE did not have nexus to any individual state in the United States prior to the share exchange with Infinity on September 10, 2010 and accordingly no deferred tax asset was recognized for state taxes prior to that date. Australia does not have any state corporation income tax. Future changes in Company operations might impact the geographic mix which could affect the Company's overall effective tax rate. As of June 30, 2012 and June 30, 2011, the Company had approximately $1,130,600 and $1,524,300 of U.S. federal net operating loss carryovers, respectively which expire starting in 2030. The U.S. net operating loss carryovers may be subject to limitation under Internal Revenue Code Section 382 should there be a greater than 50% change in ownership in the future as determined under the regulations. At the time of the share transaction, Infinity had approximately $936,300 in U.S. federal net operating loss carryovers and $170,500 U.S. capital loss carryovers which expire beginning in 2023 and are not included in the net operating loss carryover above. The business of Infinity is included in discontinued operations, pursuant to limitations under Internal Revenue Code Section 382 these carryovers cannot be utilized to offset future taxable income from continuing operations. The Company has filed all U.S. federal tax returns and has filed state and local tax returns due since the share transaction. The Company is in the process of filing State and local tax returns for Infinity from 2005-2009. The Company believes no material tax balance is due for all tax returns which have not yet been filed. NOTE 11. STOCKHOLDERS' EQUITY ----------------------------- Common Stock Prior to the share exchange with Infinity on September 10, 2010, 30DC DE outstanding common shares were as follows: SHARES --------- Common shares outstanding, July 1, 2009 1,200,000 Issuance of shares for acquisitions 3,420,000 --------- Common shares outstanding, September 10, 2010 4,620,000 ========= The share exchange ratio was 13.2:1 with 30DC DE shareholders receiving 60,984,000 of Infinity common shares for exchanging their 4,620,000 common shares of 30DC DE. The share exchange resulted in 30DC DE becoming a wholly-owned subsidiary of Infinity but for accounting purposes 30DC DE was deemed the acquirer. In the financial statements, for comparison purposes, shares outstanding at June 30, 2010 were restated to the 60,984,000 post-exchange amount from the 4,620,000 which were actually outstanding on that date. In August 2010, 30DC issued the private placement memorandum ("PPM") discussed in note 6. A first closing was held on September 22, 2010 for which 2,554,205 units were issued consisting of 2,554,205 shares of common stock and 2,554,205 of each of the two warrants. Subsequent closings were held from November 2010 to March 2011 for which 538,468 units were issued consisting of 538,468 shares of common stock and 538,468 of each of the two warrants. F-19
30DC, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2012 On September 30, 2010, the Company issued common shares to settle outstanding liabilities and for shares due under services agreements as follows; Cameron Associates, an investor relations firm, pursuant to a contract signed December 8, 2009 under which Cameron was due 50,000 shares of the Company's common stock which was adjusted to 660,000 shares under the exchange ratio. Jesselton, Ltd, was issued a total of 1,250,001 common shares of the Company; 769,231 for $200,000 in contractor fees due for the fiscal year ending June 30, 2010 and 480,770 for $125,000 of the $250,000 fee that was due for advising on the process which resulted in completion of the share exchange. Corholdings Pty Ltd., settled $125,000 AUD ($115,025 USD) of the $250,000 AUD ($231,050 USD) fee they were due for advising on the process which resulted in completion of the share exchange for 444,327 common shares of the Company. In February 2010, 30DC engaged Prestige Financial Center, Inc. ("Prestige") a registered Broker Dealer to provide investment banking and advisory services to the Company pursuant to which Prestige had the opportunity to earn fees for various services. Under terms of the contract as revised in June 2010, Prestige is due a reverse merger fee of an option to purchase at least 1% of the Company's outstanding common shares at the completion of a reverse merger with a publicly-traded company at an exercise price of $0.001 per share. The Company entered into a release agreement dated October 28, 2010 with Prestige under which Prestige was issued 675,314 shares of the Company's restricted common stock and both parties released each other from any other claims. Theodore A. Greenberg was issued 480,770 common shares of the Company (see note 8). On February 10, 2011, Cameron Associates settled $20,000 of consulting fees due for 76,923 common shares of the Company. On June 28, 2012, Marillion Partnership surrendered 1,591,827 of the Company's common shares it held and the Company has canceled these shares (see note 7). Summary of Common Stock Outstanding; Prior to the share exchange 4,620,000 Exchange Ratio 13.2 ---------------- Shares Issued in the Exchange 60,984,000 Infinity Outstanding pre Exchange 6,547,391 PPM Closing September 2010 2,554,205 PPM Closings November 2010 - March 2011 847,317 Cameron Associates 736,923 Jesselton, Ltd. 1,250,001 Corholdings, Pty Ltd. 444,327 Prestige Financial Center, Inc. 675,314 Theodore A. Greenberg 480,770 Marillion Partnership (1,591,827) ---------------- Common Shares Outstanding June 30, 2012 72,928,421 ================ F-20
30DC, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2012 Warrants and Options Infinity issued 600,000 options under its 2008 stock option plan which are fully vested and remain outstanding as follows: 404,000 options exercisable at 80 cents per share expiring August 7, 2018 196,000 options exercisable at 50 cents per share expiring January 5, 2019 192,500 of these options are held by Pierce McNally a director of the Company and the balance are held by a former employee and former directors of Infinity. No options have been issued under Infinity's stock option plan since the share exchange with 30DC DE. As further detailed in Note 13, on October 11, 2012 1,500,000 options exercisable at $0.08 per share expiring on October 10, 2022 were issued to Theodore A. Greenberg, the Company's Chief Financial Officer and a Director and 1,500,000 options exercisable at $0.08 per share expiring on October 10, 2022 were issued to Henry Pinskier who joined the Company as a director in October 2012. At June 30, 2012 the outstanding options had no intrinsic value. 161,163 warrants (net of forfeitures) are due to Imperial Consulting Network under an agreement signed in June 2010 at an exercise price of $0.0001 per share. Such warrants are yet to be issued. Pursuant to the PPM discussed in Note 6, a first closing was held on September 22, 2010 under which 2,554,205 warrants at 37 cents per share, expiring December 21, 2010 were issued along with 2,554,205 warrants at 50 cents per share expiring September 22, 2015. The warrants expiring December 21, 2010 were subsequently extended to March 15, 2011. From November 2010 through March 2011, an additional 847,317 of 37 cent warrants expiring March 15, 2011 were issued and 847,317 of the 50 cent warrants with an expiration date five years from the date of investment were issued. All of the warrants expiring March 15, 2011 expired unexercised. NOTE 12. SUPPLEMENTAL SCHEDULE OF OPERATING EXPENSES ---------------------------------------------------- Year Ended Year Ended June 30, 2012 June 30, 2011 --------------- --------------- Related Party Contractor Fees Base Compensation (1) $ 753,428 $ 730,221 Related party Contractor Fees Bonus Compensation (1)(2) - 79,643 Officer's Salary 200,000 200,000 Independent Contractors 370,284 556,305 Transaction Fees (3) - 670,138 Commissions 833,449 97,839 Professional Fees 291,895 357,034 Travel Expenses 31,225 150,136 Other Operating Costs 363,013 355,732 --------------- --------------- Total Operating Expenses $ 2,843,294 $ 3,197,048 =============== =============== ------------------------------------------------------- (1) Related party contractors include Marillion which provides services to the Company including for Edward Dale to act as Chief Executive Officer of the Company, Raine Ventures which provides services to the Company including for Dan Raine to act as Vice President for Business Development and Jesselton, Ltd. which provided services to the Company including Clinton Carey serving as Chief Operating Officer of the Company through February F-21
30DC, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2012 28, 2012. The annual contracted amounts are not required to be paid proportionately throughout the year, however expense is recognized proportionately throughout the year, and amounts may vary from period to period due to fluctuations in foreign currency exchange rates. (2) 30DC's Board of Directors approved a bonus to Marillion based upon the net cash flow of the Company's 30 Day Challenge division (formerly 30 Day) and a bonus to Raine Ventures based upon the net cash flow of the Company's Immediate Edge division (formerly Immediate) until such time as 30DC had completed a merger or public stock listing which occurred on September 10, 2010. (3) Transaction fees were incurred upon completion of the 30DC/Infinity share exchange for consulting services which resulted in completion of the share exchange. $250,000 was due to Jesselton, Ltd., $250,000 AUD ($231,050) was due to Corholdings Pty, Ltd. and Prestige Financial Center, Inc. was due 675,314 common shares which were valued at $189,088. NOTE 13. SUBSEQUENT EVENTS -------------------------- Effective July 15, 2012, the Company entered into a six-month Consulting Services Agreement with GHL Group, Ltd., whose President, Gregory H. Laborde is a Director. Pursuant to the Consulting Services Agreement, GHL Group received 500,000 shares of the Company's restricted common stock and payments of $3,000 monthly for services including but not limited to evaluation of financial forecasts, assisting in the development of business and financial plans and assisting in the identification of potential acquisitions and financial sources. The contract expired January 15, 2013 and has continued on a month to month basis under the terms of the expired agreement. On October 11, 2012, the Company's board of directors approved the Company's 2012 stock option plan and grants of 3,000,000 options to purchase the Company's common stock with an exercise price of $0.08 per share. 1,500,000 of these options were granted the Theodore A. Greenberg, the Company's Chief Financial Officer and a Director of the Company and 1,500,000 of these options were granted to Henry Pinskier who joined the Company as a Director in October 2012. On November 20, 2012 the Company issued 515,385 shares of common stock to consultants as partial payment for services. This included the 500,000 shares of common stock issued to GHL noted above. On December 31, 2012 the Company and Netbloo entered into an asset purchase agreement for the Company to purchase Netbloo's interest in the MagCast JV Agreement and Market Pro Max a product which helps companies run online information businesses. Netbloo received a three year contractor agreement with annual compensation of $300,000 which is payable in monthly installments of $25,000 and may be terminated after two years subject to a six month termination payment. The contractor agreement was effective October 1, 2012. In two separate transactions in January and March 2013 the Company received a total of $105,000 in cash from the sale of 300,000 shares of Strategic Environmental and Energy Resources, Inc. which were included in Assets of Discontinued Operations at a value of $60,000 at June 30, 2012. Management has evaluated subsequent events to determine if events or transactions occurring through the date on which the financial statements were issued, require potential adjustment to or disclosure in the Company's financial statements. F-22
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE -------------------------------------------------------------------------------- Not applicable. ITEM 9A. CONTROLS AND PROCEDURES -------------------------------- DISCLOSURE CONTROLS AND PROCEDURES Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by our Company is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the SEC. Our Chief Executive Officer and Chief Financial Officer are responsible for establishing and maintaining disclosure controls and procedures for our Company. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of our "disclosure controls and procedures" (as defined in the Securities Exchange Act of 1934 (the "Exchange Act") Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this annual report on Form 10-K (the "Evaluation Date"). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the Evaluation Date, our disclosure controls and procedures are not effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported, within the time periods specified in the SEC rules and forms and (ii) is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Specifically, management's evaluation was based on the following material weaknesses, which existed as of June 30, 2012: (1) Financial Reporting Systems: We did not maintain a fully integrated financial consolidation and reporting system throughout the period and as a result, extensive manual analysis, reconciliation and adjustments were required in order to produce financial statements for external reporting purposes. (2) Segregation of Duties: We do not currently have a sufficient complement of technical accounting and external reporting personal commensurate to support standalone external financial reporting under public company or SEC requirements. Specifically, the Company did not effectively segregate certain accounting duties due to the small size of its accounting staff, and maintain a sufficient number of adequately trained personnel necessary to anticipate and identify risks critical to financial reporting and the closing process. In addition, there were inadequate reviews and approvals by the Company's personnel of certain reconciliations and other processes in day-to-day operations due to the lack of a full complement of accounting staff. (3) Overpayment of Contractor Fees: The Company did not maintain proper controls over revenue received , and disbursements for, a Paypal e-commerce account and a related party bank account which had been used historically by the business prior to the Infinity transaction, As a result, during the fiscal year ended June 30, 2012, Marillion, which is a company affiliated with our Chief Executive Officer, was paid contractor fees of $158,139 AUD ($159,183 USD) in excess of the amount of its annual contract. The Company has taken steps to prevent future occurrences by notifying all repeat paying customers that payments are to be remitted to specific company accounts which have more appropriate financial controls. The Company's Board has stipulated that the accounts in question are no longer to be used for any ongoing or new business, any deposit errors are to be immediately corrected by transfer of funds to appropriate accounts and that the Company's Chief Financial Officer be informed of all receipts so funds can be tracked on a timely basis. -24-
We believe that our weaknesses in internal control over financial reporting and our disclosure controls relate in part to the fact that we are an emerging business with limited personnel. Management and the Board of Directors believe that the Company must allocate additional human and financial resources to address these matters. Throughout the year, the Company has been continuously improving its monitoring of current reporting systems and its personnel. The Company intends to continue to make improvements in its internal controls over financial reporting and disclosure controls until its material weaknesses are remediated. REMEDIATION OF MATERIAL WEAKNESS As our current financial condition allows, we are in the process of analyzing and developing our processes for the establishment of formal policies and procedures with necessary segregation of duties, which will establish mitigating controls to compensate for the risk due to lack of segregation of duties. DISCLOSURE CONTROLS AND PROCEDURES Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected, at this time. CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING There was no change in the Company's internal control over financial reporting that occurred during the fiscal quarter ended June 30, 2012, that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting. ITEM 9B. OTHER INFORMATION -------------------------- Not applicable. -25-
PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE --------------------------------------------------------------- The following table sets forth information as to persons who currently serve as 30DC, Inc., directors or executive officers, including their ages as of June 30, 2012. NAME AGE POSITION ------------------------ ------- ---------------------------------------------- Edward Dale 42 President, CEO and Chairman of the Board (1) Theodore A. Greenberg 52 CFO, Secretary and Director Clinton Carey 42 Director (2) Gregory H. Laborde 47 Director Pierce McNally 63 Director Henry Pinskier 52 Director (3) ------------------------ (1) Mr. Dale resigned as Chairman of the Board on January 31, 2013 and remains a Director. (2) Mr. Carey resigned as the Chief Operating Officer of the Company on March 1, 2012. Mr. Carey resigned as a Director of the Company on October 11, 2012. (3) Mr. Pinskier was elected as a Director on October 11, 2012 and was elected Chairman of the Board on January 31, 2013 30DC's directors are elected by the Company's shareholders and hold office until their successors are duly elected and qualified under 30DC's bylaws. Unless otherwise indicated, the directors named above will serve until the next annual meeting of 30DC stockholders. Thereafter, directors will be elected for one-year terms at the annual stockholders' meeting. BIOGRAPHICAL INFORMATION The following is a brief account of the business experience during at least the past five years of the directors and Officers of 30DC, indicating the principal occupation and employment during that period by each, and the name and principal business of the organizations by which they were employed. EDWARD DALE, DIRECTOR AND CHIEF EXECUTIVE OFFICER Mr. Dale, age 42, has served as a Director and President and CEO of 30DC since the transaction between Infinity and 30DC DE on September 10, 2010. Mr. Dale was a founding shareholder of 30DC DE and served as its President, Chief Executive Officer and a director from October 2008 until September 10, 2010. From 2005 to 2008, Mr. Dale developed the 30 Day Challenge business, which he ran for 4 years as part of the Marillion Partnership and was sold to 30DC DE in July 2009. In 2006, Mr. Dale created and marketed the Dominiche `Buying and Selling websites' program. Mr. Dale is a beneficiary of the Marillion Trust which is a partner in the Company's majority shareholder, Marillion Partnership. On January 31, 2013, Mr. Dale was adjudicated in personal bankruptcy in Australia resulting from claims of personal creditors, which is the equivalent of involuntary bankruptcy in the United States. This action was due to personal creditors unrelated to the Company and 30DC, Inc. is not a party to the matter. At that time, Mr. Dale resigned as Chairman of the Board of Directors of the Company a position he had -26-
held since the transaction between Infinity and 30DC CE on September 10, 2010 and remains a Director. THEODORE A. GREENBERG, DIRECTOR AND CHIEF FINANCIAL OFFICER Mr. Greenberg, age 53, has served as a Director, Chief Financial Officer and Secretary of 30DC and Infinity since November 15, 2005. Mr. Greenberg is a senior financial executive with more than 30 years experience in private equity, consulting, industry and public accounting. He was a General Partner and co-founder of Park Avenue Equity Partners, LP, a $110 million private equity fund focused on the middle market. In his five years with Park Avenue, Mr. Greenberg, sourced, evaluated and negotiated deals and worked extensively with portfolio companies post acquisition. Prior to founding Park Avenue, he worked with Development Capital, LLC on direct equity investments and served as consulting CFO to one of Development Capital's portfolio companies. Previously, Ted directed the financial services practice at Marcum & Kliegman, LLP, a New York Metropolitan area accounting and consulting firm where he advised on merger and acquisition transactions, as well as operations and taxation. Mr. Greenberg graduated with a BS in Accounting, Cum Laude, from the State University of New York at Albany and received an MBA in Finance & Business Policy from the University of Chicago. Mr. Greenberg earned certification as a Certified Public Accountant in New York State. GREGORY H. LABORDE, DIRECTOR Mr. Laborde, age 48, has served as a Director of 30DC since September 10, 2010. Prior to the transaction between Infinity and 30DC DE, Mr. Laborde served as President, Chief Executive Officer and Chairman of the Board of Infinity. Mr. Laborde currently serves as President and Chief Executive Officer of 21st Century Investor Relations and has over 22 years experience on Wall Street in the areas of investment banking, trading, sales and financial consulting. From 1986 to 1997, Mr. Laborde worked in corporate finance at a number of prestigious NYC based investment banks, including: Drexel Burnham Lambert, Lehman Brothers, Gruntal & Co., and Whale Securities. During his Wall Street tenure, Mr. Laborde was involved in over 20 public and private financing transactions totaling over 100 million dollars. In 1999 he founded and took public Origin Investment Group, a business development company that was involved in investing in IT related businesses. Mr. Laborde holds a Bachelor of Science degree in Engineering from Lafayette College. PIERCE MCNALLY, DIRECTOR Mr. McNally, age 63, has served as a Director of 30DC and Infinity since 2006. Mr. McNally, serves of counsel to Gray Plant Mooty, (Minneapolis, St. Cloud, MN and Washington, D.C.) practicing in the areas of business law and entrepreneurial services. He also serves as Chief Strategic Officer and General Counsel of OutsourceOne, Inc. a third party benefits administration and technology company located in Minneapolis, MN. He has served as Chairman and Director of Lockermate Corporation of Minnetonka, Minnesota, a company that provides locker organizing systems and fashion accessories to the retail trade. He served as Minnesota American's Chairman of the Board, Chief Executive Officer and Secretary from October 1994 until January 2000, when Minnesota American merged with CorVu Corporation (OTC: CRVU). He served as Chairman and Director of Corporate Development of Nicollet Process Engineering, Inc. from May 1995 until April 1999, when he retired from the board. He also serves on the board of directors of Digital Town (OTC:BB DGTW) and Outsell, LLC. In December, 1983, Pierce was elected to the board of directors of his family company, Midwest Communications, Inc., owner of numerous broadcast properties including WCCO-TV, WCCO-AM and WLTE in the Twin Cities. In 1989, he was subsequently also elected an officer of the company and he served in both capacities until the company merged with CBS, Inc. (NYSE:CBS) in 1992. Mr. McNally completed his undergraduate studies at Stanford University. He received his law degree from the University of Wisconsin Law School in 1978. He is a member of Order of the Coif. -27-
HENRY PINSKIER, DIRECTOR Mr. Pinskier, age 52, joined the Company's board of directors on October 11, 2012 and was elected Chairman of the Board on January 31, 2013. Mr. Pinskier serves as Chair and Joint Owner (1993- current) of Medi7 Pty Ltd., a General Practice medical services company with 70 Doctors and staff across multiple clinics in Melbourne Australia. Mr. Pinskier also currently serves as Chair for RivusTV P/L an unlisted Public Company, which provides syndicated, secure easy to use video on demand system utilizing Pay Per View with a multi-level payment distribution process. He has previously served on the boards of 3 publicly listed companies in Australia related to Health technology in the area of Medical devices and services as well as having served as a Director of a Private US company with an Australian subsidiary delivering safety surveillance services. Mr. Pinskier has been involved in the Health Sector and IT /IM sector as well as having served as a Director in the past on a number of Victorian public sector organizations, VMIA the State Government of Victoria's Insurance Company from 2005-2011, Yarra Valley Water from 2008-2011 and The Alfred Group of Hospitals from 2000-2009. From 1985 until 2000, he practiced medicine. Across the different organizations he Chaired Strategy subcommittees, Risk and Audit Committees, Nomination Committees and been part of Finance Committees. Mr. Pinskier attended and graduated MBBS from Monash University in 1984. CLINTON CAREY, DIRECTOR Mr. Carey, age 42, served as a Director of 30DC since the transaction between Infinity and 30DC DE on September 10, 2010 through his resignation from the board on October 11, 2012. Mr. Carey served as the Company's Chief Operating Officer from September 10, 2010 through March 1, 2012. Mr. Carey was a founding shareholder of 30DC DE and served as a director from October 2008 until September 10, 2010 and Chief Operation Officer starting in July 2009. Over the past 17 years, Mr. Carey has been involved in startup businesses at both the management and the directorial level. Mr. Carey was a director of Roper River Resources and was involved in the reverse takeover of Roper River Resources by Webjet, in Australia. Following Webjet, Mr. Carey became involved in several technology companies including Banque Technology Systems (UK), MobiData Ltd (Australia) and MDS Group Ltd (UK) for which he helped raise capital and was involved in strategic planning and business development. Mr. Carey holds a degree in Economics from Bond University. No appointee for a director position has been found guilty of any civil regulatory or criminal offense or is currently the subject of any civil regulatory proceeding or any criminal proceeding. COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act") requires that the Company's officers and directors, and persons who own more than ten percent of a registered class of the Company's equity securities, file reports of ownership and changes in ownership with the Securities and Exchange Commission. Officers, directors and greater than ten percent stockholders are required by regulation to furnish to the Company copies of all Section 16(s) forms they file. The following persons failed to file forms during the past two fiscal years as required under Section 16(a) as follows: None. CONFLICTS OF INTEREST Members of the Company's management are associated with other firms involved in a range of business activities. Consequently, there are potential inherent conflicts of interest in their acting as officers and directors of the Company. Insofar as the officers and directors are engaged in other business activities, -28-
management anticipates it will devote only a minor amount of time to the Company's affairs. The Company's Board of Directors has adopted a policy that the Company will not seek a merger with, or acquisition of, any entity in which any officer or director serves as an officer or director or in which they or their family members own or hold a controlling ownership interest. Although the Board of Directors could elect to change this policy, the Board of Directors has no present intention to do so. There can be no assurance that management will resolve all conflicts of interest in favor of the Company. COMMITTEES OF THE BOARD OF DIRECTORS 30DC is managed under the direction of its board of directors. EXECUTIVE COMMITTEE 30DC does not have an Executive Committee at this time. AUDIT COMMITTEE 30DC does not have an Audit Committee, at this time but plans to institute an audit committee in the future. COMPENSATION COMMITTEE 30DC does not have a Compensation Committee at this time but plans to institute a Compensation Committee in the future. CONFLICTS OF INTEREST - GENERAL The Company's directors and officers are, or may become, in their individual capacities, officers, directors, controlling shareholder and/or partners of other entities engaged in a variety of businesses. Thus, there exist potential conflicts of interest including, among other things, time, efforts and corporation opportunity, involved in participation with such other business entities. While each officer and director of the Company's business is engaged in business activities outside of its business, the amount of time they devote to Infinity's business will be up to approximately 40 hours per week. CONFLICTS OF INTEREST - CORPORATE OPPORTUNITIES Presently no requirement contained in the Company's Articles of Incorporation, Bylaws, or minutes which requires officers and directors of the Company's business to disclose to 30DC business opportunities which come to their attention. The Company's officers and directors do, however, have a fiduciary duty of loyalty to 30DC to disclose to it any business opportunities which come to their attention, in their capacity as an officer and/or director or otherwise. Excluded from this duty would be opportunities which the person learns about through his involvement as an officer and director of another company. The Company has no intention of merging with or acquiring an affiliate, associate person or business opportunity from any affiliate or any client of any such person. -29-
ITEM 11. EXECUTIVE COMPENSATION ------------------------------- The following table sets forth the compensation paid to officers during the fiscal years ended June 30, 2012, 2011 and 2010. The table sets forth this information for 30DC and Infinity Capital Group, Inc., including salary, bonus, and certain other compensation to the named executive officers for the past three fiscal years and includes all Officers as of June 30, 2012. SUMMARY EXECUTIVES COMPENSATION TABLE NON-EQUITY NON- INCENTIVE QUALIFIED PLAN DEFERRED STOCK OPTION COMPEN COMPENSATION ALL OTHER SALARY BONUS AWARDS AWARDS SATION EARNINGS COMPENSATION TOTAL NAME & POSITION YEAR ($) ($) ($) ($) ($) ($) ($) ($) -------------------- -------- ------------ ---------- ---------- ---------- ---------- -------------- -------------- ---------- Edward Dale, CEO(1) 2012 328,376 0 0 0 0 0 0 328,376 2011 280,221 79,643 0 0 0 0 0 359,864 2010 250,000 496,714 0 0 0 0 0 746,714 Clinton Carey, COO 2012 175,052 0 0 0 0 0 0 175,052 (2) 2011 200,000 0 0 0 0 0 0 200,000 2010 200,000 0 0 0 0 0 0 200,000 Dan Raine, 2012 250,000 0 0 0 0 0 0 250,000 VP Business 2011 250,000 0 0 0 0 0 0 250,000 Development (3) 2010 250,000 211,925 0 0 0 0 0 461,925 Theodore A. 2012 200,000 0 0 0 0 0 0 200,000 Greenberg, CFO, 2011 200,000 0 0 0 0 0 0 200,000 and Secretary (4) 2010 6,000 0 0 0 0 0 0 6,000 -------------------- (1) During the year ended June 30, 2010, Marillion Partnership ("Marillion"), a company affiliated with Edward Dale was paid $746,714, which includes a bonus of $496,714. By contract Marillion was receiving annual contractor fees of $250,000. 30DC DE's Board of Directors approved Marillion receiving a bonus based on the net cash flow of the 30 Day Challenge business unit until such point as 30DC completed the Agreement which closed on September 10, 2010. During the year ended June 30, 2011, Marillion, a company affiliated with Edward Dale was paid $359,864, which includes a bonus of $79,643. This amount was included in related party contractor fees. By contract Marillion receives annual contractor fees of $250,000 however, since payment is made in Australian Dollars, and the amount reported in the Company's financial statements is based upon the average exchange rate for the year, fluctuation in the exchange rate can cause the amount reported to vary from the contract amount. 30DC's Board of Directors approved Marillion receiving a bonus based on the net cash flow of the 30 Day Challenge business unit until such point as 30DC completed the Agreement which closed on September 10, 2010. On December 12, 2011 cash remuneration under the Marillion contractor agreement was amended for the year ended June 30, 2012 to the Australian Dollar equivalent of the originally contracted amount at the exchange rate on the contract start date of July 15, 2009. The original annual contract amount of $250,000 was amended to $317,825 AUD Dollars Effective July 1, 2012 the United States Dollar equivalent amount varies with the exchange rate. During the year ended June 30, 2012, Marillion received annual contractor fees of $328,376. During the year ended June 30, 2012, Marillion was paid $158,139 AUD ($159,183 USD) in fees beyond their contracted amount. On June 28, 2012, this excess amount was settled by Marillion surrendering 1,591,827 of the Company's common shares, which it held and the Company has canceled these shares. -30-
(2) During the year ended June 30, 2010, Jesselton, Ltd. ("Jesselton"), a company affiliated with Clinton Carey earned $200,000 in contractor fees that were accrued but unpaid and included in related party contractor fees. This amount was paid in shares of the Company after completion of the acquisition of 30DC by Infinity. During the year ended June 30, 2011, Jesselton earned $200,000 in contractor fees which were included in related party contractor fees, Jesselton, also earned $250,000 pursuant to a consulting agreement for services in connection with the closing of the acquisition of 30DC by Infinity; $125,000 was paid in shares of the Company. On December 12, 2011 cash remuneration under the Jesselton contractor agreement was amended for the year ended June 30, 2012 to the Australian Dollar equivalent of the originally contracted amount at the exchange rate on the contract start date of July 15, 2009. The original annual contract amount of $200,000 was amended to $254,260 AUD Dollars Effective July 1, 2012 the United States Dollar equivalent amount varies with the exchange rate. During the year ended June 30, 2012, Jesselton, earned $175,052 in contractor fees. On March 1, 2012, Mr. Carey resigned as the Company's Chief Operating Officer. At such time, Jesselton voluntarily resigned from its contract. (3) During the year ended June 30, 2010, 23V Ltd. and Raine Ventures, LLC (collectively "Raine V"), companies affiliated with Dan Raine were paid $461,925, which includes a bonus of $211,925. This amount was included in related party contractor fees. By contract Raine V receives annual contractor fees of $250,000. 30DC DE's Board of Directors approved Raine V receiving a bonus based on the net cash flow of the Immediate Edge unit until such point as 30DC completed the Agreement which closed on September 10, 2010. Subsequent to that time, Raine V's contractor fees have followed the contracted amount. During the years ended June 30, 2011 and June 30, 2012, Raine V, a company affiliated with Dan Raine earned $250,000 which were included in related party contractor fees. (4) During the year ending June 30, 2010, Mr. Greenberg received $6,000 cash compensation from Infinity which was prior to the transaction with 30DC. During the year ended June 30, 2011, Theodore A. Greenberg earned salary of $200,000 for his services as an officer of the Company. $100,000 of this amount was paid in shares of the Company and the balance was accrued but not actually paid. Mr. Greenberg earned salary of $200,000 during the year ended June 30, 2012 which was accrued but has not been paid. OPTION/SAR GRANTS IN THE LAST FISCAL YEAR COMPENSATION PURSUANT TO STOCK OPTION PLAN On August 7, 2008 our directors approved the Company's 2008 Stock Option Plan (the "Plan") authorizing the plan to grant options to purchase up to 970,934 shares of our common stock. The board's responsibility will include the selection of option recipients, as well as, the type of option granted and the number of shares covered by the option and the exercise price. Plan options may either qualify as non-qualified options or incentive stock options under Section 422 of the Internal Revenue Code. Any incentive stock option granted under the plan must provide for an exercise price of at least 100% of the fair market value on the date of such grant and a maximum term of ten years. If the employee owns more than 10% of our stock, the exercise price of any incentive option granted must be at least 110% of fair market value and must be exercised within five years after the grant. -31-
All of our officers, directors, key employees and consultants will be eligible to receive non-qualified options under the plan. Only officers, directors and employees who are formally employed by the Company are eligible to receive incentive options. All incentive options are non-assignable and non-transferable, except by will or by the laws of descent and distribution. If an optionee's employment is terminated for any reason other than death, disability or termination for cause, the stock option will lapse on the earlier of the expiration date or three months following the date of termination. If the optionee dies during the term of employment, the stock option will lapse on the earlier of the expiration date of the option or the date one-year following the date of death. If the optionee is permanently and totally disabled within the meaning of Section 22(e)(3) of the Internal Revenue Code, the plan option will lapse on the earlier of the expiration date of the option or one year following the date of such disability. Subsequent to June 30, 2012, our directors approved the Company's 2012 Stock Option Plan (the "Plan") authorizing the plan to grant options to purchase up to 7,500,000 shares of the Company's common stock. On October 11, 2012 1,500,000 options to purchase shares of the Company's common stock were issued to Theodore A. Greenberg the Company's Chief Financial Officer and a Director and 1,500,000 options to purchase shares of the Company's common stock were issued to Henry Pinskier who is a Director and who subsequently became Chairman of the Board. CONTRACTOR AGREEMENTS AND TERMINATION OF CONTRACTOR AND CHANGE-IN-CONTROL ARRANGEMENTS MARILLION PARTNERSHIP The Company entered into three-year Contract For Services Agreements commencing July 2009 with the Marillion for services which includes Mr. Edward Dale acting as the Company's Chief Executive Officer providing for among other things, the payment of $250,000 in cash remuneration per year. On December 12, 2011 cash remuneration under the Marillion contractor agreement was amended for the year ended June 30, 2012 to the Australian Dollar equivalent of the originally contracted amount at the exchange rate on the contract start date of July 15, 2009. The original annual contract amount of $250,000 was amended to $317,825 AUD Dollars Effective July 1, 2012 the United States Dollar equivalent amount varies with the exchange rate. During the year ended June 30, 2012, Marillion received annual contractor fees of $328,376. During the year ended June 30, 2012, Marillion was paid $158,139 AUD ($159,183 USD) in fees beyond their contracted amount. On June 28, 2012, this excess amount was settled by Marillion surrendering 1,591,827 of the Company's common shares, which it held and the Company has canceled these shares. The Marillion contractor agreement expired June 30, 2012 and has continued on a month to month basis under the terms of the expired agreement. CLINTON CAREY The Company entered into three-year Contract For Services Agreements commencing July 2009 with Jesselton, Ltd. ("Jesselton") for services which include Mr. Clinton Carey acting as the Company's Chief Operating Officer providing for among other things, the payment of $200,000 in cash remuneration per year. On December 12, 2011 cash remuneration under the Jesselton contractor agreement was amended for the year ended June 30, 2012 to the Australian Dollar equivalent of the originally contracted amount at the exchange rate on the contract start date of July 15, 2009. The original annual contract amount of $200,000 was amended to $254,260 AUD Dollars Effective July 1, 2012 the United States Dollar -32-
equivalent amount varies with the exchange rate. During the year ended June 30, 2012, Jesselton, earned $175,052 in contractor fees. On March 1, 2012, Mr. Carey resigned as the Company's Chief Operating Officer. At such time, Jesselton voluntarily resigned from its contract. DAN RAINE The Company entered into three-year Contract For Services Agreements commencing July 2009 with 23V Industries, Ltd. ("23V") for services which include Mr. Dan Raine acting as the Company's Vice President of Business Development providing for among other things, the payment of $250,000 in cash remuneration per year. Effective April 1, 2010, Raine Ventures, LLC ("Raine Ventures") replaced 23V Industries, Ltd in providing consulting services to the Company including Mr. Raine acting as the Company's Vice President of Business Development. The Raine Ventures contractor agreement expired June 30, 2012 and has continued on a month to month basis under the terms of the expired agreement. In July, 2009 when 30DC DE acquired 30 Day and Immediate, Messrs. Dale and Carey signed executive services agreements with the Company and Mr. Raine signed a consulting services agreement with the Company. Pursuant to the agreements with Marillion, Jesselton and 23V (effective April 1, 2010 Raine Ventures replaced 23V), the contract for services agreements memorialized the preexisting contractual relationship and formally set the terms and conditions between the parties from July 1, 2009 and all prior understandings and agreements - oral or written were merged therein, including the respective executive services and consulting services agreements. All compensation under the contract for services agreements is identical with the respective executive services and consulting agreements. Where applicable under local law, all payroll and other taxes are the responsibility of Marillion, Jesselton, 23V and Raine Ventures and they have provided the Company with indemnification of such taxes which under the prior contracts may have been a liability of the Company. The parties acknowledged that the effective date of the agreements relates back to the contractual relationship between the parties. If in any year starting from the commencement date, revenues of 30DC, Inc. doubles, compared to the preceding year, then a bonus equal to 50% of cash remuneration will be due in shares of 30DC, Inc. as additional compensation. This threshold was not achieved for the fiscal years ending June 30, 2012 and 2011. DESCRIPTION OF 30 DC DE CONTRACTOR AGREEMENTS The Marillion, Jesselton and Raine V contractor agreements were with 30DC DE, a subsidiary of 30DC, at this time no one has contractor or employment agreements with 30DC. The agreements provided the following terms: BONUSES: Performance bonuses and milestones for such bonus are to be determined by the Board of Directors. SALARY: Annual reviews of compensation are to be performed by the Board of Directors. At such review the Board of 30DC shall consider: the responsibilities of the contractor, the performance of the company, the performance of the contractor's division, the performance of the contractor, the remuneration available in the workforce outside the 30DC for persons with responsibilities and experience equivalent to those of the contractor and the benefits which have accrued and will accrue under the agreement. TAKEOVER EVENT: If, a Trade Sale or a Takeover Event occurs and the Executive providing services through one of the contractor agreements is required to resign as Officer of the Company, and the Agreement is effectively terminated, -33-
then in addition to any other entitlements due to the contractor in accordance with the terms of this Agreement, the contractor will be entitled to: - be paid a lump sum equal to at least the total of all amounts that, if the contract had continued until the end of the term, 30DC would have become liable to pay to the contractor during that period; and - be issued with that number of shares in 30DC comprising 50% of the cash remuneration. None of the Executives providing services through the contractor agreements were required to resign their positions with 30DC as a result of the transaction with Infinity so this provision did not apply. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION In August 2008, the Board of Directors approved and created a compensation committee. The committee consisted of the independent directors of the Company. Contemporaneous with the Infinity/30DC transaction, two of the independent directors resigned and the compensation committee ceased to exist. The Company plans to form a new compensation committee when new independent directors join the board. DIRECTOR COMPENSATION The Company does not pay any Directors fees for meeting attendance. DIRECTORS COMPENSATION The following table sets forth certain information concerning compensation paid to the Company's directors during the year ended June 30, 2012: NON-QUALIFIED NON-EQUITY DEFERRED FEES INCENTIVE PLAN COMPENSATION ALL OTHER EARNED STOCK OPTION COMPENSATION ($) EARNINGS COMPENSATION ($) TOTAL NAME OR PAID AWARDS AWARDS ($) ($) IN CASH ($) ($) ($) ---------------- --------- ---------- ---------- ------------------ ------------------ ------------------ ---------- Edward Dale (1) $ -0- $ -0- $ -0- $ -0- $ -0- $328,376 $328,376 Clinton Carey (2) $ -0- $ -0- $ -0- $ -0- $ -0- $175,052 $175,052 Theodore A. $ -0- $ -0- $ -0- $ -0- $ -0- $200,000 $200,000 Greenberg (3) Gregory H. $ -0- $ -0- $ -0- $ -0- $ -0- $-0- $-0- Laborde Pierce McNally $ -0- $ -0- $-0- $ -0- $-0- $ -0- $-0- ---------------- (1) During the year ended June 30, 2012, Marillion Partnership, the Company's majority shareholder and of which Edward Dale, is the beneficial owner of the shares, was paid $328,376. The payment was included in related party contractor fees. During the fiscal year ended June 30, 2012, Marillion was -34-
paid $158,139 AUD ($159,183 USD) in fees beyond their contracted amount. On June 28, 2012, this excess amount was settled by Marillion surrendering 1,591,827 of the Company's common shares, which it held and the Company has canceled these shares. (2) During the year ended June 30, 2012, Jesselton, Ltd. a company affiliated with Clinton Carey was paid $175,052. The payment was included in related party contractor fees. Jesselton voluntarily withdrew from its contract with the Company effective March 1, 2012. At that time Mr. Carey, resigned as the Company's Chief Operating Officer, but remained as a director of the Company. Mr. Carey resigned as a director of the Company on October 11, 2012. (3) During the year ended June 30, 2012, Theodore A. Greenberg earned salary of $200,000 for his services as an officer of the Company all of which was accrued but not actually paid. All of the Company's officers and/or directors will continue to be active in other companies. All officers and directors have retained the right to conduct their own independent business interests. The Company does not pay any Directors fees for meeting attendance. INDEMNIFICATION OF DIRECTORS AND OFFICERS 30DC's officers and directors are indemnified as provided by the Maryland Revised Statutes and the bylaws. Under the Maryland Revised Statutes, director immunity from liability to a company or its shareholders for monetary liabilities applies automatically unless it is specifically limited by a company's Articles of Incorporation. The Company's Articles of Incorporation do not specifically limit the directors' immunity. Excepted from that immunity are: (a) a willful failure to deal fairly with Infinity or its shareholders in connection with a matter in which the director has a material conflict of interest; (b) a violation of criminal law, unless the director had reasonable cause to believe that his or her conduct was lawful or no reasonable cause to believe that his or her conduct was unlawful; (c) a transaction from which the director derived an improper personal profit; and (d) willful misconduct. The Company's bylaws provide that it will indemnify the directors to the fullest extent not prohibited by Maryland law; provided, however, that it may modify the extent of such indemnification by individual contracts with the directors and officers; and, provided, further, that the Company shall not be required to indemnify any director or officer in connection with any proceeding, or part thereof, initiated by such person unless such indemnification: (a) is expressly required to be made by law, (b) the proceeding was authorized by the board of directors, (c) is provided by the Company, in sole discretion, pursuant to the powers vested under Maryland law or (d) is required to be made pursuant to the bylaws. The Company's bylaws provide that it will advance to any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was a director or officer of the Company, or is or was serving at the request of Infinity as a director or executive officer of another company, partnership, joint venture, trust or other enterprise, prior to the final disposition of the proceeding, promptly following request therefore, all expenses incurred by any director or officer in connection with such proceeding upon receipt of an undertaking by or on behalf of such person to repay said amounts if it should be determined ultimately that such person is not entitled to be indemnified under the bylaws or otherwise. The Company's bylaws provide that no advance shall be made by the Company to an officer except by reason of the fact that such officer is or was the Company's director in which event this paragraph shall not apply, in any action, suit or proceeding, whether civil, criminal, administrative or investigative, if a determination is reasonably and promptly made: (a) by the board of directors by -35-
a majority vote of a quorum consisting of directors who were not parties to the proceeding, or (b) if such quorum is not obtainable, or, even if obtainable, a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, that the facts known to the decision-making party at the time such determination is made demonstrate clearly and convincingly that such person acted in bad faith or in a manner that such person did not believe to be in or not opposed to the best interests of 30DC, Inc. EQUITY COMPENSATION PLAN INFORMATION STOCK OPTION PLAN The Company has an Option Plan. As of June 30, 2012, 600,000 options are outstanding under the 2008 Option Plan of which all 600,000 are exercisable. During the year ended June 30, 2012, we did not issue any shares under the option plan. We have reserved a total of 970,934 shares of common stock for issuance under the 2008 Option Plan. Subsequent to June 30, 2012, our directors approved the Company's 2012 Stock Option Plan (the "Plan") authorizing the plan to grant options to purchase up to 7,500,000 shares of the Company's common stock. On October 11, 2012 1,500,000 options to purchase shares of the Company's common stock were issued to Theodore A. Greenberg the Company's Chief Financial Officer and a Director and 1,500,000 options to purchase shares of the Company's common stock were issued to Henry Pinskier who is a Director and who subsequently became Chairman of the Board. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. -------------------------------------------------------------------------------- The following table sets forth information with respect to the beneficial ownership of 30DC, Inc. outstanding common stock by: o each person who is known by 30DC to be the beneficial owner of five percent (5%) or more of 30DC's common stock; o 30DC's chief executive officer, its other executive officers, and each director as identified in the "Management-- Executive Compensation" section; and o all of the Company's directors and executive officers as a group. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Shares of common stock and options, warrants and convertible securities that are currently exercisable or convertible within 60 days of the date of this document into shares of the Company's common stock are deemed to be outstanding and to be beneficially owned by the person holding the options, warrants or convertible securities for the purpose of computing the percentage ownership of the person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person. The information below is based on the number of shares of 30DC, Inc. common stock that 30DC believes was beneficially owned by each person or entity as of June 30, 2012, including options exercisable within 60 days. -36-
NAME AND ADDRESS OF BENEFICIAL TITLE OF CLASS OWNER (1) BENEFICIAL OWNER AMOUNT AND NATURE OF PERCENT OF CLASS (2) ------------------------ -------------------------------- ----------------------- ------------------------- Common Restricted Edward Dale, Director, 20,036,440 27.47% President, CEO and Chairman of the Board (Directly and Beneficially through Marillion Partnership)(3) Common Restricted Clinton Carey, Director (4) 3,432,000 4.71% Common Restricted Gregory H. Laborde, Director, 2,957,250 4.06% Former President, CEO, and Chairman of the Board (Beneficially through GHL Group, Ltd.) Common Restricted Theodore A. Greenberg, CFO, 1,580,770 2.17% Secretary and Director Common Restricted Pierce McNally, Director 192,500 0.26% Common Restricted Dan Raine (Beneficially 10,560,000 14.48% through Raine Ventures, LLC) Common Restricted All Directors and Executive 28,198,960 38.67% Officers as a Group (5 persons) ------------------------ (1) All directors can be reached at the address of the Company. (2) At June 30, 2012, the Company had 72,928,421 shares of its common stock issued and outstanding. The Company had 600,000 options issued and outstanding, but the options are not included in this calculation as the Company considers them to be "out of the money" and does not expect the status to change in the next 60 days. (3) Mr. Dale resigned as Chairman of the Board on January 31, 2013 and remains a Director. (4) Mr. Carey resigned as Chief Operating Officer on March 1, 2012 and resigned as a director on October 11, 2012. Rule 13d-3 under the Securities Exchange Act of 1934 governs the determination of beneficial ownership of securities. That rule provides that a beneficial owner of a security includes any person who directly or indirectly has or shares voting power and/or investment power with respect to such security. Rule 13d-3 also provides that a beneficial owner of a security includes any person who has the right to acquire beneficial ownership of such security within sixty days, including through the exercise of any option, warrant or conversion of a security. Any securities not outstanding which are subject to such options, warrants or conversion privileges are deemed to be outstanding for the purpose of computing the percentage of outstanding securities of the class owned by such -37-
person. Those securities are not deemed to be outstanding for the purpose of computing the percentage of the class owned by any other person. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ------------------------------------------------------- RELATED PARTY TRANSACTIONS During the years ended June 30, 2012 and 2011, Marillion Partnership ("Marillion"), a company affiliated with Edward Dale was paid contractor fees of $328,376 and $359,864 respectively. Mr. Dale is CEO, President and Chairman of the Board of the Company. During the year ended June 30, 2012, Marillion was paid $158,139 AUD ($159,183 USD) in fees beyond their contracted amount. On June 28, 2012, this excess amount was settled by Marillion surrendering 1,591,827 of the Company's common shares, which it held and the Company has canceled these shares. During the years ended June 30, 2012 and 2011, Jesselton, Ltd. ("Jesselton"), a company affiliated with Clinton Carey earned contractor fees $175,052 and $200,000 respectively. Mr. Carey resigned as COO of the Company on March 1, 2012 and resigned as a Director of the Company on October 11, 2012. During the year ended June 30, 2012 and 2011, Raine Ventures, LLC (collectively "Raine V"), companies affiliated with Dan Raine earned $250,000 in contractor fees in each year. Mr. Raine has beneficial ownership of 14.48% of the Company. During the years ended June 30, 2012 and 2011, Theodore A. Greenberg earned salary of $200,000 each year. Mr. Greenberg is CFO and a Director of the Company. On October 11, 2012 Mr. Greenberg was issued 1,500,000 options to purchase shares of the Company's common stock. On October 11, 2012 1,500,000 options to purchase shares of the Company's common stock were issued to Henry Pinskier who is a Director and who subsequently became Chairman of the Board. Effective July 15, 2012, the Company entered into a six-month Consulting Services Agreement with GHL Group, Ltd., whose President, Gregory H. Laborde is a Director. Pursuant to the Consulting Services Agreement, GHL Group received 500,000 shares of the Company's restricted common stock and payments of $3,000 monthly for services including but not limited to evaluation of financial forecasts, assisting in the development of business and financial plans and assisting in the identification of potential acquisitions and financial sources. The contract expired January 15, 2013 and has continued on a month to month basis under the terms of the expired agreement. 30DC DE entered into a three-year Contract For Services Agreement commencing July 2009 with the Marillion Partnership ("Marillion") for services which includes Mr. Edward Dale acting as the Company's Chief Executive Officer providing for among other things, the payment of $250,000 in cash remuneration per year. On December 12, 2011 cash remuneration under the Marillion contractor agreement was amended for the year ended June 30, 2012 to the Australian Dollar equivalent of the originally contracted amount at the exchange rate on the contract start date of July 15, 2009. The original annual contract amount of $250,000 was amended to $317,825 AUD Dollars Effective July 1, 2012 the United States Dollar equivalent amount varies with the exchange rate. If in any year starting from the commencement date, revenues of 30DC doubled then Marillion would be due shares in 30DC, Inc. equal to 50% of cash remuneration as additional compensation; this threshold was not achieved during the term of the contract. The Marillion contractor agreement expired June 30, 2012 and has continued on a month to month basis under the terms of the expired agreement. -38-
30DC DE entered into a three-year Contract For Services Agreement commencing July 2009 with 23V Industries, Ltd. ("23V") for services which include Mr. Dan Raine acting as the Company's Vice President of Business Development providing for among other things, the payment of $250,000 in cash remuneration per year. Effective April 1, 2010, Raine Ventures, LLC ("Raine Ventures") replaced 23V Industries, Ltd in providing consulting services to the Company including Mr. Raine acting as the Company's Vice President of Business Development. If in any year starting from the commencement date, revenues of 30DC, Inc. doubled then Raine Ventures will be due shares in 30DC equal to 50% of cash remuneration as additional compensation; this threshold was not achieved during the term of the contract.. The Raine Ventures contractor agreement expired June 30, 2012 and has continued on a month to month basis under the terms of the expired agreement. The Company entered into three-year Contract For Services Agreements commencing July 2009 with Jesselton, Ltd. ("Jesselton") for services which include Mr. Clinton Carey acting as the Company's Chief Operating Officer providing for among other things, the payment of $200,000 in cash remuneration per year. On December 12, 2011 cash remuneration under the Jesselton contractor agreement was amended for the year ended June 30, 2012 to the Australian Dollar equivalent of the originally contracted amount at the exchange rate on the contract start date of July 15, 2009. The original annual contract amount of $200,000 was amended to $254,260 AUD Dollars Effective July 1, 2012 the United States Dollar equivalent amount varies with the exchange rate. If in any year starting from the commencement date, revenues of 30DC doubled then Jesselton will be due shares in 30DC, Inc. equal to 50% of cash remuneration as additional compensation; this threshold was not achieved during the term of the contract. Jesselton voluntarily withdrew from its contract with the Company effective March 1, 2012 and Mr. Carey resigned as Chief Operating Officer. In August, 2008, 30DC contracted with two consultants in connection with the acquisition and merger process which resulted in signing of the Agreement with Infinity. Compensation under both consulting agreements was contingent on completion of the transaction with Infinity. Upon execution of the Agreement $250,000 (US) was owed to Jesselton, Ltd , a consulting firm which Mr. Carey, former COO and formerly a Director of the Company, is associated with and $250,000 (Australian) was owed to the other consultant. $125,000 of the amount due to Jesselton was satisfied by issuance of 480,770 of the Company's common shares. During the years ended June 30, 2012 and 2011, Jesselton was paid $0- and $17,000 pursuant to the contract. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES ----------------------------------------------- GENERAL. Marcum, LLP ("Marcum") is the Company's principal auditing accountant firm. The Company's Board of Directors has considered whether the provisions of audit services is compatible with maintaining independence. The following table represents aggregate fees billed to the Company for the years ended June 30, 2012 and 2011 by Marcum, LLP Year Ended June 30, 2012 2011 -------------------- ------------------ Audit Fees $ 206,010 $ 195,990 Audit-related Fees $ 0 $ 0 Tax Fees $ 0 $ 0 All Other Fees $ 0 $ 0 -------------------- ------------------ Total Fees $ 206,010 $ 195,990 -39-
PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES ------------------------------------------------ The following is a complete list of exhibits filed as part of this Form 10K. Exhibit number corresponds to the numbers in the Exhibit table of Item 601 of Regulation S-K. (a) Audited financial statements for years ended June 30, 2012 and 2011 (b) EXHIBIT NO. DESCRIPTION ---------- ------------------------------------------------------------- 3.1 Articles of Incorporation of Infinity Capital Group, Inc. (1) 3.2 Bylaws of Infinity Capital Group, Inc. (1) 31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act 31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act 32.1 Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act 32.2 Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act 101.INS XBRL Instance Document (2) 101.SCH XBRL Taxonomy Extension Schema Document (2) 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document (2) 101.LAB XBRL Taxonomy Extension Label Linkbase Document (2) 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document (2) ----------- (1) Incorporated by reference from the exhibits included in the Company's Form 8K12g3 filed with the Securities and Exchange Commission (www.sec.gov), dated May 5, 2005. A copy can be provided by mail, free of charge, by sending a written request to 30DC, Inc., 80 Broad Street, 5th Floor, NY, NY 10004. (2) Pursuant to Rule 406T of Regulation S-T, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections. -40-
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. 30DC, Inc. Dated: June 3, 2013 By: /s/ Edward Dale ------------------------------------------ Edward Dale, President, Chief Executive Officer and Director By: /s/ Theodore A. Greenberg ------------------------------------------ Theodore A. Greenberg, Chief Financial Officer (Principal Accounting Officer), Secretary and Director Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Dated: June 3, 2013 30DC , Inc. -------------------------------------- /s/ Edward Dale -------------------------------------- Edward Dale, Director /s/ Theodore A. Greenberg -------------------------------------- Theodore A. Greenberg, Director /s/ Henry Pinskier -------------------------------------- Henry Pinskier, Director /s/ Gregory Laborde -------------------------------------- Gregory Laborde, Director /s/ Pierce McNally -------------------------------------- Pierce McNally, Director -41-