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

                                    FORM 10-Q

(Mark One)

[ X  ] QUARTERLY  REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES  EXCHANGE
       ACT OF 1934

                  For Quarterly Period Ended September 30, 2014

                                       or

[    ] TRANSITION  REPORT UNDER 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
---------------------------------           ------------------------------------
 (State or other jurisdiction of            (I.R.S. Employer Identification No.)
  incorporation or organization)


                 80 BROAD STREET, 5TH FLOOR, NEW YORK, NY 10004
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               (Address of principal executive offices) (Zip Code)

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


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              (Former name, former address and former fiscal year,
                          if changed since last report)


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

                                            Yes[_x_]          No[__]

Indicate by check mark whether the registrant has submitted  electronically  and
posted on its corporate Web site, if any, every  Interactive  Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.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 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_] Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date. As of November 14, 2014, the number of shares outstanding of the registrant's class of common stock was 76,853,464.
TABLE OF CONTENTS PAGE PART I - FINANCIAL INFORMATION Item 1. Financial Statements 2 Condensed Consolidated Balance Sheets (Unaudited) as of September 30, 2014 and June 30, 2014 3 Condensed Consolidated Statements of Operations (Unaudited) for the Three Months Ended September 30, 2014 and 2013 4 Condensed Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended September 30, 2014 and 2013 5 Notes to Condensed Consolidated Financial Statements (Unaudited) 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 12 Item 3. Quantitative and Qualitative Disclosures About Market Risk 16 Item 4. Controls and Procedures 16 PART II - OTHER INFORMATION Item 1. Legal Proceedings 18 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 18 Item 3. Defaults upon Senior Securities 18 Item 4. Mine Safety Disclosures 18 Item 5. Other Information 18 Item 6. Exhibits 18 Signatures 19 -1-
PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ---------------------------- -2-
30DC, INC. AND SUBSIDIARY Condensed Consolidated Balance Sheets September June 30, 2014 30, 2014 ---------------- ------------------- Unaudited Assets Current Assets Cash and Cash Equivalents $ 144,612 $ 102,684 Restricted Cash 126,835 83,730 Accrued Commissions Receivable 6,031 12,706 Accounts Receivable 149,185 38,313 Prepaid Expenses 23,598 24,291 Assets of Discontinued Operations 87,485 116,313 ---------------- ------------------- Total Current Assets 537,746 378,037 Property and Equipment, Net 18,538 19,066 Intangible Assets, Net 203,500 220,000 Goodwill 2,027,564 2,027,564 ---------------- ------------------- Total Assets $ 2,787,348 $ 2,644,667 ================ =================== Liabilities and Stockholders' Equity Current Liabilities Accounts Payable $ 188,626 $ 190,228 Accrued Expenses and Refunds 688,491 625,565 Deferred Revenue 124,654 90,716 Due to Related Parties 815,390 805,483 Liabilities of Discontinued Operations 213,526 216,548 ---------------- ------------------- Total Current Liabilities 2,030,687 1,928,540 ---------------- ------------------- Total Liabilities 2,030,687 1,928,540 ---------------- ------------------- Stockholders' Equity Preferred Stock, Par Value $0.001, 10,000,000 Authorized, -0- Issued - - Common Stock, Par Value $0.001, 100,000,000 authorized, 76,853,464 issued and outstanding 76,853 76,853 Paid in Capital 3,835,460 3,826,606 Accumulated Deficit (3,052,794) (3,084,474) Accumulated Other Comprehensive Loss (102,858) (102,858) ---------------- ------------------- Total Stockholders' Equity 756,661 716,127 ---------------- ------------------- Total Liabilities and Stockholders' Equity $ 2,787,348 $ 2,644,667 ================ =================== The accompanying notes are an integral part of the unaudited condensed consolidated financial statements. -3-
30DC, INC. AND SUBSIDIARY Condensed Consolidated Statements of Operations Three Months Ended September 30 Unaudited 2014 2013 --------------- ------------------ Revenue Commissions $ 13,935 $ 18,974 Subscription Revenue 29,954 - Products and Services 656,178 1,923,905 --------------- ------------------ Total Revenue 700,067 1,942,879 Operating Expenses 638,081 1,285,282 --------------- ------------------ Operating Income 61,986 657,597 Other Income Forgiveness of Debt - 87,253 --------------- ------------------ Total Other Income - 87,253 --------------- ------------------ Income From Continuing Operations 61,986 744,850 Loss From Discontinued Operations (30,306) (8,012) --------------- ------------------ Net Income $ 31,680 $ 736,838 =============== ================== Weighted Average Common Shares Outstanding Basic 76,853,464 87,069,922 Diluted 77,398,919 87,454,537 Earnings (Loss) Per Common Share (Basic) Continuing Operations $ 0.00 $ 0.01 Discontinued Operations (0.00) (0.00) Net Income (Loss) Per Common Share $ 0.00 $ 0.01 Earnings (Loss) Per Common Share (Diluted) Continuing Operations $ 0.00 $ 0.01 Discontinued Operations (0.00) (0.00) Net Income (Loss) Per Common Share $ 0.00 $ 0.01 The accompanying notes are an integral part of the unaudited condensed consolidated financial statements. -4-
30DC, INC. AND SUBSIDIARY Condensed Consolidated Statements of Cash Flows Three Months Ended September 30 Unaudited 2014 2013 --------------- ---------------- Cash Flows from Operating Activities: Net Income $ 31,680 $ 736,838 Loss From Discontinued Operations 30,306 8,012 Adjustments to Reconcile Income from Continuing Operations to Net Cash Provided By Operations Depreciation and Amortization 18,328 20,335 Equity Based Payments To Employees 8,854 24,764 Gain on Debt Forgiveness - (87,253) Changes in Operating Assets and Liabilities Restricted Cash (43,105) (163,472) Accrued Commissions Receivable 6,675 18,498 Accounts Receivable (110,872) (703,053) Prepaid Expenses 693 (3,589) Accounts Payable (1,602) 356,231 Accrued Expenses and Refunds 62,926 514,257 Deferred Revenue 33,938 88,367 Due to Related Parties 9,907 (245,762) --------------- ---------------- Net Cash Provided By Operating Activities 47,728 564,173 --------------- ---------------- Cash Flows from Investing Activities Purchases of Property and Equipment (1,300) (3,298) --------------- ---------------- Net Cash Used in Investing Activitities (1,300) (3,298) --------------- ---------------- Cash Flows from Discontinued Operations Cash Flows From Operating Activities (4,500) (37,262) --------------- ---------------- Net Cash Used in Discontinued Operations (4,500) (37,262) --------------- ---------------- Increase in Cash and Cash Equivalents 41,928 523,613 Cash and Cash Equivalents - Beginning of Period 102,684 116,372 --------------- ---------------- Cash and Cash Equivalents - End of Period $ 144,612 $ 639,985 =============== ================ Supplemental Disclosures of Non Cash Financing Activity Cash paid during the period for: Interest $ 1,332 $ 25,211 Income taxes 300 - Common Stock Issued to Settle Liabilities $ - $ 54,100 The accompanying notes are an integral part of the unaudited condensed consolidated financial statements. -5-
30DC, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2014 (UNAUDITED) NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -------------------------------------------------- BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles ("GAAP") and with instructions to Form-10Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information required by GAAP for a complete set of financial statements. In the opinion of management, all adjustments, (including normal recurring accruals) considered necessary for a fair presentation have been included in the financial statements. Operating results for the interim period are not necessarily indicative of the results that may be expected for the fiscal year ended June 30, 2015 or any other period. In addition, the balance sheet data at June 30, 2014 was derived from the audited financial statements but does not include all disclosures required by GAAP. This Form 10-Q should be read in conjunction with the Audited Financial Statements for the year ended June 30, 2014 included in the Company's annual report on Form 10-K which was filed on October 10, 2014. The unaudited condensed consolidated financial statements include the accounts of 30DC, Inc., (f/k/a Infinity Capital Group, Inc.) and its subsidiary 30DC, Inc., Delaware, ("30DC DE"). REVENUE RECOGNITION The Company offers customers the option to purchase its digital products for a single payment or for a higher price consisting of a down payment and additional payments over a period of time which can be as long as one year. Pursuant to ASC 605 the Company has determined that revenue is realizable and the earnings process is complete and the four criteria for revenue recognition stated in SAB Topic 13 are met at the time of the initial purchase. Accordingly, the Company deems the sale to have occurred at the time of initial purchase and records the full amount paid and/or due from a customer as revenue. Typically customers are offered a period to review the product and request a refund and if a refund is requested the company reverses the revenue which was recorded at the time of the sale. The Company records a liability for future refunds and reduces revenue by that amount. If a customer defaults on an additional payment, the customer loses access to the digital product. Based upon its past experience with extended payment plans, the Company has estimated the number of future defaulted payments and has reduced revenue and accounts receivable by that amount. For an additional charge, the Company offers customers ancillary services which are not required to be purchased with a product. These services include additional technical support and/or specific product services. The Company recognizes revenue when the service is completed; receipts for services which have not been completed are included in deferred revenue. 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 loss per share available to common stockholders by the weighted average number of shares outstanding for the period and excludes the effects of any potentially dilutive securities. Diluted earnings per share, includes the dilution that would occur upon the exercise or conversion of all potentially dilutive securities into common stock using the "treasury stock" and/or "if converted" methods as applicable. In computing diluted earnings per share for the three month period ended September 30, 2014, the Company has included as outstanding 2,000,000 options which are exercisable and have an exercise price below the average market price for the Company's shares during the period. In computing diluted earnings per share for the three month period ended September 30, 2013, the Company has included as outstanding 1,000,000 options which are exercisable and have an exercise price below the average market price for the Company's shares during the period. -6-
30DC, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2014 (UNAUDITED) NOTE 2. GOING CONCERN --------------------- The condensed 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 September 30, 2014, the Company had a working capital deficit of approximately $1,493,000 and had accumulated losses of approximately $3,053,000 since its inception. The Company's ability to continue as a going concern is dependent upon its ability to obtain the necessary financing or to earn profits from its business operations to meet its obligations and pay its liabilities arising from normal business operations when they come due. In the past few years, the Company switched its focus to developing its own products. In May 2012, the Company launched MagCast which the Company expects to be an integral part of its businesses on an ongoing basis. MagCast is being sold directly to customers and through an affiliate network which expands the Company's selling capability and has a broad target market beyond the Company's traditional customer base. In April of 2014, the Company began offering the Ultimate Product System which incorporates 30DC's digital marketing platform Market Pro Max. Until the Company achieves sustained profitability it does not have sufficient capital to meet its needs and continues to seek loans or equity placements to cover such cash needs. No commitments to provide additional funds have been made and there can be no assurance that any additional funds will be available to cover expenses as they may be incurred. If the Company is unable to raise additional capital or encounters unforeseen circumstances, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, issuance of additional shares of the Company's stock to settle operating liabilities which would dilute existing shareholders, curtailing its operations, suspending the pursuit of its business plan and controlling overhead expenses. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all. These conditions raise substantial doubt about the Company's ability to continue as a going concern. These condensed 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. For the past few years, the Company offered MagCast through a once per year large-scale promotion for which the majority of sales were through marketing affiliates which are unrelated parties who earn commissions by referring customers to the Company and a majority of the Company's annual sales were during the promotion. The Company held a smaller promotion through marketing affiliates in July 2014 than in prior years. The Company does not expect to have a large-scale promotion during this fiscal year. NOTE 3. DIVESTITURE ------------------- Effective February 28, 2014, the Company divested assets and liabilities that made up its Immediate Edge subscription business ("Edge") to Raine Ventures, LLC ("Raine") in exchange for the 10,560,000 common shares of the Company which Raine had held. Included with the Edge business was cash of approximately $1,000 and intangible assets including goodwill of approximately $225,000. Raine assumed liability for deferred revenue of approximately $19,000. The Company recorded zero gain or loss on the divestiture. Operating results for the Edge have been reclassified as discontinued operations for the three months ended September 30, 2013 (see note 4). Raine had been party to a contractor agreement with the Company which had expired in 2012 and was extended on a month to month basis and was terminated concurrent with the divestiture. -7-
30DC, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2014 (UNAUDITED) NOTE 4. DISCONTINUED OPERATIONS ------------------------------- The Company has included two businesses in discontinued operations; the Immediate Edge business which was divested effective February 28, 2014 (see note 3) and the business of Infinity which was discontinued after the share exchange with 30DC DE on September 10, 2010. Prior to the share exchange, Infinity withdrew its election to operate as a Business Development Company ("BDC") under the Investment Company Act of 1940 ("1940 Act"). Infinity historically operated as a non-diversified, closed-end management investment company and prepared its financial statements as required by the 1940 Act. 30DC is no longer actively operating the BDC and the assets, liabilities and results of operations of Infinity's former business are shown as discontinued operations in the Company's financial statements subsequent to the share exchange with 30DC. Investment companies report assets at fair value and the Company has continued to report investment assets in discontinued operations on this basis. Results of Discontinued Operations for the THREE MONTHS ENDED SEPTEMBER 30, 2014 THREE MONTHS ENDED SEPTEMBER 30, 2013 ---------------------------------------- ------------------------------------- IMMEDIATE EDGE INFINITY TOTAL IMMEDIATE EDGE INFINITY TOTAL -------------- ------------ --------- -------------- ---------- ---------- Revenues $ - $ - $ - $ 97,069 $ - $ 97,069 Operating expenses - 1,478 1,478 105,093 1,930 107,023 Income (Loss) from operations - (1,478) (1,478) (8,024) (1,930) (9,954) Forgiveness of debt - - - - 796 796 Realized gain on marketable securities - - - - - - Unrealized gain (loss) on marketable securities - (28,828) (28,828) - 1,146 1,146 ---------------------------------------- ------------------------------------- Net Income (Loss) $ - $ (30,306) $ (30,306) $ (8,024) $ 12 $ (8,012) ======================================== ===================================== Assets and Liabilities of Discontinued Operations as of SEPTEMBER 30, 2014 JUNE 30, 2014 --------------------------------------- -------------------------------------- IMMEDIATE EDGE INFINITY TOTAL IMMEDIATE EDGE INFINITY TOTAL -------------- ----------- ---------- --------------- -------- --------- Assets Cash $ - $ - $ - $ - $ - $ - Prepaid expenses - - - - - - Marketable securities - 87,485 87,485 - 116,313 116,313 --------------------------------------- --------------------------------------- Total Current Assets - 87,485 87,485 - 116,313 116,313 Goodwill - - - - - - --------------------------------------- --------------------------------------- Total Assets of Discontinued Operations $ - $ 87,485 $ 87,485 $ - $116,313 $ 116,313 ======================================= ======================================= LIABILITIES Accounts payable $ - $ 72,201 $ 72,201 $ - $ 72,201 $ 72,201 Accrued expenses - 63,775 63,775 - 62,297 62,297 Deferred revenue - - - - - - Notes payable - 56,550 56,550 - 61,050 61,050 Due to related parties - 21,000 21,000 - 21,000 21,000 --------------------------------------- --------------------------------------- Total Liabilities of Discontinued Operations $ - $ 213,526 $ 213,526 $ - $216,548 $ 216,548 ======================================= ======================================= Notes Payable Included in liabilities of discontinued operations at September 30, 2014 and June 30, 2014 are $56,550 and $61,050 respectively in notes payable plus related accrued interest of which are all in default for lack of repayment by their due date. -8-
30DC, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2014 (UNAUDITED) For the three months ended September 30, 2014 and September 30, 2013 the Company incurred interest expense on notes payable of $1,478 and $1,897 respectively which is included in the Statement of Operations under income (loss) from discontinued operations. Marketable Securities At September 30, 2014 the fair value of marketable securities held for sale was $87,485 which included cumulative net unrealized gains of $21,045. June 30, 2014 the fair value of marketable securities held for sale was $116,313 which included cumulative net unrealized gains of $49,873. NOTE 5. RELATED PARTY TRANSACTIONS ---------------------------------- At September 30, 2014, due to related parties totaled $815,390. This consisted of $4,900 due to GHL Group, Ltd., whose President, Gregory H. Laborde is a Director, under their consulting services agreement, $121,500 accrued for directors' fees for services of non-executive directors and $689,000 due to Theodore A. Greenberg, CFO and director, for compensation. NOTE 6. INCOME TAXES -------------------- As of June 30, 2014, the Company had net operating loss carryovers for United States income tax purposes of approximately $925,300, which begin to expire in 2030. For income tax purposes, net income for the three month period ended September 30, 2014 is completely offset by the net operating loss carryovers; accordingly no income tax provision has been provided. For future periods, 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 as determined under the regulations. NOTE 7. STOCKHOLDERS' EQUITY ---------------------------- COMMON STOCK During the three months ended September 30, 2014, the Company did not issue any common stock. WARRANTS Information relating to outstanding warrants is as follows: Weighted Weighted Average Number Average Remaining of Exercise Contract Shares Price Life (years) ------------------------------------------ Outstanding warrants at 06/30/14 3,401,522 $ 0.50 1.30 Granted - - - Exercised - - - Forfeited/expired - - - Outstanding warrants at 9/30/14 3,401,522 0.50 1.05 Exercisable on 9/30/14 3,401,522 0.50 1.05 The aggregate intrinsic value of warrants outstanding and exercisable was $0 at September 30, 2014. Total intrinsic value of warrants exercised was $0 for the three months ended September 30, 2014 as no warrants were exercised during this period. -9-
30DC, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2014 (UNAUDITED) NOTE 8. STOCK BASED COMPENSATION PLANS -------------------------------------- The Company follows FASB Accounting Standards Codification No. 718 - Compensation - Stock Compensation for share based payments to employees. The Company follows FASB Accounting Standards Codification No. 505 for share based payments to Non-Employees. The Company recognized expense in the amount of $8,854 and $24,764 for the three months ended September 30, 2014 and September 30, 2013 respectively for options granted in prior periods the cost of which is being recorded on a straight-line basis over the vesting period. There was no impact on the Company's cash flow. Further information relating to stock options is as follows: WEIGHTED WEIGHTED AVERAGE NUMBER AVERAGE REMAINING OF EXERCISE CONTRACT SHARES PRICE LIFE (YEARS) ------------------------------------------- Outstanding options at 06/30/14 3,600,000 $ 0.18 7.61 Granted - - - Exercised - - - Forfeited/expired - - - Outstanding options at 9/30/14 3,600,000 0.18 7.36 Exercisable on 9/30/14 2,600,000 0.22 7.10 The options have a contractual term of ten years. The aggregate intrinsic value of options outstanding and exercisable was $0 at September 30, 2014. Total intrinsic value of options exercised was $0 for the three months ended September 30, 2014 as no options were exercised during this period. At September 30, 2014, shares available for future stock option grants to employees and directors under the 2012 Stock Option Plan were 4,500,000. -10-
30DC, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2014 (UNAUDITED) NOTE 9. SUPPLEMENTAL SCHEDULE OF OPERATING EXPENSES --------------------------------------------------- Three Months Ended Three Months Ended September 30, 2014 September 30, 2013 -------------------- ------------------- Related Party Contractor Fees (1) $ 164,184 $ 159,508 Officer's Salary 37,427 62,382 Directors' Fees 31,927 39,882 Independent Contractors 106,376 118,168 Commission Expense 144,738 719,348 Professional Fees 57,204 34,829 Credit Card Processing Fees 26,253 96,934 Telephone and Data Lines 10,052 6,106 Other Operating Costs 59,920 48,125 -------------------- ------------------- Total Operating Expenses $ 638,081 $ 1,285,282 ==================== =================== --------------------------------------------------------------------- (1) Related party contractors include Marillion an affiliate of the Company that manages marketing and development for the Company and provides the services of Edward Dale as Chief Executive Officer of the Company, GHL Group, Ltd., whose President, Gregory H. Laborde is a Director and Netbloo which was the joint developer of the MagCast Publishing Platform -11-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -------------------------------------------------------------------------------- THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH OUR UNAUDITED FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED HEREIN. IN CONNECTION WITH, AND BECAUSE WE DESIRE TO TAKE ADVANTAGE OF, THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995, WE CAUTION READERS REGARDING CERTAIN FORWARD LOOKING STATEMENTS IN THE FOLLOWING DISCUSSION AND ELSEWHERE IN THIS REPORT AND IN ANY OTHER STATEMENT MADE BY, OR ON OUR BEHALF, WHETHER OR NOT IN FUTURE FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION. FORWARD-LOOKING STATEMENTS ARE STATEMENTS NOT BASED ON HISTORICAL INFORMATION AND WHICH RELATE TO FUTURE OPERATIONS, STRATEGIES, FINANCIAL RESULTS OR OTHER DEVELOPMENTS. FORWARD LOOKING STATEMENTS ARE NECESSARILY BASED UPON ESTIMATES AND ASSUMPTIONS THAT ARE INHERENTLY SUBJECT TO SIGNIFICANT BUSINESS, ECONOMIC AND COMPETITIVE UNCERTAINTIES AND CONTINGENCIES, MANY OF WHICH ARE BEYOND OUR CONTROL AND MANY OF WHICH, WITH RESPECT TO FUTURE BUSINESS DECISIONS, ARE SUBJECT TO CHANGE. THESE UNCERTAINTIES AND CONTINGENCIES CAN AFFECT ACTUAL RESULTS AND COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED IN ANY FORWARD LOOKING STATEMENTS MADE BY, OR ON OUR BEHALF. WE DISCLAIM ANY OBLIGATION TO UPDATE FORWARD-LOOKING STATEMENTS. OVERVIEW On September 10, 2010, Infinity Capital Group, Inc., a Maryland Corporation, ("Infinity") entered into a Plan and Agreement of Reorganization (the "Agreement") with 30DC, Inc., a Delaware corporation, ("30DC DE") and the Shareholders of 30DC DE ("30DC DE Shareholders."). In exchange for 100% of the issued and outstanding shares of 30DC DE, Infinity issued 60,984,000 shares of its restricted common stock. The 30DC DE Shareholders received 13.2 shares of common stock of Infinity for every one share of 30DC DE. Infinity, as a result of the transaction, became the owning entity of 100% of the outstanding shares of common stock of 30DC DE. For purposes of accounting, 30DC DE was considered the accounting acquirer. The business of 30DC DE became the primary business of Infinity. Infinity was renamed 30DC, Inc. (Maryland) ("30DC" and together with its subsidiary "the Company."). 30DC DE was incorporated on October 17, 2008 in the state of Delaware, as a holding company, for the purpose of building, acquiring and managing international web-based sales and marketing companies. On July 15, 2009, 30DC DE completed the acquisitions of the business and assets of 30 Day Challenge ("30 Day") and Immediate Edge ("Immediate"). In May of 2012 the Company signed a joint venture agreement ("JV Agreement") with Netbloo Media, Ltd. ("Netbloo") for the MagCast Publishing Platform ("MagCast") which was jointly developed. MagCast provides customers access to a cloud-based service to create an application ("App") to publish a digital magazine on the digital distribution platforms Apple Newsstand and Google Play and includes executive training modules to develop and market a digital magazine. MagCast was launched in May 2012 and a majority of sales were the result of affiliate marketing relationships which result in commission of 50% of gross revenue for those sales to the affiliate responsible for the sale. In October 2012 the Company reached an agreement to purchase Netbloo's 50% interest in the MagCast JV Agreement and Market Pro Max an online marketing platform that allows anyone to create digital products and quickly build a variety of eCommerce marketing websites for a purchase price of 13,487,363 shares of the Company's common stock. Effective February 28, 2014, the Company divested assets and liabilities that made up to Raine Ventures, LLC ("Raine") in exchange for the 10,560,000 common shares of the Company which Raine had held. Please see Note 3 for further details on the divestiture. -12-
30DC offers internet marketing services and related training that help Internet companies in marketing and operating their businesses. 30DC's core business platforms are MagCast and Market Pro Max. Other revenue streams include sales of instructional courses and from commissions on third party products sold via introduction to the 30DC customer base of active online participants and subscribers which are referred to as affiliate marketing commissions. The Company has continued to update the MagCast platform and released version 4 in the summer of 2013 which enabled customers to offer a version of their magazine tailored for the IPhone which significantly expanded the potential number of magazine readers. MagCast version 6 released in July 2014 enables customers to publish on Google Play where their digital magazine is available to users of Android Devices. The Company now offers ancillary services to assist customers in creating their Apps and provides customers with training in developing and marketing their digital publications. 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. RESULTS OF OPERATIONS FOR THE THREE MONTH PERIOD ENDED SEPTEMBER 30, 2014 COMPARED TO THE THREE MONTH PERIOD ENDED SEPTEMBER 30, 2013. During the three months ended September 30, 2014, 30DC, Inc. recognized revenues of $700,067 from continuing operations compared to $1,942,879 during the three months ended September 30, 2013. Revenues from continuing operations were from the following sources during the three months ended September 30, 2014 compared to September 30, 2013. Three Months Ended Three Months Increase September 30, Ended or 2014 September 30, 2013 (Decrease) ------------------- -------------------- -------------- Revenue Commissions $ 13,935 $ 18,974 $ (5,039) Subscription Revenue 29,954 - 29,954 Products and Services 656,178 1,923,905 (1,267,727) ------------------- -------------------- -------------- Total Revenues $ 700,067 $ 1,942,879 $ (1,242,812) The $29,954 increase in subscription revenue was due to a new online forum subscription product which was launched in April 2014 and has a recurring monthly charge. The $1,267,727 decrease in products and services revenue was mainly due to a decrease of $1,289,113 in revenue from the MagCast Publishing Platform which resulted from a smaller launch promotion in July 2014 than August 2013. This was partially offset by a $19,964 increase in sales of Market Pro Max including the Ultimate Product System which is a training program that includes a lifetime license for one Market Pro Max marketing web site. During the three months ended September 30, 2014, the Company incurred $638,081 in operational expenses for continuing operations compared to $1,285,282 during the three months ended September 30, 2013. Operational expenses during the three months ended September 30, 2014 and 2013, include the following categories: -13-
Three Months Three Months Increase Ended Ended or September 30, 2014 September 30, 2013 Decrease ------------------ ------------------ -------- Accounting Fees $ 51,250 $ 22,207 $ 29,043 Advertising 11,386 192 11,194 Credit Card Processing Fees 26,253 96,934 (70,681) Commissions 144,738 719,348 (574,610) Independent Contractors 106,376 118,168 (11,792) Depreciation and Amortization 18,328 20,335 (2,007) Directors' Fees 31,927 39,882 (7,955) Internet Expenses 8,561 8,255 306 Legal Fees 5,954 12,622 (6,668) Officer's Salaries 37,427 62,382 (24,955) Related Party Contractors 164,184 159,508 4,676 Telephone and Data Lines 10,052 6,106 3,946 Other Operating Expenses 21,645 19,343 2,302 ------------------------------------------------- Total Operating Expenses $ 638,081 $ 1,285,282 $(647,201) ================================================= The increase of $29,043 in accounting fees was primarily due to $10,750, including a one-time setup fee of $4,750, paid to an e-commerce accounting firm which was engaged July 2014 to automate and administer recording and reconciling 30DC's daily transactions, and an increase of $17,793 in charges from the Company's independent auditing firm due to a delay in timing of the Company's audit for the fiscal year ending June 30, 2013 which resulted in charges being delayed beyond September 30, 2013. The increase of $11,194 in advertising is due to the Company advertising its digital products on Facebook and the cost of marketing consultant who helped with the advertising campaign. The decrease of $70,681 in credit card processing fees resulted from the $1,242,812 decrease in revenue and a decrease of approximately 1% in the effective credit card processing rate. The decrease of $574,610 in commissions resulted from the $1,267,727 decrease in products and services revenue, a significant portion of which are sales marketing affiliate relationships which result in commission expense. The decrease of $11,792 in independent contractors is primarily due to the Company terminating its relationship with two long-term contractors, one at the end of July 2014, saving the Company approximately $9,000 per month, and one at the end of August 2014, saving the Company approximately $6,000 per month, offset by an increase of $6,000 per month to a contractor who has assumed additional responsibilities. The decrease of $7,955 in directors' fees is from a reduction in the charge for amortization of stock option expense over the vesting period, for stock options previously issued to Henry Pinskier, the Company's board chair, in the September 2014 quarter from the amount in the September 2013 quarter due to fewer options remaining unvested. The decrease of $6,668 in legal fees was due to a decrease in a number of items which went through legal review including press releases and nonrecurring cost for the legal review of a presubmission request to the SEC regarding reporting requirements of the Netbloo asset acquisition in the September 2013 quarter. The decrease of $24,955 in officer's salaries was due to a reduction in a reduction in base salary for Theodore A. Greenberg, the Company's CFO from $200,000 to $132,000 per year and a reduction in the charge for amortization of -14-
stock option expense over the vesting period, for stock options previously issued to Mr. Greenberg in the September 2014 quarter from the amount in the September 2013 quarter due to fewer options remaining unvested. During the three months ended September 30, 2014, the Company recognized a net income from continuing operations of $61,986 compared to a net income from continuing operations of $744,850 during the three months ended September 30, 2013. The decrease in net income from continuing operations of $682,864 was due to the decrease in revenue $1,242,812 offset by the decrease in operating expenses $647,201 and forgiveness of debt income of $87,253 in the September 2013 quarter. LIQUIDITY AND CAPITAL RESOURCES The Company had a cash balance of $144,612 at September 30, 2014 and the Company had a working capital deficit of $1,492,941. To fund working capital for the next 12 months, the Company expects to raise capital and to improve the results of operations from increasing revenue as well as a reduction in operating costs. The Company expects increased revenue from further sales of MagCast Publishing Platform through its Digital Publishing Blueprint training course and by marketing to customers outside its historical customer base with the goal of recurring revenue through annual licenses. The Company also expects increased revenue from further sales of Market Pro Max through its Ultimate Product System training course and introduction of new products some of which will be extensions of existing product lines. Additionally, the Company intends to increase funds available by raising capital, though at this time the Company has not commenced any offerings and cannot guarantee that they will be successful in its capital raising efforts. If the results of operations and capital raised, if any, are not sufficient to fund the Company's expenses as they come due, the Company will defer amounts due to related parties and to the extent possible utilize shares of the Company to satisfy its liabilities. Included in liabilities of discontinued operations at September 30, 2014 is $56,550 in notes payable plus related accrued interest that are in default for lack of repayment by their due date. During the three month period ended September 30, 2014, operating activities provided the Company with $47,728. During the three month period ended September 30, 2013, operating activities provided the Company with $564,173. The decrease of $516,445 in funds provided by operating activities was a combination of the decrease of net income from continuing operations of approximately $705,000, a decrease of approximately $358,000 in the change in accounts payable due to payment of affiliate commissions which were due at September 30, 2014 from the MagCast relaunch in August 2013, a decrease of approximately $451,000 in in the change accrued expenses and refunds due to payment of commissions which accrued on accounts receivable at September 30, 2013 and change in status of accrued contractor fees in the September 30, 2013 quarter from due to related parties because Clinton Carey was no longer a member of the Company's board. This was offset by a decrease in change in accounts receivable of approximately $592,000 due to the collection of accounts receivable from the MagCast relaunch in August 2013, a decrease to the change in due to related parties of approximately $256,000 because Clinton Carey was no longer a member of the Company's board, a decrease in change in the amount of restricted cash which is the amount held in reserve by the Company's credit card processor which was higher at September 30, 2014 due to the MagCast relaunch in August 2013 and a decrease of approximately $87,000 in forgiveness of debt income which was including in net income from continuing operations in the September 2013 quarter but did not generate cash. GOING CONCERN The condensed 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 September 30, 2014, the Company has a working capital deficit of approximately $1,493,000 and has accumulated losses of approximately $3,053,000 since its inception. The Company's ability to continue as a going concern is 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 the past few years, the Company switched its focus to developing its own products. -15-
In May 2012, the Company launched MagCast which the Company expects to be an integral part of its businesses on an ongoing basis. MagCast is being sold directly to customers and through an affiliate network which expands the Company's selling capability and has a broad target market beyond the Company's traditional customer base. In April of 2014, the Company began offering the Ultimate Product System which incorporates 30DC's digital marketing platform Market Pro Max. Until the Company achieves sustained profitability it does not have sufficient capital to meet its needs and continues to seek loans or equity placements to cover such cash needs. No commitments to provide additional funds have been made and there can be no assurance that any additional funds will be available to cover expenses as they may be incurred. If the Company is unable to raise additional capital or encounters unforeseen circumstances, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, issuance of additional shares of the Company's stock to settle operating liabilities which would dilute existing shareholders, curtailing its operations, suspending the pursuit of its business plan and controlling overhead expenses. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all. These conditions raise substantial doubt about the Company's ability to continue as a going concern. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ------------------------------------------------------------------ The Company earns the majority of its revenue in United States dollars ("USD") and pays a significant amount of its expense in Australian dollars ("AUD"). Material fluctuations in the exchange rate between USD and AUD may have material impact on the Company's results of operations. ITEM 4. CONTROLS AND PROCEDURES ------------------------------- DISCLOSURES CONTROLS AND PROCEDURES We have adopted and maintain disclosure controls and procedures (as such term is defined in Rules 13a 15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act, is recorded, processed, summarized and reported within the time periods required under the SEC's rules and forms and that the information is gathered and communicated to our management, including our Chief Executive Officer (Principal Executive Officer) and Principal Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. As required by SEC Rule 15d-15(b) for the quarter ended September 30, 2014, our Chief Executive Officer and Chief Financial Officer, carried out an evaluation under the supervision and with the participation of our management, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 15d-14 as of the end of the period covered by this report. Based on the foregoing evaluation, they have concluded that our disclosure controls and procedures are not effective in timely alerting them to material information required to be included in our periodic SEC filings and to ensure that information required to be disclosed in our periodic SEC filings is accumulated and communicated to our management, including our Chief Executive Officer, to allow timely decisions regarding required disclosure as a result of the deficiency in our internal control over financial reporting discussed below. MANAGEMENT'S QUARTERLY REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING. With the participation of our Chief Executive Officer and Chief Accounting Officer, we have evaluated the effectiveness of our "internal control over financial reporting" (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the " Exchange Act ")), as of the end of the period covered by this report. Based upon such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, our "internal control over financial reporting" is not effective due to the material weaknesses noted below, in ensuring that (i) -16-
information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms and (ii) information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. (1) 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. (2) 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. REMEDIATION OF MATERIAL WEAKNESS As our current financial condition allows, we are in the process of analyzing and developing our processes for the establishment of formal policies and procedures with necessary segregation of duties, which will establish mitigating controls to compensate for the risk due to lack of segregation of duties. In July 2014, the Company contracted an e-commerce accounting firm to automate a number of our accounting processes and to provide outsourced bookkeeping services that provide for segregation of some of the duties which previously had not been. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. There was no change in our internal control over financial reporting that occurred during the fiscal quarter ended September 30, 2014, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. -17-
PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS ------------------------- None. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS ------------------------------------------------------------------- During the period July 1, 2014 through September 30, 2014 the Company did not issue any equity securities. ITEM 3. DEFAULTS UPON SENIOR SECURITIES --------------------------------------- Included in liabilities of discontinued operations at September 30, 2014 is $56,550 in notes payable plus related accrued interest that are in default for lack of repayment by their due date. ITEM 4. MINE SAFETY DISCLOSURES ------------------------------- Not Applicable. ITEM 5. OTHER INFORMATION ------------------------- None. ITEM 6. EXHIBITS ---------------- The following is a complete list of exhibits filed as part of this Form 10-Q. Exhibit numbers correspond to the numbers in the Exhibit Table of Item 601 of Regulation S-K. ------------- ------------------------------------------------------------------ EXHIBIT NO. DESCRIPTION ------------- ------------------------------------------------------------------ 31.1 Section 302 Certification - CEO ------------- ------------------------------------------------------------------ 31.2 Section 302 Certification - CFO ------------- ------------------------------------------------------------------ 32.1 Section 906 Certification - CEO ------------- ------------------------------------------------------------------ 32.2 Section 906 Certification - CFO ------------- ------------------------------------------------------------------ 101.INS XBRL Instance Document (1) ------------- ------------------------------------------------------------------ 101.SCH XBRL Taxonomy Extension Schema Document (1) ------------- ------------------------------------------------------------------ 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document (1) ------------- ------------------------------------------------------------------ 101.DEF XBRL Taxonomy Extension Definition Linkbase Document (1) ------------- ------------------------------------------------------------------ 101.LAB XBRL Taxonomy Extension Label Linkbase Document (1) ------------- ------------------------------------------------------------------ 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document (1) -------------------------------------------------------------------------------- (1) 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. -18-
SIGNATURES Pursuant to the requirements of Section 12 of the Securities and 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. ------------------------------- Registrant Dated: November 14, 2014 By:/s/ Edward Dale ----------------------------- Edward Dale Principal Executive Officer Chief Executive Officer President Dated: November 14, 2014 By:/s/ Theodore A. Greenberg ----------------------------- Theodore A. Greenberg, Principal Accounting Officer Chief Financial Officer -19