10-Q 1 thirtydcmarch312015qvfinal.txt 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 March 31, 2015 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. ------------------------------------------------------------- (Exact name of registrant as specified in its charter) MARYLAND 16-1675285 --------------------------------- ------------------------------------ (State or other jurisdiction (I.R.S. Employer Identification No.) of incorporation or organization) 80 BROAD STREET, 5TH FLOOR, NEW YORK, NY 10004 ------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (212) 962-4400 ------------------------------------------------------------- Registrant's telephone number, including area code ------------------------------------------------------------- (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 May 13, 2015, the number of shares outstanding of the registrant's class of common stock was 76,853,464. TABLE OF CONTENTS PART I - FINANCIAL INFORMATION PAGE Item 1. Financial Statements 2 Condensed Consolidated Balance Sheets (Unaudited) as of March 31, 2015 and June 30, 2014 3 Condensed Consolidated Statements of Operations (Unaudited) for the Three and Nine Months Ended March 31, 2015 and 2014 4 Condensed Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended March 31, 2015 and 2014 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 20 Item 4. Controls and Procedures 20 PART II - OTHER INFORMATION Item 1. Legal Proceedings 22 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 22 Item 3. Defaults upon Senior Securities 22 Item 4. Mine Safety Disclosures 22 Item 5. Other Information 22 Item 6. Exhibits 22 Signatures 23 -1- PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ---------------------------- -2-

30DC, INC. AND SUBSIDIARY Condensed Consolidated Balance Sheets March June 31, 2015 30, 2014 ---------------- ------------------- Unaudited Assets Current Assets Cash and Cash Equivalents $ 44,148 $ 102,684 Restricted Cash 90,000 83,730 Accrued Commissions Receivable 11,036 12,706 Accounts Receivable 27,116 38,313 Prepaid Expenses 18,620 24,291 Assets of Discontinued Operations 86,750 116,313 ---------------- ------------------- Total Current Assets 277,670 378,037 Property and Equipment, Net 18,536 19,066 Intangible Assets, Net 170,500 220,000 Goodwill 2,027,564 2,027,564 ---------------- ------------------- Total Assets $ 2,494,270 $ 2,644,667 ================ =================== Liabilities and Stockholders' Equity Current Liabilities Accounts Payable $ 247,698 $ 190,228 Accrued Expenses and Refunds 610,978 625,565 Deferred Revenue 116,033 90,716 Due to Related Parties 1,056,685 805,483 Liabilities of Discontinued Operations 211,200 216,548 ---------------- ------------------- Total Current Liabilities 2,242,594 1,928,540 ---------------- ------------------- Total Liabilities 2,242,594 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 3,844,315 3,826,606 Accumulated Deficit (3,566,634) (3,084,474) Accumulated Other Comprehensive Loss (102,858) (102,858) ---------------- ------------------- Total Stockholders' Equity 251,676 716,127 ---------------- ------------------- Total Liabilities and Stockholders' Equity $ 2,494,270 $ 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 Unaudited For the Three Months Ended For the Nine Months Ended March 31, March 31, 2015 2014 2015 2014 ---------------- ------------------ -------------- -------------- Revenue Commissions $ 15,297 $ 26,912 $ 44,223 $ 58,642 Subscription Revenue 27,625 - 89,263 - Products and Services 57,379 238,701 843,604 2,357,597 ---------------- ------------------ -------------- -------------- Total Revenue 100,301 265,613 977,090 2,416,239 Operating Expenses 374,834 495,263 1,425,535 2,393,869 ---------------- ------------------ -------------- -------------- Operating Income (Loss) (274,533) (229,650) (448,445) 22,370 Other Income Forgiveness of Debt - - - 93,513 ---------------- ------------------ -------------- -------------- Total Other Income - - - 93,513 ---------------- ------------------ -------------- -------------- Income (Loss) From Continuing Operations (274,533) (229,650) (448,445) 115,883 Income (Loss) From Discontinued Operations (20,614) 11,380 (33,715) (3,607) ---------------- ------------------ -------------- -------------- Net Income (Loss) $ (295,147) $ (218,270) $ (482,160) $ 112,276 ================ ================== ============== ============== Weighted Average Common Shares Outstanding Basic 76,853,464 83,658,797 76,853,464 86,052,421 Diluted 76,853,464 83,658,797 76,853,464 86,985,754 Earnings (Loss) Per Common Share (Basic) Continuing Operations $ (0.00) $ (0.00) $ (0.01) $ 0.00 Discontinued Operations (0.00) 0.00 (0.00) (0.00) Net Income (Loss) Per Common Share $ (0.00) $ (0.00) $ (0.01) $ 0.00 Earnings (Loss) Per Common Share (Diluted) Continuing Operations $ (0.00) $ (0.00) $ (0.01) $ 0.00 Discontinued Operations (0.00) 0.00 (0.00) (0.00) Net Income (Loss) Per Common Share $ (0.00) $ (0.00) $ (0.01) $ 0.00

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 Nine Months Ended March 31 Unaudited 2015 2014 --------------- ---------------- Cash Flows from Operating Activities: Net Income (Loss) $ (482,160) $ 112,276 Loss From Discontinued Operations 33,715 3,607 Adjustments to Reconcile Income from Continuing Operations to Net Cash Provided By (Used In) Operations Depreciation and Amortization 55,488 60,965 Equity Based Payments To Employees 17,709 58,383 Gain on Debt Forgiveness - (93,513) Changes in Operating Assets and Liabilities Restricted Cash (6,270) (69,250) Accrued Commissions Receivable 1,670 30,035 Accounts Receivable 11,197 (35,365) Prepaid Expenses 5,671 (3,616) Accounts Payable 57,470 (170,626) Accrued Expenses and Refunds (14,587) 257,637 Deferred Revenue 25,317 106,008 Due to Related Parties 251,202 (155,932) --------------- ---------------- Net Cash Provided By (Used In) Operating Activities (43,578) 100,609 --------------- ---------------- Cash Flows from Investing Activities Purchases of Property and Equipment (5,458) (7,438) --------------- ---------------- Net Cash Used in Investing Activitities (5,458) (7,438) --------------- ---------------- Cash Flows from Discontinued Operations Cash Flows From Operating Activities (9,500) (106,559) --------------- ---------------- Net Cash Used in Discontinued Operations (9,500) (106,559) --------------- ---------------- Decrease in Cash and Cash Equivalents (58,536) (13,388) Cash Transferred In Divestiture - (969) Cash and Cash Equivalents - Beginning of Period 102,684 116,372 --------------- ---------------- Cash and Cash Equivalents - End of Period $ 44,148 $ 102,015 =============== ================ Cash paid during the period for: Interest $ 4,827 $ 33,868 Income taxes 1,514 2,936 Supplemental Disclosures of Non Cash Financing Activity Common Stock Issued to Settle Liabilities $ - $ 104,690 Common Stock Redeemed For Divestiture $ - $ 207,335

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 MARCH 31, 2015 (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 nine month period ended March 31, 2014, 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. For all other periods presented, potentially dilutive securities would be anti-dilutive have not been included in computing diluted earnings per share. -6- 30DC, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2015 (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 March 31, 2015, the Company had a working capital deficit of approximately $1,965,000 and had accumulated losses of approximately $3,567,000 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 nine months ended March 31, 2014 (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 MARCH 31, 2015 (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 NINE MONTHS ENDED MARCH 31, 2015 NINE MONTHS ENDED MARCH 31, 2014 IMMEDIATE EDGE INFINITY TOTAL IMMEDIATE EDGE INFINITY TOTAL ----------------------------------------------- ------------------------------------------------- Revenues $ - $ - $ - $ 266,495 $ - $ 266,495 Operating expenses - 4,152 4,152 287,017 8,943 295,960 Income (Loss) from operations - (4,152) (4,152) (20,522) (8,943) (29,465) Forgiveness of debt - - - - 796 796 Unrealized gain (loss) on marketable securities - (29,563) $ (29,563) - 25,062 25,062 ----------------------------------------------- ------------------------------------------------- Net Income (Loss) $ - $ (33,715) $ (33,715) $ (20,522) $ 16,915 $ (3,607) =============================================== ================================================= THREE MONTHS ENDED MARCH 31, 2015 THREE MONTHS ENDED MARCH 31, 2014 IMMEDIATE EDGE INFINITY TOTAL IMMEDIATE EDGE INFINITY TOTAL ----------------------------------------------- ------------------------------------------------- Revenues $ - $ - $ - $ 72,360 $ - $ 72,360 Operating expenses - 1,301 1,301 65,921 2,746 68,667 Income (Loss) from operations - (1,301) (1,301) 6,439 (2,746) 3,693 Unrealized gain (loss) on marketable securities - (19,313) (19,313) - 7,687 7,687 ----------------------------------------------- ------------------------------------------------- Net Income (Loss) $ - $ (20,614) $ (20,614) $ 6,439 $ 4,941 $ 11,380 =============================================== ================================================= ASSETS AND LIABILITIES OF DISCONTINUED OPERATIONS AS OF MARCH 31, 2015 JUNE 30, 2014 IMMEDIATE EDGE INFINITY TOTAL IMMEDIATE EDGE INFINITY TOTAL ----------------------------------------------- ------------------------------------------------- Assets Marketable securities $ - $ 86,750 $ 86,750 $ - $ 116,313 $ 116,313 ----------------------------------------------- ------------------------------------------------- Total Assets of Discontinued Operations $ - $ 86,750 $ 86,750 $ - $ 116,313 $ 116,313 =============================================== ================================================= LIABILITIES Accounts payable $ - $ 72,201 $ 72,201 $ - $ 72,201 $ 72,201 Accrued expenses - 66,449 66,449 - 62,297 62,297 Notes payable - 51,550 51,550 - 61,050 61,050 Due to related parties - 21,000 21,000 - 21,000 21,000 ----------------------------------------------- ------------------------------------------------- Total Liabilities of Discontinued Operations $ - $ 211,200 $ 211,200 $ - $ 216,548 $ 216,548 =============================================== =================================================

-8- 30DC, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2015 (UNAUDITED) Notes Payable Included in liabilities of discontinued operations at March 31, 2015 and June 30, 2014 are $51,550 and $61,050 respectively in notes payable plus related accrued interest of which are all in default for lack of repayment by their due date. For the nine months ended March 31, 2015 and March 31, 2014 the Company incurred interest expense on notes payable of $4,152 and $7,764 respectively which is included in the Statement of Operations under income (loss) from discontinued operations. Marketable Securities At March 31, 2015 the fair value of marketable securities held for sale was $86,750 which included cumulative net unrealized gains of $20,340. 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 March 31, 2015, due to related parties totaled $1,056,685. This primarily consisted of $17,500 due to GHL Group, Ltd., whose President, Gregory H. Laborde is a Director, under their consulting services agreement, $176,500 accrued for directors' fees for services of non-executive directors, $99,500 due to Netbloo Media, Ltd. under its contractor agreement, 35,500 due to Marillion Partnership under its contractor agreement and $727,500 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 nine month period ended March 31, 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 nine months ended March 31, 2015, the Company did not issue any common stock. WARRANTS Information relating to outstanding warrants is as follows: Weighted Average Number of Weighted Average Remaining Contract Shares Exercise Price Life (years) ----------------------------------------------- Outstanding warrants at 06/30/14 3,401,522 $ 0.50 1.30 Granted - - - Exercised - - - Forfeited/expired - - - Outstanding warrants at 3/31/15 3,401,522 0.50 0.55 Exercisable on 3/31/15 3,401,522 0.50 0.55 -9- 30DC, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2015 (UNAUDITED) The aggregate intrinsic value of warrants outstanding and exercisable was $0 at March 31, 2015. Total intrinsic value of warrants exercised was $0 for the nine months ended March 31, 2015 as no warrants were exercised during this period. 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 $17,709 and $58,383 for the nine months ended March 31, 2015 and March 31, 2014 respectively and $-0- and $8,855 for the three months ended March 31, 2015 and March 31, 2014 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 3/31/15 3,600,000 0.18 6.86 Exercisable on 3/31/15 3,600,000 0.18 6.86 The options have a contractual term of ten years. The aggregate intrinsic value of options outstanding and exercisable was $0 at March 31, 2015. Total intrinsic value of options exercised was $0 for the nine months ended March 31, 2015 as no options were exercised during this period. At March 31, 2015, 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 MARCH 31, 2015 (UNAUDITED) NOTE 9. SUPPLEMENTAL SCHEDULE OF OPERATING EXPENSES --------------------------------------------------- Nine Months Ended Nine Months Ended March 31, 2015 March 31, 2014 -------------------- -------------------- Related Party Contractor Fees (1) $ 475,733 $ 488,813 Officer's Salary 107,855 179,191 Directors' Fees 91,355 111,691 Independent Contractors 242,877 365,244 Commission Expense 154,676 771,862 Professional Fees 109,604 135,500 Credit Card Processing Fees 32,917 115,629 Telephone and Data Lines 27,450 26,475 Other Operating Costs 183,068 199,464 -------------------- -------------------- Total Operating Expenses $ 1,425,535 $ 2,393,869 ==================== ==================== ----------------------------------- (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 Three Months Ended Three Months Ended March 31, 2015 March 31, 2014 -------------------- -------------------- Related Party Contractor Fees (1) $ 153,759 $ 163,147 Officer's Salary 33,000 54,427 Directors' Fees 27,500 31,927 Independent Contractors 65,936 118,777 Commission Expense 4,766 16,945 Professional Fees 22,545 34,126 Credit Card Processing Fees 4,715 10,353 Telephone and Data Lines 8,311 9,656 Other Operating Costs 54,302 55,905 -------------------- -------------------- Total Operating Expenses $ 374,834 $ 495,263 ==================== ==================== ----------------------------------- (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 30DC offers digital media training and publishing solutions for individuals, professionals and businesses using the Internet and mobile media in operating their businesses and in particular in marketing digital creations. Our flagship training course, The Challenge, is offered once annually for a thirty-day period at no fee as an interactive on-line education program. The Challenge content is made available for purchase throughout the year as the Digital Success Bootcamp training course. The course content of The Challenge is geared to individuals and professionals with an interest in marketing using digital media. The participants might be motivated to begin a new on-line business or extend an existing brick-and-mortar business to an on-line platform. Increasingly, Challenge participants are involved in the migration of commerce to mobile media comprised of tablet computers and smartphones. 30DC's digital publishing solutions include the MagCast Digital Publishing Platform for the publication of magazines and other content to mobile devices through a mobile application or "app" and Market Pro Max, a system for on-line marketing of digital products. The MagCast platform and Market Pro Max system are licensed as software-as-a-service applications and are sold independently or in conjunction with related training courses. Digital Publishing Blue Print instructs participants in content monetization methods and the use of proprietary content in developing brand awareness and marketing products or services. The Ultimate Product System is a video-based program to help novice e-marketers identify and define a market niche and package their digital products for greatest marketability. In addition to our core digital media training and publishing products and solutions, from time to time we offer a series of on-line training products related to the use of digital media for commerce and priced at nominal subscription rates around $50 per month. We also offer individual courses covering a variety of digital marketing topics such as how to drive traffic to websites using social media platforms like Facebook. The Company provides particular training courses to licensees of our MagCast Digital Publishing Platform related to developing and marketing their digital publications and we provide ancillary services to assist licensees in creating mobile apps with the MagCast platform. CORPORATE HISTORY 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 -12- its restricted common stock. The 30DC DE Shareholders received 13.2 shares of common stock of Infinity for every one share of 30DC DE. Infinity, as a result of the transaction, became the owning entity of 100% of the outstanding shares of common stock of 30DC DE. For purposes of accounting, 30DC DE was considered the accounting acquirer. The business of 30DC DE became the primary business of Infinity. Infinity was renamed 30DC, Inc. (Maryland) ("30DC" and together with its subsidiary "the Company"). 30DC DE was incorporated on October 17, 2008 in the state of Delaware, as a holding company, for the purpose of building, acquiring and managing international web-based sales and marketing companies. On July 15, 2009, 30DC DE completed the acquisitions of the business and assets of 30 Day Challenge ("30 Day") and Immediate Edge ("Immediate"). In May of 2012 the Company signed a joint venture agreement ("JV Agreement") with Netbloo Media, Ltd. ("Netbloo") for the joint development of the MagCast Digital Publishing Platform ("MagCast"). 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. PRODUCT OFFERINGS Our principal digital media training products and publishing solutions include the following: o The Challenge o Digital Success Bootcamp o MagCast Digital Publishing Platform o Digital Publishing Blue Print o Market Pro Max System o Ultimate Market System 30DC was founded 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 is a thirty-day interactive educational program configured to give participants the framework and guidance to design and develop an on-line business. The course content is made available by subscription throughout the year as the Ignition Blue Print training course. The Challenge program includes modules on a range of topics, including researching market opportunity and competition, identifying and sustaining niche markets, utilizing social media to build your business, among many other subjects pertinent to Internet marketing. There are no prerequisites to taking the course and participants come from around the globe. The course content of The Challenge is geared to individuals, professionals and business people with an interest in Internet marketing. The participants might be motivated to begin a new on-line business or extend existing `brick-and-mortar' business to an on-line platform. Increasingly, Challenge participants are involved in the migration of business to the mobile media comprised of tablet computers and smartphones. The Challenge has predominately grown through our viral marketing campaign whereby participants are encouraged to publicize the program through email and -13- social media, including Twitter, Facebook, FriendFeed and blogs focused on Internet marketing. The growth in The Challenge community has resulted in a targeted community, to which the Company markets other high-valued added digital media training courses and solutions as well as third-party products related to Internet marketing. The Company's first digital media solution, The MagCast Digital Publishing Platform ("MagCast") originated from the collaboration of 30DC with Netbloo Media Ltd. ("Netbloo') in a joint venture. It was first introduced in fiscal year 2012, as a software-as-a-service for publication of digital magazines and other proprietary content to mobile devices through mobile applications or `apps' based on the Applie iOS and Google Android architectures. The MagCast platform is relevant to the Company's historical customer base of Internet marketers as well as a broader audience of users interested in marketing to their clients through the mobile medium. Publications created on the MagCast platform can be distributed to readers through Apple Newsstand or Google Play, the app distribution channels for the two principal mobile device operating systems. We believe the MagCast platform is distinctive among digital publishing applications by providing users with a built-in suite of marketing functions and tools. We believe we are the first to introduce such a product and expect these features to differentiate the MagCast platform from competitors. The Company has continued to update the MagCast software application to improve functionality and 30DC has engaged a dedicated team of software developers to create new product features. Initially mobile apps created using the MagCast platform were available only to readers with Apple iPad devices. In the summer 2013, the Company released MagCast version 4, which enabled our customers to offer a version of their publication tailored for the iPhone thereby significantly expanding the potential number of magazine readers. MagCast version 6 released in July 2014 enabled distribution through Google Play where their digital magazine is available to users of Android devices. This update included a variety of new features and capabilities such as dynamic in-app purchasing, a survey funnel, e-mail sharing, push notifications, and Facebook event tracking, among other modern marketing techniques that could benefit MagCast platform users. In September 2014, MagCast version 7 was released with an in-app sales funnel and the user interface was improved to facilitate list building and issuance of new products and service offers. Version 7 was optimized for both Google's Android architecture and Apple's iOS 8 operating system, which are the two most popular mobile device architectures. Digital Publishing Blueprint is a comprehensive training program that provides instruction in developing and marketing a digital publication. The course is designed to instruct participants in content monetization and the use of proprietary content to create brand awareness and build sales. The fee for Digital Publishing Blueprint includes a license for the MagCast Digitial Publishing Platform. Market Pro Max is on-line marketing system acquired in 2012 from Netbloo Media, Ltd. Market Pro Max is made available to users as a software-as-a-service. The application provides plug-n-play functionality to create on-line marketing sites with little or no programming experience. Market Pro Max is targeted at digital businesses and information publishers seeking to monetize content on-line. Starting in 2014, Market Pro Max has been sold in conjunction with an on-line training course Ultimate Product System. This video-based course helps the novice e-marketer identify and define a market niche and package products for greatest marketability. BUSINESS MODEL AND GROWTH OPPORTUNITIES We generate revenue through subscriptions to on-line training programs, the sale of video-based training courses, and the sale of licenses for the use of our proprietary digital publishing solutions. We also earn commissions on the sale of third-party Internet marketing products and services to the 30DC customer base and in particular during and after the annual Challenge training program. Such revenue is referred to as affiliate marketing commissions. The Company's long-term growth strategy is to increase its portfolio of products and services while expanding the audience to which it markets those products and services. Our business has historically been driven by the attraction of participants to a no-fee Internet marketing program, The Challenge, and the -14- retention of those participants as potential customers for other high valued-added training programs and digital publishing solutions. Nearly 200,000 individuals have participated in The Challenge since its inception. To expand the Company's access to potential customers, during the fiscal year ended June 30, 2012, 30DC began a more comprehensive program of selling through affiliate marketing relationships. Affiliates promote 30DC's products to their respective customer bases and receive a commission from 30DC as a percentage of gross revenue typically in a range of 30% to 50%. In fiscal year 2013, the Company initiated its MagCast Certified Professional (MCP) program for the resale of the MagCast Digital Publishing Platform. The MCP program is intended to drive penetration of corporate and other vertical markets with an interest in reaching their audiences with digital content on mobile devices. 30DC's marketing strategy includes paid-for traffic generation to its product web sites as well as the purchase of sales leads for product promotion through targeted e-mails. Additionally, during fiscal year 2014, the Company began test marketing on-line and mobile advertising, which has become more sophisticated and enables targeting of customers who are more likely to be interested in 30DC products and services. The initial advertising test focused on the Market Pro Max system and related training program Ultimate Product System. 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 MARCH 31, 2015 COMPARED TO THE THREE MONTH PERIOD ENDED MARCH 31, 2014. During the three months ended March 31, 2015, 30DC, Inc. recognized revenues of $100,301 from continuing operations compared to $265,613 during the three months ended March 31, 2014. Revenues from continuing operations were from the following sources during the three months ended March 31, 2015 compared to March 31, 2014. Three Months Three Months Ended Ended Increase or March 31, 2015 March 31, 2014 (Decrease) ------------------ ----------------- -------------- Revenue Commissions $ 15,297 $ 26,912 $ (11,615) Subscription Revenue 27,625 - 27,625 Products and Services 57,379 238,701 (181,322) ------------------ ----------------- -------------- Total Revenues $ 100,301 $ 265,613 $ (165,312) The $11,615 decrease in commissions was due to commissions earned during the three months ended March 31, 2014 from a product promotion which did not repeat during the three months ended March 31, 2015. The $27,625 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 $181,322 decrease in products and services revenue was due to an $185,981 decrease in revenue from the MagCast Publishing Platform. During the three months ended March 31, 2015 the company did offer any special promotions for -15- MagCast. During the three months ended March 31, 2014, the Company released the Android version of MagCast which had revenue of $106,855, offered a special promotion for existing customers to purchase an additional MagCast license which had revenue of $29,910, received $28,466 in revenue from customers for MagCast payment plan purchases which had been deferred and therefore not previously recorded in accounts receivable and earned an additional $17,754 in revenue from MagCast Done For You services. During the three months ended March 31, 2015, the Company incurred $374,834 in operational expenses for continuing operations compared to $495,263 during the three months ended March 31, 2014. Operational expenses during the three months ended March 31, 2015 and 2014, include the following categories: THREE MONTHS ENDED THREE MONTHS ENDED INCREASE OR MARCH 31, 2015 MARCH 31, 2014 DECREASE -------------------------------------------------- Accounting Fees $ 16,000 $ 22,805 $ (6,805) Advertising 11,073 428 10,645 Credit Card Processing Fees 4,715 10,353 (5,638) Commissions 4,766 16,945 (12,179) Independent Contractors 65,936 118,777 (52,841) Depreciation and Amortization 18,600 19,957 (1,357) Directors' Fees 27,500 31,927 (4,427) Internet Expenses 6,262 13,905 (7,643) Legal Fees 6,545 11,321 (4,776) Officer's Salaries 33,000 54,427 (21,427) Related Party Contractors 153,759 163,147 (9,388) Telephone and Data Lines 8,311 9,656 (1,345) Travel & Entertainment 770 2,814 (2,044) Other Operating Expenses 17,597 18,801 (1,204) -------------------------------------------------- Total Operating Expenses $ 374,834 $ 495,263 $ (120,429) ================================================== The increase of $10,645 in advertising is due to the Company advertising its digital products on Facebook and the cost of a marketing consultant who helped the Company develop the advertising campaign. The decrease of $12,179 in commissions resulted from the $185,981 decrease in revenue from the MagCast Publishing Platform, a portion of which were sales through marketing affiliate relationships which resulted in commission expense. The decrease of $52,841 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 and a reduction of $6,000 in the amount for Clinton Carey, former Chief Operating Officer of the Company who is helping shape sales strategy to extend marketing of MagCast outside the Company's traditional customer base. In addition the March 2014 quarter included approximately $8,500 paid to a contractor hired to help with the Company's annual free course and was retained to work on additional development projects, $5,000 for a strategic consultant and $1,500 for a valuation analyst. These increases were offset by an increase of $6,000 per month to a contractor who has assumed additional responsibilities. The decrease of $21,427 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 stock option expense over the vesting period, for stock options previously issued to Mr. Greenberg which fully vested January 1, 2015. -16- The decrease of $9,388 in Related Party Contractors was due to a change in the exchange rate which reduced the US Dollar amount for Marillion Partners contractor fees which are paid in Australian Dollars. During the three months ended March 31, 2015, the Company recognized a net loss from continuing operations of $274,533 compared to a net loss from continuing operations of $229,650 during the three months ended March 31, 2014. The increased net loss from continuing operations of $44,883 was due to the decrease in revenue of $165,312 offset by the decrease in operating expenses of $120,429. FOR THE NINE MONTH PERIOD ENDED MARCH 31, 2015 COMPARED TO THE NINE MONTH PERIOD ENDED MARCH 31, 2014. During the nine months ended March 31, 2015, 30DC, Inc. recognized revenues of $977,090 from continuing operations compared to $2,416,239 during the nine months ended March 31, 2014. Revenues from continuing operations were from the following sources during the nine months ended March 31, 2015 compared to March 31, 2014. Nine Months Nine Months Ended Ended Increase or March 31, 2015 March 31, 2014 (Decrease) ------------------ ------------------- ---------------- Revenue Commissions $ 44,223 $ 58,642 $ (14,419) Subscription Revenue 89,263 - 89,263 Products and Services 843,604 2,357,597 (1,513,993) ------------------ ------------------- ---------------- Total Revenues $ 977,090 $ 2,416,239 $ (1,439,149) The $14,419 decrease in commissions was due to commissions earned during the nine months ended March 31, 2014 from product promotions which did not repeat during the nine months ended March 31, 2015. The $89,263 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 $1,513,993 decrease in products and services revenue was mainly due to a decrease of $1,616,811 in revenue from the MagCast Publishing Platform which resulted from a smaller launch promotion in July 2014 than August 2013 and the release of the MagCast Android version in February 2014. This was partially offset by a $27,998 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 and an increase in sales of $71,506 in the sale of other products the company has developed on topics such as increasing traffic to web sites. During the nine months ended March 31, 2015, the Company incurred $1,425,535 in operational expenses for continuing operations compared to $2,393,869 during the nine months ended March 31, 2014. Operational expenses during the nine months ended March 31, 2015 and 2014, include the following categories: -17- NINE MONTHS ENDED NINE MONTHS ENDED INCREASE OR MARCH 31, 2015 MARCH 31, 2014 DECREASE -------------------------------------------------- Accounting Fees $ 83,250 $ 96,612 $ (13,362) Advertising 44,985 620 44,365 Credit Card Processing Fees 32,917 115,629 (82,712) Commissions 154,676 771,862 (617,186) Independent Contractors 242,877 365,244 (122,367) Depreciation and Amortization 55,489 60,965 (5,476) Directors Fees 91,355 111,691 (20,336) Internet Expenses 22,961 30,386 (7,425) Legal Fees 26,354 38,888 (12,534) Officer's Salaries 107,855 179,191 (71,336) Related Party Contractors 475,733 488,813 (13,080) Telephone and Data Lines 27,450 26,475 975 Travel & Entertainment 2,903 47,982 (45,079) Other Operating Expenses 56,730 59,511 (2,781) -------------------------------------------------- Total Operating Expenses $ 1,425,535 $ 2,393,869 $ (968,334) ================================================== The decrease of $13,362 in accounting fees is primarily due to an additional $30,000 in fees to our auditors during the nine months ended March 31, 2014 for the Company to file reports which had been in arrears, offset by $18,000 in fees during the nine months ended March 31, 2015 to an e-commerce accounting firm to automate a number of our accounting processes and to provide outsourced bookkeeping services. The increase of $44,365 in advertising is due to the Company advertising its digital products on Facebook and the cost of a marketing consultant who helped the Company develop the advertising campaign. The decrease of $82,712 in credit card processing fees resulted from the $1,439,149 decrease in revenue and a decrease of approximately 1.5% in the effective credit card processing rate. The decrease of $617,186 in commissions resulted from the $1,513,993 decrease in products and services revenue, a significant portion of which are sales marketing affiliate relationships which result in commission expense. The decrease of $122,367 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 and a reduction of $11,500 in the amount for Clinton Carey, former Chief Operating Officer of the Company who is helping shape sales strategy to extend marketing of MagCast outside the Company's traditional customer base. In addition the nine months ended March 2014 included approximately $20,500 paid to a contractor hired to help with the Company's annual free course, the Challenge and was retained to work on additional development projects, $6,500 paid to investor relations consultants, $10,000 for a strategic consultant and $4,500 for a valuation analyst. These increases were offset by an increase of $6,000 per month to a contractor who has assumed additional responsibilities. The decrease of $20,336 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 nine months ended March 2015 from the amount in the nine months ended March 2014, these options fully vested January 1, 2015. The decrease of $71,336 in officer's salaries was due to a reduction in base salary for Theodore A. Greenberg, the Company's CFO from $200,000 to $132,000 per year and a reduction in the charge for amortization of stock option expense -18- over the vesting period, for stock options previously issued to Mr. Greenberg in the nine months ended March 2015 from the amount in the nine months ended March 2014, these options fully vested January 1, 2015. The decrease of $13,080 in Related Party Contractors was due to a change in the exchange rate which reduced the US Dollar amount for Marillion Partners contractor fees which are paid in Australian Dollars. Travel and Entertainment decreased by $45,079 due to a company-wide group meeting and travel to an investor conference, both in November 2013 which did not repeat during the nine months ended March 2015. During the nine months ended March 31, 2015, the Company recognized a net loss from continuing operations of $448,445 compared to net income from continuing operations of $115,883 during the nine months ended March 31, 2014. The decrease in net income from continuing operations of $564,328 was due to the decrease in revenue $1,439,149 offset by the decrease in operating expenses $968,334 and forgiveness of debt income of $93,513 in the nine months ended March 2014. LIQUIDITY AND CAPITAL RESOURCES The Company had a cash balance of $44,148 at March 31, 2015 and the Company had a working capital deficit of $1,964,924. 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 March 31, 2015 is $51,550 in notes payable plus related accrued interest that are in default for lack of repayment by their due date. During the nine month period ended March 31, 2015, operating activities used $43,578. During the nine month period ended March 31, 2014, operating activities provided the Company with $100,609. The decrease of $144,187 in funds provided by operating activities was a combination of the decrease in net income from continuing operations of approximately $594,000, a decrease of approximately $272,000 in the change in accrued expenses and refunds due to the change in status of accrued contractor fees in the nine months ended March 31, 2014 from due to related parties because Clinton Carey was no longer a member of the Company's board and a decrease in deferred revenue of approximately $81,000. This was offset by an increase of approximately $228,000 from the change in accounts payable due to payment of payables at June 30, 2013 with proceeds from the August 2013 MagCast relaunch, an increase from the change in due to related parties of approximately $407,000 partly because Clinton Carey was no longer a member of the Company's board resulting in a change in status during the nine months ended March 31, 2014 and deferral of payments to the Company's Chief Financial Officer, Directors and other related parties during the nine months ended March 31, 2015, an approximate decrease of $63,000 to 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 March 31, 2014 due to the MagCast relaunch in August 2013 and a decrease of approximately $93,000 in forgiveness of debt income which was including in net income from continuing operations in the nine months ended March 2014 but did not generate cash. -19- 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 March 31, 2015, the Company has a working capital deficit of approximately $1,965,000 and has accumulated losses of approximately $3,567,000 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. 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 March 31, 2015, 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. -20- 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) 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 March 31, 2015, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. -21- 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 March 31, 2015 the Company did not issue any equity securities. ITEM 3. DEFAULTS UPON SENIOR SECURITIES --------------------------------------- Included in liabilities of discontinued operations at March 31, 2015 is $51,550 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. -22- 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: May 13, 2015 By:/s/ Edward Dale -------------------------------------- Edward Dale Principal Executive Officer Chief Executive Officer President Dated: May 13, 2015 By:/s/ Theodore A. Greenberg -------------------------------------- Theodore A. Greenberg, Principal Accounting Officer Chief Financial Officer -23-