ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
Readers are cautioned that certain statements contained herein are forward-looking statements and should be read in conjunction with our disclosures under the heading "Forward-Looking Statements" above. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. This discussion also should be read in conjunction with the notes to our consolidated financial statements contained in Item 8. "Financial Statements and Supplementary Data" of this Report.
Operations Overview/Outlook
Operationally, 2015-2017 has been important in continuing the direction of the Company and steering it toward a scaled growth plan. The model developed in fiscal 2014 has been reinforced and is differentiating to clients, therefore, the model will continue into fiscal 2018, and beyond.
Entertainment/Fashion/Sports/Automotive/Ecommerce/ Investment Banking Solutions
DBMM continues to build on its strengths. The company had strong relationships within the market and intends to build its business focus in a wide variety of industry verticals.
The heart of the business is the marketing consultancy. DBMM Group’s main business Digital Clarity, works in the area of Digital Marketing. Understanding each client and developing the model to individualize the outlook has been essential. This kind of close relationship with the client resulted in Digital Clarity being considered a close professional advisor.
In fiscal year 2018, the Company will continue to focus on the positive, proven operating model and use that model to expand geographic reach with existing and new clients.
Digital Marketing Services
2018 will continue to see exponential growth in the adoption of Social Media as communication, marketing and engagement avenues. An acceptance of change is driving revenue. The future growth in mobile search is one of the fastest growing ancillary businesses. It was clear that the direction, talent and growth of the Company is in its human capital and outside relationships which must be proactive in order to differentiate itself from competition
The clear opportunity is at the foundation of the Company, namely the need to expedite and continue to encourage development in the digital marketing services sector. The marketing services product is labor intensive and thus the Company must jumpstart the growth by significant capital to grow simultaneously in multiple geographies.
As a foundation, the 2015 fiscal year financial review showed that Digital Clarity increased its revenues by 23%, and the operating company remained cash flow positive through 2017 despite challenging situations in the parent company, the company outlook is robust for the foreseeable future.
Key Milestones
2017 has been a very significant year in its increasing revenues quarter to quarter during the fiscal year. The client base is expanding in base number and the size of client serviced. Certain new significant clients representing a variety of industries were added to client roster. The Company’s clients tend to operate with a NDA, as our clients see us a competitive advantage. Accordingly, we cannot share all clients’ brands or company names.
Recently the company has been hired by the prestigious organizational group, British Marine. British Marine are the membership body for nautical and sea faring craft and include Super and Luxury Yacht companies such as Sunseeker and Princess Yachts.
Digital Clarity have been hired to audit Google Search and Analytics for British Marine’s top show, The London Boat Show and one of Europe’s largest events, The Southampton Boat Show. The company is in talk to act as digital advisor with British Marine for the Abu Dhabi Boat Show. These shows will fit into the circuit that incorporates Fort Lauderdale, Monaco and Cannes Boat & Yachting events.
Digital Clarity are also working with sponsors and potential sponsors of a Formula 1 team that are in the top 5 racing teams in this prestigious and global sport.
Other examples are representative of the diversity of client base, DBMM's approach using a client's analytics, and executing an individualized model to increase ROI as the prime objective, span a wide range of industries.
Digital Clarity continues to expand into high end Real Estate and Luxury brands and is building a strong network on High Net-worth and Ultra High Net-worth Individuals
NOTABLE EVENTS - INDUSTRY AWARDS & RECOGNITION
Digital Clarity Named in Top Ten Best Social Media Marketing Firms in the UK for 6th Year (http://Topseos.com/uk/best-social-media-marketing-companies)
“Topseos.co.uk, an independent research firm, revealed the listing of the top 10 best social media marketing agencies in the UK based on their strength and competitive advantage. Social media marketing companies are put through a methodical analysis to ensure the rankings contain the absolute best companies the search marketing industry has to offer. Their criteria include timeliness, brand management, consultation, methodology and reach.
Based in these criteria, Digital Clarity was awarded a spot in the top 10. The process for researching and declaring social media marketing agencies in the UK is based on the use of a set of analysis criteria and learning more about their solutions and their communications with their customers through references. The topsesos.com independent analysis team communicated directly with the clients in order to inquire about the solutions and achievement from the client’s perspective.
Digital Clarity Team Member shortlisted for top player in Under 25 UK Search Awards
The UK Search Awards have been celebrating the expertise, talent and achievements of the search industry for over half a decade and are regarded as the premiere celebration of SEO, PPC and content marketing in the UK.
The awards attract hundreds of entries from the leading search and digital agencies from across the UK and to those based elsewhere around the globe who are delivering work for the UK market.
The team member works with a range of PPC, SEO, Analytics and Social campaigns, with a specialist flair for Shopping campaigns. She works across a wide range of businesses from not for profit, ecommerce and B2B, adapting her approach and strategy to each specific client. One of her key strengths includes having the passion to learn the ins and outs of client’s industries, learning the market, competitors and their business models to insure every section of a campaign is on point and delivers results.
In the judging sessions the Young Search Professional category was said to be highly competitive and a tough one to judge.
The category and shortlist is a testament to Digital Clarity’s commitment to training and personal development.
Digital Clarity Shortlisted for Ecommerce Awards for Excellence for ProCook
ProCook is the UK’s leading specialist cookware multi-channel retailer. With retail outlets in major towns and cities across the UK, the company also has a powerful online e-commerce presence.
ProCook has seen great growth in the last few years via PPC and SEO strategies and have been working with Digital Clarity over the past 8 years.
Results were staggering
● PPC brand revenue uplift – 35%
● PPC non-brand revenue uplift – 36%
● SEO revenue uplift – 51%
● Shopping revenue uplift – 48%
Digital Entrepreneur Awards - Digital Clarity Shortlisted for Digital Business of the Year 2017
Sponsored by UKFast, the Digital Entrepreneur awards are the only national awards ceremony that is dedicated to internet entrepreneurialism. The awards aim to celebrate entrepreneurs from startup level right through to large corporate companies.
“The awards celebrate not only the high-profile websites and leaders driving online commerce but the silent heroes who develop the systems that change the online landscape and shape our digital future.”
Digital Clarity Research Featured in Huffington Post
Digital Clarity looked into the perils of internet addiction, especially among the young and the effects it can have to both the individual as well as broader society.
The research was deemed worthy to be published in the Huffington Post, an online paper rum by Ariana Huffington and used by journalists worldwide as both a distribution point as well as an inspiration to feed into current events and stories.
http://www.huffingtonpost.co.uk/2014/10/16/youths-controlled-internet-addiction_n_5995068.html
Key Differentiators
2015-2017 has been about strengthening foundations by continuing to streamline while developing new client relationships and revenue streams as a differentiating digital marketing and technology provider. This focus has allowed the Company to enhance brand value for its clients. 2018 will continue to be about growth and outreach utilizing five key differentiators:
1.Brand enhancement
2.Search
–PPC
–SEO
3.Design
4.Social media
5.Analytics
1. STRENGTHS: BRAND ENHANCEMENT
Digital Clarity is an evolving Strategic Brand Consultancy that crafts, designs and executes digital marketing strategies across multiple ad platforms and social media networks for a broad array of clients to help each of them establish a uniform brand identity across the digital universe.
As the online world becomes increasingly sophisticated and complex, Digital Clarity concentrates on core areas that help business navigate through an often-confusing mosaic choice of systems and platforms. Focusing on the areas of Search, Social Media and Design, all of Digital Clarity work is underpinned by a unique understanding of Analytics. This aspect is often a missed piece of the jigsaw that makes up the digital marketing mix. The five differentiators, presented to clients as an integrated model, result in being selected over competition in the majority of presentations.
2. STRENGTHS: SEARCH:
– PPC
Definition:
PPC stands for Pay-per-Click Advertising. It is an abbreviation for a number of search advertising platforms, of which the mostly widely used is Google AdWords. PPC is one of the most effective online marketing services available, generating instant activity and instant results for new or existing websites.
The real beauty of PPC is that you only pay for an ad when a potential customer clicks on it, meaning you can bring people to your site for mere pennies while ensuring your traffic is relevant and targeted at people who are looking for your service or product. Additionally, PPC is highly measurable and can be closely monitored, allowing your business to keep a close eye on return-on-investment (ROI).
The major platforms used for PPC are:
● Google AdWords (Global)
● Microsoft Bing
● Yandex (Russia)
● Baidu (China)
● AdWords Audit
Key Areas of Service:
● Budget Management
● Keyword Research
● Conversion Rate Optimization
● Bid Optimization
● Dedicated PPC Management
As an elite consultancy, Digital Clarity has extensive experience in PPC management and implementation ranging from small independent businesses with one or two ad campaigns to multi-national ecommerce websites which utilize hundreds of ads and thousands of keywords. Whatever the nature and size of the account, Digital Clarity understands the importance of utilizing a programmatic, well-defined approach:
•Strategy.
By understanding the business, demographics and audience, Digital Clarity makes sure that campaigns hit the ground running from day one.
•Implementation.
Digital Clarity uses experience to put in place the best structure, keywords, ad copy and bidding strategies to maximize the effectiveness of your account.
•Optimization.
Digital Clarity rigorously interrogates and checks client accounts to ensure optimal performance, with regular reviews of all aspects of each campaign.
•Reporting.
By defining and explaining the numbers of each account, Digital Clarity provides the information needed to steer things in the right direction for each client’s business.
PPC AUDIT
From selecting the right keywords, to the settings and structure. It is important that we allow time to research and refine the account in order to save on wasted spend as well as increasing conversions.
This audit would cover Google and Bing account setup.
● KEYWORD RESEARCH
● AD AUDIT AND OPTIMISE - INCLUDING AD EXTENSIONS
● BUDGET AND BIDDING STRATEGIES FOR THE TARGET AUDIENCE
● DEVICE & LOCATION STRATEGIES
● REMARKETING LISTS & STRATEGY
PPC STRATEGY
Digital Clarity’s unique PPC strategy affords the opportunity to test and change things based on results. Testing ads, optimizing keywords and enhancing the ways to target the right audience are just a few areas which will be covered.
Weekly updates and monthly reporting will be provided to identify areas of improvement and things which need to be optimized further.
● KEYWORD REFINEMENT & SEARCH QUERY
● AD COPY TESTING
● LOCATION MANAGEMENT AND KEYWORD TESTING
● BUDGET ALLOCATION & CONTINUED CPC AND KEYWORD BID STRATEGIES FOR ROI
2. STRENGTHS: SEARCH:
– SEO
Definition:
When customers look for service on Google or another search engine, they might find a client company’s business – or they might find a competitor. SEO (Search Engine Optimization) is the process by which you can help ensure that your site appears first in the rankings. These rankings are determined by the search engine’s algorithms: programs which trawl the internet indexing details about each site, in order to deliver relevant results when people search. If your website does not perform well according to the algorithm’s criteria, your rank will be lower, and people will not be able to find your site; this is what makes partnering with the right SEO agency such a crucial part of your digital marketing activity.
Digital Clarity is at the vanguard of this sector, having implemented countless SEO plans for a broad array of clients in a number of different industries. These plans included:
● Onsite Technical Audit
● Quality Content Creation
● Meta, Tags & Technical Optimization
● Website Structure
● Use of Optimum Keywords
● Link Building & Referrals
● Social Media Integration
Search Algorithms
SEO strategy is changing all the time, and the rate of change continues to increase dramatically in the last 12-18 months. Changes to the Google algorithm in particular have shifted the landscape of search optimization, including named updates such as Penguin, Panda, and Hummingbird. These changes can have huge consequences: well-performing sites can lose visibility and poor performers can gain it, literally overnight. It is therefore absolutely essentially that a website’s SEO is closely curated and managed, making sure one is always ahead of the curve.
SEO Can Deliver Results for Business
By applying website optimization to your site for better search engine performance, you will gain more traffic and brand recognition as more and more people are able to find you online. This in turn allows more sales and conversions, leading to higher profits and better return on your digital investment. Contact our team today to find out how we can improve your performance.
Growth of Mobile in Search (PPC & SEO)
Mobile devices are used more than traditional computers for web browsing, as smartphone and tablet use overtook desktop for the first time, October figures show.
Mobile web browsing has been steadily growing since 2009, while the desktop’s share of web traffic has steadily decreased. In October 2015, the two crossed over, with global mobile and tablet browsing accounting for 51.3% versus the desktop’s 48.7%, according to the latest data from web analytics firm StatCounter.
Growth of Mobile Search Compared to Desktop
Google Dominates Search
3. STRENGTHS: DESIGN:
Definition:
Web design encompasses many different skills and disciplines in the production and maintenance of websites.
A site can be the most functional, user-friendly and search-optimized in the world; if people don't like the look of it, they will bounce off your page and never come back. Making sure a site looks good and that it reflects your brand company identity is the difference between success and failure, and having a good web design agency on your side is more important than ever.
Web Design Services:
● e-Commerce
● Device Compatibility
● Web Development
● Mobile Compatibility
● Process & Planning
● Content Management System (CMS)
● Version Control
Changes in the Last Few Years
With 43% growth in mobile devices and tablets, the game has changed. It’s no longer enough for a site to look great on a PC; it has to be able to scale from a widescreen view of a modern flat screen monitor to the narrow portrait of an Android mobile screen; it has to spin and rotate with the movements of an iPad. This aspect of website design is called ‘responsiveness,’ and in the last few years has gone from being ‘nice to have’ to absolutely essential, necessitating a complete website redesign in many cases. Digital Clarity have years of experience in building functional, beautiful websites which work across all devices.
Digital Clarity’s Unique Proposition
Specialist creative agencies are great at making things pretty and applying their own methodologies and ideas to client websites, both creatively and financial, and operating analytics. Digital Clarity takes a different approach: combining a client’s ideas, vision and brand identity with our experience and expertise to produce sites which perfectly blend form and functionality. Additionally, Digital Clarity does not design in a bubble; the sites built integrate seamlessly with PPC campaigns, SEO activity, and are fully optimized to perform as part of a greater whole. Digital Clarity does not just build websites; the company’s role as a website design agency is part of an integrated approach which will help achieve the overall business goal.
4. STRENGTHS: SOCIAL MEDIA:
Definition
Social media refers to sites where users interact with each other on a large scale, including Facebook, Twitter, LinkedIn, Pinterest, Imgur, Tumblr and many others. Begun as a social phenomenon, the growth in use of social media sites over the past decade has made it impossible to ignore for any brand or business.
● Social Media Audit
● Content Creation
● Social Media Management
● Social Media Set Up
● Reporting
● Blog Writing
● Content Strategy
● Reputation Management
● Social Media Advertising
The Need for Social
Social media can help achieve business goals by allowing greater engagement with the customer base, audience and stakeholders. A company doesn’t just need a brand anymore: it needs a face, a voice, and maybe even a heart. As well as being a central component of how customers see a company. It can also yield other opportunities: Promotions, customer feedback, and even just having a little fun can all be used to bring you closer to your clients and users, informing strategy, guiding your product offering and in the long term, increasing sales and profits.
1. Online adults aged 18-34 are most likely follow a brand via social networking (95%). (Source: MarketingSherpa)
2. 71% of consumers who have had a good social media service experience with a brand are likely to recommend it to others. (Source: Ambassador)
3. 2.56 billion global mobile social media users, equaling 34% penetration; globally with 1 million new active mobile social users added every day (Source: We Are Social).
4. 96% of the people that discuss brands online do not follow those brands’ owned profiles. (Source: Brandwatch)
5. Visual content is more than 40 times more likely to get shared on social media than other types of content. (Source: HubSpot)
Digital Clarity’s Value Proposition
As a Digital Marketing and Technology Agency, Digital Clarity has been helping brands manage their social presence since before ‘social media’ had been coined as a phrase. Using our integrated methodology, we will incorporate a social presence as part of an overall offering, utilizing the platforms which are most appropriate to each business in the best possible way. Whether you need from-scratch implementation, or just want a social media audit to benchmark your activity, Digital Clarity have the expertise to deliver the results you need.
Digital Clarity have a strong track record of increasing membership numbers, creating deeper engagement, and measuring the success of your activity to help inform social media marketing strategy and guide development.
Number of social media users worldwide from 2010 to 2021 (in billions)
The Market for Growth in Social
Digital Clarity incorporate Social Media strategy wherever possible. There is continued opportunities to grow business via social networks and social analytics.
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Social-media advertising spend will grow rapidly through 2018. It’s up 40year and will top $8.5 billion, growing to nearly $14 billion in 2018, a five-year compound annual growth rate (CAGR) of 18%.
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Social media ad spend has reached the mobile-tipping point. Spending on mobile social-media ads, including mobile app-install ads, will surpass non-mobile spend by the end of this year in the US. In 2018, two-thirds of social-media ad spend will go to mobile, creating a $9.1 billion social-mobile market.
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Mobile app-install ads and programmatic buying are also growth drivers. Analyses suggest that mobile app-install ads could account for anywhere from one-quarter to more than one-half of Facebook’s mobile ad revenues.
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Social programmatic ad platforms are also growth engines. Spending on FBX, Facebook’s programmatic platform, increased by 150% year-over-year globally.
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Prices are increasing as performance and targeting improve, even as ad loads stay steady on the established platforms. Facebook, for example, is not likely to increase the amount of in-feed native ads an average user will see.
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5. STRENGTHS: ANALYTICS
Definition:
Analytics is the act of analyzing data from your website, marketing campaigns and user activity. It can include everything from what time of day people are most likely to click on your PPC ads, right down to how long users are spending on individual pages on your site. Analytics can help you locate problems, find areas for improvement, form projections for the future and help you get the best out of your marketing budget.
● Google Analytics
● Goal Setting
● Tag Management
● 3rd Party Analytics
● Funnel Planning
● Attribution Modelling
● Path Analysis
● Link Testing
Why Analytics Are Important
Knowing how to identify trends and interrogate data is of paramount importance to any marketing department. Analytics gives you answers to some of the most important questions you should be asking about your campaigns, maximizing effectiveness when things go well and providing solutions when things go wrong. Without this information, what appears to be a successful campaign could be failing to achieve its full potential, and there may be critical problems of which many companies may not be aware.
Digital Clarity’s Unique Proposition
What really sets Digital Clarity apart is the company’s ability to translate numbers into action. Analytics is extremely important, but for many, it is difficult to draw meaningful conclusions from the data, or to know how to act on the knowledge gained from this analysis. Online marketing is a sea of numbers, data and statistics; Digital Clarity turns this information into actionable insights for business.
Digital Clarity’s knowledge of analytics methodologies puts us at the forefront of our industry. We can use this experience to help guide strategy and deliver action points with recommendations, rather than just presenting you with meaningless statistics. With this knowledge in hand, you can implement solutions which will help you get the most out of your online presence. Digital Clarity also offers Google Analytics training to help businesses get the most out of this powerful tool independently.
As the internet and mobile arena continues to mature, the need to make sense of and manage companies through this often-complex market is clearly an area of massive growth. The Company is confident that the talent and experience within the digital marketing team is poised for a major springboard in 2018, but must be expanded significantly in order to support the global reach intended.
Artist Collaboration, through experts with existing relationships, will be exploited in the longer term after the Company integrates many of the new clients in the pipeline. As a strategic advantage, artists and brands will leverage their celebrity status through consultancies such as Digital Clarity to enhance and drive their brand in the complex arena of social media.
Market Reach
The Company has reach and experience across a large number of vertical markets including, but not limited to: Entertainment/Fashion/Sports/Automotive/Ecommerce.
Relationships and Industry Contacts
The team at Digital Clarity have professional and personal contacts, including some long-term relationships, at companies such as Google, Microsoft and Facebook, often being invited to attend strategic market briefings and insights. The resultant collaboration is invaluable.
Partnerships, strategic alliances and agency management have allowed Digital Clarity to work on some of the biggest brands, sitting behind the agencies as a support and resource to deliver very high quality service and results to their clients.
TEAM EXPERTISE
COMPANY KEY ASSETS
Examples:
● PPC campaign experience especially Google AdWords existed
● SEO evolution from aggressive link building and onsite SEO through to strategic marketing and integration of inbound marketing
● Website design and development based on results driven design and planning
● Brand consultancy
● Social media management and advertising. Several clients have been “won” directly via Digital Clarity’s internal social media strategy
● Sales and account management experience from multi-disciplined backgrounds
Evolution and Flexibility
The market is continually changing. Digital Clarity has always remained ahead of the curve and given their clients peace of mind by remaining a true strategic partner.
Creative, Individualized Solutions and Customer Service
Case Studies and testimonials reflect the client-centric approach of Digital Clarity. Being selected over larger more established firms, support that we provide the client with skills that are differentiating. The Digital Clarity Brand is being established positively.
Growth Opportunities in the Market
As the use of web mobile sites and applications grow, so do the complexities and challenges of using these sites and platforms commercially. Digital Clarity directs business through the maze of an often confusing and sophisticated set of barriers, to create a clear path for the customer to our client’s product or service. As this market matures, the need for companies to rely on the services from Digital Clarity can only grow. Here we look at some of the growth areas in Digital Clarity’s arsenal integrating the key trends going forward:
1. More Mobile
2. More Social
3. More Informed
4. More Experiential
5. More Real-Time
6. More Global
7. More Multichannel
These trends translate to being “always on.”
Growth & Opportunities in Search
Search remains the foundation of digital marketing. Businesses now spend 24% of total marketing budget on paid search by 2017.
● US digital ad spending will approach $85 billion – Interactive Advertising Bureau.
● U.S. search spend grew by 11 percent Year over Year, while ROI improved by 26 percent – Adobe
● 72% of Consumers Want Mobile-Friendly Sites – Google Research
● 2 million search queries are made on Google, every minute – Google
● Growth in Corporate Search – All Fortune 100 Companies have a Google Plus Account
Growth & Opportunities in Social Media
Number of social network users worldwide from 2010 to 2018 (in billions)
INSTAGRAM GROWTH
Instagram has seen a phenomenal growth rate, much to the detriment of Twitter. Both remain powerful though Instagram’s video and photographic social channel is far outpacing twitter.
Top brands on Instagram are seeing a per-follower engagement rate of 4.21% which is 58 times higher than on Facebook and 120 times higher than on Twitter (Source: Hootsuite)
Instagram has become a powerful platform for marketers and its potential cannot be overlooked any longer.
Media brands are the most active whereas business services, financial services, and fast moving consumer goods have the lowest percentage of brands represented on Instagram. (Source: Simply Measured)
Also, the increase in business activity on Instagram the brand posting frequency is becoming more normalized and standardized to highlight the increase in a more measurable approach.
90% of Instagram users are younger than 35 (Source: Science Daily)
Instagram has become the social media network for targeting millennials. 32% of teenagers consider Instagram to be the most important social network. Female internet users are more likely to use Instagram than men, at 38% vs. 26%.
Products were the top content types for the top 200 global brands in terms of engagement, at 60% in 2017 beating lifestyle category by over 20%. (Source: Hootsuite)
This is great news for marketers since people who follow brands on Instagram are aware and accept the fact that they’re going to be exposed to products.
Posts tagged with another user (56%) or location (79%) have significantly higher engagement rates (Source: Simply Measured)
GROWTH OPPORTUNITIES IN LONDON & THE UK MARKET
Digital Clarity’s presence in the UK provides an excellent springboard into mainland Europe as London remains the gateway into both Northern and Southern European markets.
From the recent Internet Advertising Bureau (IAB) and (Price Waterhouse Coopers) PwC Report:
● At half year, the total UK digital advertising market is worth £5.56bn, up 13.8% y-o-y
● Mobile is driving almost all growth in the market
● At £2.37bn, mobile now makes up 43% of all digital
● Mobile is accounting for 57% of all digital display advertising
● Online video has overtaken banners as the largest display format, up 46% year-on-year
● Outstream is now the largest video format, at 52% of all online video
● Social revenue is now over £1 billion
WORLDWIDE E-COMMERCE GROWTH OPPORTUNITIES FOR DIGITAL CLARITY
In 2016, retail e-commerce sales worldwide amounted to $1.86 trillion and e-retail revenues are projected to grow to $4.48 trillion by 2021. China overtook the online the US-Market as the world’s largest online market in 2015. Online shopping is one of the most popular online activities worldwide, Goldman Sachs expects on-line shopping retail sales in China to grow at an annual average of 23% over the next 4 years, topping $1.7 trillion by 2020, but the usage varies by region - in 2016, an estimated 19% of all retail sales in China occurred via internet but in Japan the share was only 6.7%. Desktop PCs are still the most popular device for placing online shopping orders, but mobile devices, especially smartphones, are catching up. Fast.
Worldwide Retail Ecommerce Sales Will Reach $2.8 Trillion in 2018.
Double-digit growth will continue through 2020, when sales will top $4 trillion. Retail ecommerce sales—which include products and services (barring travel, restaurant and event ticket sales) ordered via the internet over any device—will reach $1.915 trillion in 2016, accounting for 8.7% of total retail spending worldwide. While the pace of growth for overall retail sales is subdued, the digital portion of sales continues to expand rapidly, with a 23.7% growth rate for 2016.
eMarketer expects retail ecommerce sales will increase to $4.058 trillion in 2020, making up 14.6% of total retail spending that year.
Global Retail Ecommerce Sales Will Reach $4.5 Trillion by 2021
Cumulative data from Statista anticipates a 246.15% increase in worldwide ecommerce sales, from $1.3 trillion in 2014 to $4.5 trillion in 2021. That’s a nearly threefold lift in online revenue.
Global B2B Ecommerce Sales Dominate B2C
In 2017, B2C ecommerce sales exceeded $2.3 trillion worldwide. B2B ecommerce, on the other hand, will reach $77 trillion. Those two data points represent a 234.78% difference in market size.
Retail Ecommerce’s Global Spread Makes International Sales Non-Negotiable
According to Business.com, the 10 largest ecommerce markets in the world are:
1. China: $672 billion
2. United States: $340 billion
3. United Kingdom: $99 billion
4. Japan: $79 billion
5. Germany: $73 billion
6. France: $43 billion
7. South Korea: $37 billion
8. Canada: $30 billion
9. Russia: $20 billion
10. Brazil: $19 billion
THE NEED FOR PROFESSIONAL CONSULTANCY & OPPORTUNITY FOR MASSIVE GROWTH
For the first time ever, four consultancies have cracked Ad Age's ranking of the 10 largest agency companies in the world. With combined revenue of $13.2 billion, the marketing services units of Accenture, PwC, IBM and Deloitte sit just below WPP, Omnicom, Publicis Groupe, Interpublic and Dentsu. Last year, only two consultancies—Accenture Interactive and IBM iX—made the top 10. IBM iX was the first to break into the top 10.
Given the experience of the team, Digital Clarity’s advisory and consultancy is in demand. With the recent growth in these business areas, and the rise of consultancies, it is confirmation that Digital Clarity is headed in the right direction for growth.
Digital advertising spending worldwide from 2017 to 2020 (in billion U.S. dollars)
Digital advertising is expected to grow to $335.5 billion by 2020.
In 2016, Facebook earned 79.38 billion U.S. dollars in digital revenue through online advertising. During the same period of time, search market leader Google generated 79.38 billion U.S. dollars through digital advertising channels.
A ranking of the ten most valuable U.S.-based internet companies by market capitalization. As of August 2017, Alphabet's market capitalization was 645 billion U.S. dollars. Third-ranked retail platform Amazon had a market cap of 471.7 billion U.S. dollars.
Internet companies generate their revenue through various means. Google, for instance, makes use of its advertisement services such as Google AdWords – which takes advantage of Google searches and appear as small advertisements next to search results – and Google AdSense which generates advertisements based on a user’s search history and location, among others. Advertisements based on AdSense appear all across Google-owned sites including YouTube and Google Finance. The online company also profits from the development of Android OS, licensing and mobile apps as well as the recent development of hardware such as the Nexus mobile device series and Google Glass. In 2015, Google’s total revenue amounted to $74.54 billion and in 2017 exceeded $85 billion. Schematic technology following compares the major internet companies:
MAJOR INTERNET COMPANIES SPEND
Social network Facebook is ranked second. It is the leading social network worldwide and has successfully managed to take advantage of the increasingly mobile online environment. In 2015, mobile accounted for 77 percent of Facebook's advertising revenues and is projected to amount to more than 60 billion U.S. dollars in 2021.
Amazon.com, the third largest U.S. internet company based on its market capitalization, generates in profit from its position as the world’s largest online retailer; in 2017, the company’s net revenue was of some $107.01 billion.
Despite operating internationally, Amazon generates the majority of its revenues in the United States and Canada. In 2014, Amazon’s North American net revenue was of close to $63.71 billion, with the majority of the revenue coming from electronics’ sales. Media sales (which include services such as Amazon Instant Video) amounted to some $12.48 billion.
The Growth of the Marketing Led Companies in Market Capitalization
● Revenue in the "Social Media Advertising" segment amounts to $32 billion in 2017.
● Revenue is expected to show an annual growth rate (CAGR 2017-2021) of 10.9 % resulting in a market volume of $48,917m in 2021.
● The average revenue per Internet user currently amounts to $11.45.
● The revenue in the "Social Media Advertising" segment currently corresponds to 0.05 % of the country's GDP.
WORLD'S MOST VALUABLE BRAND
Amazon has officially replaced Google as the most valuable brand in the world, according to brand consultancy Brand Finance. Amazon's brand value is $150.8 billion, an increase of 42% from 2016, based on business performance and marketing investment. The second most valuable global brand is Apple, at $146.3billion. Google is third highest, with a $120.9 billion valuation. (Business Insider.com)
GROWTH IN INVESTOR AWARENESS AND OUTREACH.
Digital Brand Media & Marketing Group, Inc. is initiating a significant effort to raise investor awareness on a global basis. The strategic outreach is directed at investors around the world who understand the digital marketplace and its expanding influence on consumer decisions. DBMM is targeting these new investors through a global digital and traditional integrated investor outreach campaign which will be run by Digital Clarity, with third parties, as required for distribution.
In the full industry context of dramatic expansion of digital footprints, there has been no direct correlation between DBMM's (increasing) revenues and its pps. Economic and industry analysts state the multiple for digital media has continued to grow to 25-30 times revenues. DBMM is in a long-term growth pattern both in scale and in revenues, begun in 2014. This has been a frustrating situation for DBMM and we look forward to large scale expansion which will address the issue directly and the pps will respond accordingly-very positively.
Financial Overview/Outlook
DBMM has been honing its commercial model since the acquisition of Digital Clarity ("DC") in 2011which has been cash-flow positive as an operating company since its acquisition. However, the incremental, significant cost of being a fully reporting company to the SEC, must be absorbed annually which is a long-term strategic decision as to the benefit of being a public company. Going forward, as the Company is scaling up, it obviously will take growth capital to expand proportionately. The good news is that the business had a turning point during 2015, when its revenues increased quarter-over-quarter to a 23% increase for the fiscal year. The increases have been re-invested into the business, thus increasing the cost of sales in the short term until the optimum cross-over point is reached. The Company continued to grow the scale in fiscal years 2015-2017 focusing on the digital marketing global triangle of London, New York and Los Angeles. This was in spite of being frugal. Its margins continue at range of 31-36%, and once the business reaches appropriate scale with assumed profitability and cross-over point, DBMM will become a very successful business for all its stakeholders.
The clients benefit immediately; the shareholders will benefit as the market cap grows. The media market multiple which far exceeds the manufacturing cap multiples, as digital marketing technology has become one of the fastest growing industries in the world today.
The business has been sound from the acquisition of DC, and the Company has been proving incrementally, but not nearly at pace the management would like because of the non-operating hurdles faced since the Company was required to re-audit in 2013, and the litigation there after, though no fault of DBMM.
Regarding DBMM’s place in the sector, it is strong. The industry environment continues to grow exponentially and the future of digital marketing as an essential strategy for any consumer-facing business is essential. DBMM’s has been honing its business model since the acquisition of its brand and is an industry leader for its size. DBMM’s increasing client base, coupled with decreasing debt and expenses, positions the Company as intended, thus attracting mezzanine financing.
For context, Benjamin Graham, a British-born investor who inspired Warren Buffet, repeated endlessly his colleagues said: “In the short term, the stock market is a voting machine. In the long run it’s a weighing machine that measures a Company’s true value.”
In terms of state of play, DBMM’s issues have always been public company hurdles, e. g. the cost of maintaining a public company, the cost of capital during the Great Financial Recession, when the only funding available was toxic and the micro-cap environment in general. No matter how high the positive margins, it was nearly impossible to stay ahead of the cost of capital. Then superimpose the only litigation the Company has had, and the actions required to pushback. Coincidently, DBMM has worked diligently to put toxic lending in the rear-view mirror, engage mezzanine financing at “normal” market rates, to be repaid out of increasing revenues, not equity.
Going forward, there will be an emphasis on investor awareness during fiscal years 2018 and 2019. DBMM is taking significant action to aggressively widen its brand exposure using a variety of digital and social channels. There are investors around the globe who understand the digital marketplace and its growing influence on consumer decisions. DBMM is targeting these new investors through a global digital and traditional integrated campaign which will be run by Digital Clarity, with third parties, as required for distribution.
The world is evolving rapidly in how goods are purchased. The 21st Century consumer-oriented corporations are asset-light, idea-intensive sectors. Information is gathered digitally through sharing via digital technology platforms and social networks. The analytics and creative focus of Digital Clarity gives it a differentiation available to its clients as it individually designs an increase in ROI for those same clients. DC has earned a place at the table of professional advisors giving its clients strategic advantage which is measured and formidable. Orders are configured on-line after viewing goods in brick and mortar retail stores, then ordered on -line, increasingly via mobile devices. Tesla is a perfect example of disintermediation. "It doesn't have any dealerships. Customers can configure and order a car on-line, and test drive cars at company-owned showrooms."
DBMM delivers its value proposition as a labor-intensive endeavor, with human capital of knowledge and execution as differentiators. The Company will continue to scale up, and grow organically, while identifying acquisitions to grow client base and internal talent concurrently. A capital raise is underway for long-term capital needs to grow organically and by acquisition(s). The pace of growth of governed solely by available capital.
For several years, DBMM has had revenues which were never acknowledged in its market cap. The Company has always been grossly undervalued when compared to its audited revenues contained in its financial statements. DBMM’s business model is sound and will continue. Growth is only a function of capital infusion.
Fiscal Year 2017
We had approximately $55,000 in cash and our working capital deficiency amounted to approximately $3.3 million at August 31, 2017.
During the year ended August 31, 2017, we used cash in our operating activities amounting to approximately $28,000. Our cash used in operating activities was comprised of our net gain of approximately $560,000 adjusted primarily for the following:
● Change in fair value of derivative liability of $776,858;
● Amortization of debt discount of $32,083;
Additionally, the following variations in operating assets and liabilities during the year ended August 31, 2017 impacted our cash used in operating activity:
● In our accounts payable and accrued expenses, including accrued compensation, of approximately $181,000, resulting from a short fall in liquidity and capital resources.
Fiscal Year 2016
We had approximately $4,000 in cash and our working capital deficiency amounted to approximately $3.9 million at August 31, 2016.
During the year ended August 31, 2016, we used cash in our operating activities amounting to approximately $120,000. Our cash used in operating activities was comprised of our net loss of approximately $1,600,000 adjusted primarily for the following:
● Fair value of preferred shares issued for services of $5,170;
● Change in fair value of derivative liability of $1,007,007;
● Amortization of debt discount of $69,500;
Additionally, the following variations in operating assets and liabilities during the year ended August 31, 2016 impacted our cash used in operating activity:
In our accounts payable and accrued expenses, including accrued compensation, of approximately $182,000, resulting from a short fall in liquidity and capital resources.
During the year ended August 31, 2016, we generated cash from financing activities of $120,500 which primarily consists of the proceeds from the issuance of loans and convertible debt aggregating $50,000, and proceeds from demand notes payable of $70,500.
Fiscal Year 2015
We had approximately $28,000 in cash and our working capital deficiency amounted to approximately $2.5 million at August 31, 2015.
During the year ended August 31, 2015, we used cash in our operating activities amounting to approximately $301,000. Our cash used in operating activities was comprised of our net loss of approximately $738,000 adjusted primarily for the following:
● Fair value of preferred shares issued for services of $1,100;
● Change in fair value of derivative liability of $47,800;
● Amortization of debt discount of $270,666;
Additionally, the following variations in operating assets and liabilities during the year ended August 31, 2015 impacted our cash used in operating activity:
In our accounts payable and accrued expenses, including accrued compensation, of approximately $165,000, resulting from a short fall in liquidity and capital resources.
During the year ended August 31, 2015, we generated cash from financing activities of $269,500 which consists of the proceeds from the issuance of loans and convertible debt.
Going Concern
The Company has outstanding loans and convertible notes payable aggregating $1.2 million at August 31, 2017 and doesn’t have sufficient cash on hand to satisfy such obligations. Subsequent to August 31, 2017, the Company has raised $192,000 from the issuance of new loan agreements. The Company has received a non-binding commitment letter from an investor of $250,000 (plus a right of first refusal on additional equity raise up to $3.0 million) which will contribute to satisfying such obligations and fund any potential cash flow deficiencies from operations for the foreseeable future.
Accordingly, the accompanying financial statements have been prepared in conformity with U.S. GAAP, which contemplates continuation of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the financial statements do not necessarily purport to represent realizable or settlement values. The financial statements do not include any adjustment that might result from the outcome of this uncertainty.
RESULTS OF OPERATIONS
Comparison of Results for the Years Ended August 31, 2017, August 31, 2016 and August 31, 2015
Consolidated Operating Results
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended August 31,
|
|
|
2017
|
|
|
2016
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
Compared to 2016
|
|
|
Compared to 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SALES
|
|
$
|
486,369
|
|
|
$
|
468,601
|
|
|
$
|
493,758
|
|
|
$
|
17,767
|
|
|
$
|
(25,156
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COST OF SALES
|
|
|
311,027
|
|
|
|
325,628
|
|
|
|
315,971
|
|
|
|
(14,601
|
)
|
|
|
9,657
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS PROFIT
|
|
|
175,341
|
|
|
|
142,973
|
|
|
|
177,787
|
|
|
|
32,368
|
|
|
|
(34,813
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COSTS AND EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
117,658
|
|
|
|
300,700
|
|
|
|
623,358
|
|
|
|
(183,042
|
)
|
|
|
(322,658
|
)
|
Compensation Expense
|
|
|
206,500
|
|
|
|
204,000
|
|
|
|
212,000
|
|
|
|
2,500
|
|
|
|
(8,000
|
)
|
|
|
|
324,158
|
|
|
|
504,700
|
|
|
|
835,358
|
|
|
|
(180,542
|
)
|
|
|
(330,658
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL OPERATING EXPENSES
|
|
|
324,158
|
|
|
|
504,700
|
|
|
|
835,358
|
|
|
|
(180,542
|
)
|
|
|
(330,658
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING INCOME (LOSS)
|
|
|
(148,817
|
)
|
|
|
(361,727
|
)
|
|
|
(657,571
|
)
|
|
|
212,910
|
|
|
|
295,844
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER (INCOME) EXPENSE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
63,618
|
|
|
|
243,047
|
|
|
|
128,294
|
|
|
|
(179,429
|
)
|
|
|
114,753
|
|
Gain/loss on derivative liability
|
|
|
(776,858
|
)
|
|
|
1,007,007
|
|
|
|
(47,800
|
)
|
|
|
(1,783,865
|
)
|
|
|
1,054,807
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL OTHER (INCOME) EXPENSE
|
|
|
(713,240
|
)
|
|
|
1,250,054
|
|
|
|
80,494
|
|
|
|
(1,963,294
|
)
|
|
|
1,169,560
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS)
|
|
$
|
564,423
|
|
|
$
|
(1,611,781
|
)
|
|
$
|
(738,065
|
)
|
|
$
|
(2,176,204
|
)
|
|
$
|
873,716
|
|
We currently generate revenue through our Pay-Per-Click Advertising, Search Engine Marketing, Search Engine Optimization Services, Web Design, Social Media, Digital analytics and Advisory Services.
For the year ended August 31, 2017 our primary sources of revenue are the Per-Click Advertising, Web Design, and Search Engine Optimization Services. These primary sources amounted to 54%, 9% and 15% of our revenues during the year ended August 31, 2017. Our secondary sources of revenue are our Social Media and Email Media. These secondary sources amounted to approximately 22% our revenues during fiscal 2017.
We recognize revenue upon the completion of our performance obligation, provided that: (1) evidence of an arrangement exists; (2) the arrangement fee is fixed and determinable; and (3) collection is reasonably assured.
The increase in our revenues during fiscal 2017, when compared to the prior year period, is primarily attributable to an increase in volume of transactions from Search Engine Optimization, and Web Design Services during fiscal 2017.
Cost of sales during fiscal 2017 and 2016 is correlated to our revenues for the respective periods.
The decrease in general and administrative costs during fiscal 2017 when compared 2015 is primarily due to a decrease in legal and professional fees.
Interest expense, which include interest accrued on certain notes, as well as amortization of debt discount and the fair value of shares issued pursuant to embedded conversion features of certain convertible promissory notes, decrease during fiscal 2017 is primarily attributable to the amortization of debt discount which decrease, during fiscal 2017, when compared to the comparable prior year periods. The decrease in amortization of debt discount is primarily due to the issuance of a larger amount of convertible debt with beneficial conversion features and embedded conversion features during fiscal 2016 than 2017.
Gain on extinguishment of accrued compensation decreased during fiscal 2017 when compared to the prior years is primarily due to a non-recurring gain during fiscal 2016 and a lesser amount during fiscal 2017.
The increase on derivative liabilities is primarily attributable due a decrease in the Company’s estimated volatility use in the assumptions to compute its fair value at August 31, 2017 when compared to August 31, 2016.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS
|
|
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
Page
|
Report of Independent Registered Public Accounting Firm
|
F-1
|
|
|
Consolidated Balance Sheets as of August 31, 2017, 2016 and 2015
|
F-2
|
|
|
Consolidated Statements of Operations and Comprehensive Loss for the years ended August 31, 2017, 2016 and 2015
|
F-3
|
|
|
Consolidated Statements of Changes in Stockholders’ Deficit for the years ended August 31, 2017, 2016 and 2015
|
F-4
|
|
|
Consolidated Statements of Cash Flows for the years ended August 31, 2017, 2016 and 2015
|
F-5
|
|
|
Notes to Consolidated Financial Statements
|
F-6
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Digital Brand Media & Marketing Group, Inc. and Subsidiaries
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Digital Brand Media & Marketing Group, Inc. and subsidiaries (the "Company") as of August 31, 2017, 2016 and 2015, the related statements of operations and comprehensive loss, changes in stockholders’ deficit, and cash flows for the years then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of August 31, 2017, 2016 and 2015, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
The Company’s Ability to Continue as a Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has accumulated deficits and negative working capital. This raises substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting in accordance with the standards of the PCAOB. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion in accordance with the standards of the PCAOB.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Liggett & Webb P.A.
We have served as the Company’s auditor since 2017.
New York, NY
May 29, 2018
DIGITAL BRAND MEDIA & MARKETING GROUP, INC. AND SUBSIDIARIES
|
|
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended August 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
55,262
|
|
|
$
|
4,518
|
|
|
$
|
27,831
|
|
Accounts receivable, net
|
|
|
55,376
|
|
|
|
43,192
|
|
|
|
63,113
|
|
Prepaid expenses and other current assets
|
|
|
1,491
|
|
|
|
1,519
|
|
|
|
1,373
|
|
Total current assets
|
|
|
112,129
|
|
|
|
49,229
|
|
|
|
92,317
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment - net
|
|
|
3,805
|
|
|
|
3,361
|
|
|
|
5,059
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
115,934
|
|
|
$
|
52,590
|
|
|
$
|
97,376
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
385,628
|
|
|
$
|
409,600
|
|
|
$
|
405,834
|
|
Accrued interest
|
|
|
255,198
|
|
|
|
191,912
|
|
|
|
167,406
|
|
Accrued compensation
|
|
|
882,643
|
|
|
|
677,947
|
|
|
|
514,593
|
|
Loans payable
|
|
|
370,000
|
|
|
|
370,000
|
|
|
|
400,000
|
|
Derivative liability
|
|
|
740,953
|
|
|
|
1,517,811
|
|
|
|
408,053
|
|
Convertible debentures, net of debt discount
of $0, $32,083, $16,668, respectively
|
|
|
840,791
|
|
|
|
808,708
|
|
|
|
747,528
|
|
|
|
|
3,475,213
|
|
|
|
3,975,978
|
|
|
|
2,643,414
|
|
STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, Series 1, par value .001; authorized 2,000,000 shares; 1,995,185, 1,995,185, and 1,970,185 shares issued and outstanding, respectively
|
|
|
1,995
|
|
|
|
1,995
|
|
|
|
1,970
|
|
Preferred stock, Series 2, par value .001; authorized 2,000,000 shares; 0, 0, and 0 shares issued and outstanding, respectively
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Common stock, par value .001; authorized 2,000,000,000 shares; 745,718,631, 745,718,631, and 4,415,949, shares issued and outstanding, respectively
|
|
|
745,718
|
|
|
|
745,718
|
|
|
|
4,415
|
|
Additional paid in capital
|
|
|
9,274,044
|
|
|
|
9,274,044
|
|
|
|
9,760,175
|
|
Other comprehensive loss
|
|
|
(24,961
|
)
|
|
|
(24,647
|
)
|
|
|
(3,881
|
)
|
Accumulated deficit
|
|
|
(13,356,075
|
)
|
|
|
(13,920,498
|
)
|
|
|
(12,308,717
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL STOCKHOLDERS' DEFICIT
|
|
$
|
(3,359,279
|
)
|
|
$
|
(3,923,388
|
)
|
|
$
|
(2,546,038
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
$
|
115,934
|
|
|
$
|
52,590
|
|
|
$
|
97,376
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements
|
|
DIGITAL BRAND MEDIA & MARKETING GROUP, INC. AND SUBSIDIARIES
|
|
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended August 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SALES
|
|
$
|
486,369
|
|
|
$
|
468,601
|
|
|
$
|
493,758
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COST OF SALES
|
|
|
311,027
|
|
|
|
325,628
|
|
|
|
315,971
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS PROFIT
|
|
|
175,341
|
|
|
|
142,973
|
|
|
|
177,787
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COSTS AND EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales, general and administrative
|
|
|
324,158
|
|
|
|
504,700
|
|
|
|
835,358
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL OPERATING EXPENSES
|
|
|
324,158
|
|
|
|
504,700
|
|
|
|
835,358
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING INCOME (LOSS)
|
|
|
(148,817
|
)
|
|
|
(361,727
|
)
|
|
|
(657,571
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER (INCOME) EXPENSE
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
63,618
|
|
|
|
243,047
|
|
|
|
128,294
|
|
Change in fair value of derivative liability
|
|
|
(776,858
|
)
|
|
|
1,007,007
|
|
|
|
(47,800
|
)
|
TOTAL OTHER (INCOME) EXPENSE
|
|
|
(713,240
|
)
|
|
|
1,250,054
|
|
|
|
80,494
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS)
|
|
$
|
564,423
|
|
|
$
|
(1,611,781
|
)
|
|
$
|
(738,065
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE LOSS
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange translation
|
|
|
(314
|
)
|
|
|
(20,766
|
)
|
|
|
8,915
|
|
COMPREHENSIVE INCOME (LOSS)
|
|
$
|
564,109
|
|
|
$
|
(1,632,548
|
)
|
|
$
|
(729,150
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS PER SHARE
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
$
|
0.001
|
|
|
$
|
(0.003
|
)
|
|
$
|
(0.174
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE NUMBER OF SHARES
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
745,718,631
|
|
|
|
487,020,143
|
|
|
|
4,200,495
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements
|
|
DIGITAL BRAND MEDIA & MARKETING GROUP, INC. AND SUBSIDIARIES
|
|
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
|
|
FOR THE YEARS ENDED AUGUST 31, 2015, 2016 AND 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 1
|
|
|
Series 2
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
Other
|
|
|
Total
|
|
|
|
Preferred Stock
|
|
|
Preferred Stock
|
|
|
Common Stock
|
|
|
Paid in
|
|
|
Accumulated
|
|
|
Comprehensive
|
|
|
Stockholders'
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Income(Loss)
|
|
|
Deficit
|
|
Balance, August 31, 2014
|
|
|
870,185
|
|
|
$
|
870
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
3,613,791
|
|
|
$
|
3,614
|
|
|
$
|
9,724,799
|
|
|
$
|
(11,570,652
|
)
|
|
$
|
(12,796
|
)
|
|
$
|
(1,854,165
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock upon conversion of convertible debt
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
700,205
|
|
|
|
700
|
|
|
|
26,507
|
|
|
|
-
|
|
|
|
-
|
|
|
|
27,207
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
Common stock issued in connection with accrued interest and fees
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
101,953
|
|
|
|
101
|
|
|
|
4,135
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,236
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued to officers
|
|
|
1,100,000
|
|
|
|
1,100
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,734
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,834
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(738,065
|
)
|
|
|
-
|
|
|
|
(738,065
|
)
|
Other Comprehensive Loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
8,915
|
|
|
|
8,915
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, August 31, 2015
|
|
|
1,970,185
|
|
|
$
|
1,970
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
4,415,949
|
|
|
$
|
4,415
|
|
|
$
|
9,760,175
|
|
|
$
|
(12,308,717
|
)
|
|
$
|
(3,881
|
)
|
|
$
|
(2,546,038
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock upon conversion of convertible debt
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
464,935,149
|
|
|
|
464,935
|
|
|
|
(382,059
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
82,876
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued in connection with accrued interest and fees
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
260,455,533
|
|
|
|
260,456
|
|
|
|
(109,105
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
151,351
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued to officers
|
|
|
325,000
|
|
|
|
325
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,145
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,470
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued in connection with conversion of preferred shares
|
|
|
(300,000
|
)
|
|
|
(300
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
15,912,000
|
|
|
|
15,912
|
|
|
|
(15,612
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beneficial conversion feature in connection with convertible debt
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
15,500
|
|
|
|
-
|
|
|
|
-
|
|
|
|
15,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,611,781
|
)
|
|
|
-
|
|
|
|
(1,611,781
|
)
|
Other Comprehensive Loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(20,766
|
)
|
|
|
(20,767
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, August 31, 2016
|
|
|
1,995,185
|
|
|
$
|
1,995
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
745,718,631
|
|
|
$
|
745,718
|
|
|
$
|
9,274,044
|
|
|
$
|
(13,920,498
|
)
|
|
$
|
(24,647
|
)
|
|
$
|
(3,923,388
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
564,424
|
|
|
|
-
|
|
|
|
564,423
|
|
Other Comprehensive Loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(314
|
)
|
|
|
(314
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, August 31, 2017
|
|
|
1,995,185
|
|
|
$
|
1,995
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
745,718,631
|
|
|
$
|
745,718
|
|
|
$
|
9,274,044
|
|
|
$
|
(13,356,074
|
)
|
|
$
|
(24,961
|
)
|
|
$
|
(3,359,279
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements
|
|
DIGITAL BRAND MEDIA & MARKETING GROUP, INC. AND SUBSIDIARIES
|
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended August 31,
|
|
|
For the Year Ended August 31,
|
|
|
For the Year Ended August 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
564,423
|
|
|
$
|
(1,611,781
|
)
|
|
$
|
(738,065
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of preferred shares
|
|
|
-
|
|
|
|
5,470
|
|
|
|
5,834
|
|
Depreciation
|
|
|
216
|
|
|
|
2,797
|
|
|
|
4,157
|
|
Amortization of debt discount
|
|
|
32,083
|
|
|
|
69,500
|
|
|
|
270,666
|
|
Change in fair value of derivative liability
|
|
|
(776,858
|
)
|
|
|
1,007,007
|
|
|
|
(47,800
|
)
|
Gain on extinguishment of accrued compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
(93,933
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(12,184
|
)
|
|
|
19,621
|
|
|
|
6,140
|
|
Prepaid expenses and other current assets
|
|
|
28
|
|
|
|
(146
|
)
|
|
|
108
|
|
Accounts payable and accrued expenses
|
|
|
(872
|
)
|
|
|
19,560
|
|
|
|
28,069
|
|
Accrued interest
|
|
|
63,286
|
|
|
|
203,777
|
|
|
|
125,897
|
|
Accrued compensation
|
|
|
181,596
|
|
|
|
163,354
|
|
|
|
137,886
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
|
|
|
51,718
|
|
|
|
(120,841
|
)
|
|
|
(301,041
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of equipment
|
|
|
(660
|
)
|
|
|
(2,206
|
)
|
|
|
(2,290
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH USED IN INVESTING ACTIVITIES
|
|
|
(660
|
)
|
|
|
(2,206
|
)
|
|
|
(2,290
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from convertible debentures
|
|
|
-
|
|
|
|
50,000
|
|
|
|
160,000
|
|
Proceeds from loan payable
|
|
|
-
|
|
|
|
70,500
|
|
|
|
109,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH PROVIDED BY FINANCING ACTIVITIES
|
|
|
-
|
|
|
|
120,500
|
|
|
|
269,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE (DECREASE) IN CASH
|
|
|
51,058
|
|
|
|
(2,546
|
)
|
|
|
(33,831
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EFFECT OF VARIATION OF EXCHANGE RATE OF CASH
HELD IN FOREIGN CURRENCY
|
|
|
(314
|
)
|
|
|
(20,766
|
)
|
|
|
8,915
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH - BEGINNING OF YEAR
|
|
|
4,518
|
|
|
|
27,831
|
|
|
|
52,747
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH - END OF YEAR
|
|
$
|
55,262
|
|
|
$
|
4,518
|
|
|
$
|
27,831
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Cash paid for taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assignment of loan payable to convertible loan
|
|
$
|
-
|
|
|
$
|
100,500
|
|
|
$
|
85,000
|
|
Beneficial conversion feature
|
|
$
|
-
|
|
|
$
|
15,500
|
|
|
$
|
-
|
|
Conversion of Series 1 preferred stock into common stock
|
|
$
|
-
|
|
|
$
|
15,912
|
|
|
$
|
-
|
|
Conversion of accrued interest and fees to common stock
|
|
$
|
-
|
|
|
$
|
151,351
|
|
|
$
|
4,236
|
|
Conversion of convertible notes payable into common stock
|
|
$
|
-
|
|
|
$
|
82,877
|
|
|
$
|
27,027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements
|
|
DIGITAL BRAND MEDIA & MARKETING GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – ORGANIZATION, BASIS OF PRESENTATION AND GOING CONCERN
Nature of Business and History of the Company
Digital Brand Media & Marketing Group, Inc. (f/k/a RTG Ventures, Inc.) (“The Company”) is an OTC:PK listed company. The Company was organized under the laws of the State of Florida on September 29, 1998.
The Company strategically focuses on developing the business of its wholly owned and revenue generating online marketing services company, Digital Clarity. With deep DNA in its operating market, blending the services of an experienced professional workforce leveraging a technology offering positions the company in a strong, forward looking structure. Digital Clarity operates in the growing area of digital marketing that helps companies make the most the digital economy focusing on areas such as Search Engine Marketing (Google, Yahoo! & Bing), Social Media (Twitter, Facebook & LinkedIn) and Internet Strategy Planning including Design, Analytics and Mobile Marketing.
Following the acquisition of Digital Clarity in 2011 the Company has been honing its business model to be the differentiating service provider in digital marketing space to its clients and prospective business as DBMM grows into one of the leaders in the industry going forward.
Today, DBMM Group crafts, designs and executes digital marketing strategies across multiple ad platforms and social media networks for a broad array of clients to help each of them establish a uniform brand identity across the digital universe. The product offering is a unique value proposition of intelligent analytics provided by an experienced digital marketing and technology team. Therefore, DBMM Group is a blend of data, strategy and creative execution.
On March 5, 2013, Digital Brand Media & Marketing Group, Inc. received approval from the Financial Industry Regulatory Authority (FINRA) for its 100 to 1 reverse stock split.
The Company approved a 1,000 to 1 Reverse Split of its shares of common stock, effective July 17, 2015. All reference to Common Stock shares and per share amounts have been retroactively restated to effect the reverse stock split as if the transaction had taken place as of the beginning of the earliest period presented.
The Company approved an increase in Authorized Shares to 2,000,000,000 on April 4, 2016.
Going Concern
The accompanying consolidated financial statements have been prepared on a going concern basis. The financial statements do not reflect any adjustments that might result if The Company is unable to continue as a going concern. The Company has an accumulated deficit of approximately $13.4M and a negative working capital at August 31, 2017 of approximately $3.3M. The Company has incurred net income of approximately $564,000, which is primarily related to the gain on change in derivative liability, for the year ended August 31, 2017. The Company has identified new sources of financing and intends to grow its business revenues and cash flow.
The Company has outstanding loans and convertible notes payable aggregating $1.2 million at August 31, 2017 and doesn’t have sufficient cash on hand to satisfy such obligations. As discussed on Note 13, the Company has raised $192,000 subsequent to August 31, 2017 from the issuance of new loans. The Company has received a non-binding commitment letter from an investor of $250,000 (plus a right of first refusal on additional equity raise up to $3.0 million) which will contribute to satisfying such obligations and fund any potential cash flow deficiencies from operations for the foreseeable future.
Accordingly, the accompanying financial statements have been prepared in conformity with U.S. GAAP, which contemplates continuation of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the financial statements do not necessarily purport to represent realizable or settlement values. The financial statements do not include any adjustment that might result from the outcome of this uncertainty.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary Stylar (DBA Digital Clarity). All significant inter-company transactions are eliminated.
Cash and Cash Equivalents
Cash and cash equivalents consist primarily of cash in banks. The Company considers cash equivalents to include all highly liquid investments with original maturities of three months or less to be cash equivalents. The Company had no cash equivalents as of August 31, 2017, 2016 or 2015.
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable are recorded at the invoiced amount and do not bear interest. Accounts receivable are presented net of allowance for doubtful accounts.
The Company has a policy of reserving for uncollectible accounts based on its best estimate of the amount of probable credit losses in its existing accounts receivable. The Company periodically reviews its accounts receivable to determine whether an allowance is necessary based on an analysis of past due accounts and other factors that may indicate that the realization of an account may be in doubt. Account balances deemed to be uncollectible are charged to the bad debt expense after all means of collection have been exhausted and the potential for recovery is considered remote. At August 31, 2017, 2016, and 2015, the Company recognized $21,797, $22,205 and $0, respectively, as the allowance for doubtful accounts.
Property and Equipment
Property and equipment is stated at cost, less accumulated depreciation. Depreciation is provided using the straight-line method over the estimated useful lives of the related assets (primarily three to five years).
Revenue Recognition
The Company follows the guidance of ASC Topic 605, formerly, SAB 104 for revenue recognition. In general, the Company records revenue when persuasive evidence of an arrangement exists, services have been rendered, the sales price to the customer is fixed or determinable, and collectability is reasonably assured.
Advertising Costs
Advertising costs, which are included in cost of sales and general and administrative expenses in the accompanying Statements of Operations, are expensed when incurred. Total advertising expenses for fiscal years 2017, 2016 and 2015 amounted to $7,838, $5,186, and $28,371, respectively.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Income Taxes
The Company follows the provisions of the ASC 740 -10 related to, Accounting for Uncertain Income Tax Positions. When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above should be reflected as a liability for uncertain tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination. The Company believes its tax positions are all highly certain of being upheld upon examination. As such, the Company has not recorded a liability for uncertain tax benefits.
The Company has adopted ASC 740-10-25 Definition of Settlement, which provides guidance on how an entity should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits and provides that a tax position can be effectively settled upon the completion of an examination by a taxing authority without being legally extinguished. For tax positions considered effectively settled, an entity would recognize the full amount of tax benefit, even if the tax position is not considered more likely than not to be sustained based solely on the basis of its technical merits and the statute of limitations remains open.
Earnings (loss) per common share
The Company utilizes the guidance per FASB Codification “ASC 260 "Earnings Per Share". Basic earnings per share is calculated on the weighted effect of all common shares issued and outstanding and is calculated by dividing net income available to common stockholders by the weighted average shares outstanding during the period. Diluted earnings per share, which is calculated by dividing net income available to common stockholders by the weighted average number of common shares used in the basic earnings per share calculation, plus the number of common shares that would be issued assuming conversion of all potentially dilutive securities outstanding, is not presented separately as it is anti-dilutive. Such securities have been excluded from the per share computations as of August 31, 2017, 2016 and 2015. Anti-dilutive securities, which consists of shares issuable pursuant to convertible promissory notes, amounted to 42,601,938, 15,178,110,085 and 683,148,341 at August 31, 2017, 2016 and 2015, respectively.
Derivative Liabilities
The Company assessed the classification of its derivative financial instruments as of August 31, 2017, which consist of convertible instruments and rights to shares of the Company’s common stock, and determined that such derivatives meet the criteria for liability classification under ASC 815.
ASC 815 generally provides three criteria that, if met, require companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments. These three criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument subject to the requirements of ASC 815. ASC 815 also provides an exception to this rule when the host instrument is deemed to be conventional, as described.
During the years ended August 31, 2017, 2016 and 2015, the Company had notes payable outstanding in which the conversion rate was variable and undeterminable. Accordingly, the Company has recognized a derivative liability in connection with such instruments. The Company uses judgment in determining the fair value of derivative liabilities at the date of issuance at every balance sheet thereafter and in determining which valuation is most appropriate for the instrument (e.g., Black-Scholes method), the expected volatility, the implied risk free interest rate, as well as the expected dividend rate.
Fair Value of Financial Instruments
Effective January 1, 2008, the Company adopted FASB ASC 820-Fair Value Measurements and Disclosures, or ASC 820, for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition for fair value to be applied to existing generally accepted accounting principles that require the use of fair value measurements establishes a framework for measuring fair value and expands disclosure about such fair value measurements. The adoption of ASC 820 did not have an impact on the Company’s financial position or operating results, but did expand certain disclosures.
ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below.
Level 1
|
Observable inputs such as quoted market prices in active markets for identical assets or liabilities.
|
Level 2
|
Observable market-based inputs or unobservable inputs that are corroborated by market data.
|
Level 3
|
Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions.
|
The Company did not have any Level 2 or Level 3 assets or liabilities as of August 31, 2017, 2016, and 2015, with the exception of its derivative liability which are valued based on Level 3 inputs.
Cash is considered to be highly liquid and easily tradable as of August 31, 2017, 2016, and 2015 and therefore classified as Level 1 within our fair value hierarchy.
In addition, FASB ASC 825-10-25 Fair Value Option, or ASC 825-10-25, was effective January 1, 2008. ASC 825-10-25 expands opportunities to use fair value measurements in financial reporting and permits entities to choose to measure many financial instruments and certain other items at fair value. The Company did not elect the fair value options for any of its qualifying financial instruments.
Convertible Instruments
The Company evaluates and accounts for conversion options embedded in its convertible instruments in accordance with professional standards for “Accounting for Derivative Instruments and Hedging Activities”.
Professional standards generally provide three criteria that, if met, require companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments. These three criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. Professional standards also provide an exception to this rule when the host instrument is deemed to be conventional as defined under professional standards as “The Meaning of “Conventional Convertible Debt Instrument”.
The Company accounts for convertible instruments (when it has determined that the embedded conversion options should not be bifurcated from their host instruments) in accordance with professional standards when “Accounting for Convertible Securities with Beneficial Conversion Features,” as those professional standards pertain to “Certain Convertible Instruments.” Accordingly, the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their earliest date of redemption. The Company also records when necessary deemed dividends for the intrinsic value of conversion options embedded in preferred shares based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note.
ASC 815-40 provides that, among other things, generally, if an event is not within the entity’s control could or require net cash settlement, then the contract shall be classified as an asset or a liability.
Stock Based Compensation
We account for the grant of stock options and restricted stock awards in accordance with ASC 718, “Compensation-Stock Compensation.” ASC 718 requires companies to recognize in the statement of operations the grant-date fair value of stock options and other equity based compensation.
Foreign Currency Translation
Assets and liabilities of subsidiaries operating in foreign countries are translated into U.S. dollars using either the exchange rate in effect at the balance sheet date or historical rate, as applicable. Results of operations are translated using the average exchange rates prevailing throughout the year. The effects of exchange rate fluctuations on translating foreign currency assets and liabilities into U.S. dollars are included in a separate component of stockholders’ equity (accumulated other comprehensive loss), while gains and losses resulting from foreign currency transactions are included in operations.
Business Combinations
In accordance with Accounting Standards Codification 805, "Business Combinations" ("ASC 805") the Company records acquisitions under the purchase method of accounting, under which the acquisition purchase price is allocated to the assets acquired and liabilities assumed based upon their respective fair values. The Company utilizes management estimates and, in some instances, may require an independent third-party valuation firm to assist in determining the fair values of assets acquired, liabilities assumed, and contingent consideration granted. Such estimates and valuations require us to make significant assumptions, including projections of future events and operating performance.
Customer Concentration
Three of the Company's customers accounted for approximately 79%. 84% and 89% of its revenues during fiscal 2017, 2016 and 2015, respectively.
Recently Issued Accounting Pronouncements
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (ASC 606), to clarify the principles of recognizing revenue and create common revenue recognition guidance between U.S. GAAP and International Financial Reporting Standards. Under ASC 606, revenue is recognized when a customer obtains control of promised goods or services and is recognized at an amount that reflects the consideration expected to be received in exchange for such goods or services. In addition, ASC 606 requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The ASC is effective for fiscal years beginning after December 15, 2017, including interim reporting periods therein. The Company is currently evaluating the impact of the adoption of ASU 2016-12 on the Company’s financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), to increase transparency and comparability among organizations by recognizing a right-of-use asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either operating or financing, with such classification affecting the pattern of expense recognition in the income statement. ASU 2016-02 is effective for fiscal years and interim periods within those years beginning after December 15, 2018, and early adoption is permitted. We are currently evaluating the impact ASU 2016-02 will have on our consolidated financial statements and associated disclosures.
In August 2016, FASB issued accounting standards update ASU-2016-15, “Statement of Cash Flows” (Topic 230) – Classification of Certain Cash Receipts and Cash Payments”, to address diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments in this ASU are effective for public and nonpublic entities for fiscal years beginning after December 15, 2018, and interim periods with fiscal years beginning after December 15, 2019. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the impact of the adoption of ASU 2016-15 on the Company’s financial statements.
Management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying condensed financial statements.
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
|
Estimated life
|
|
August 31,
|
|
|
3 to 5 years
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
Computer and office equipment
|
|
$
|
20,618
|
|
|
$
|
19,958
|
|
|
$
|
17,752
|
|
Less: Accumulated depreciation
|
|
|
(16,813
|
)
|
|
|
(16,597
|
)
|
|
|
(12,693
|
)
|
|
|
|
$
|
3,805
|
|
|
$
|
3,361
|
|
|
$
|
5,059
|
|
Depreciation expense amounted to $216, $ 2,797, and $4,157 for the years ended August 31, 2017, 2016 and 2015 respectively.
NOTE 4 – LOANS PAYABLE
|
|
August 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
Loans payable
|
|
$
|
370,000
|
|
|
$
|
370,000
|
|
|
$
|
400,000
|
|
The loans payables are due on demand, are unsecured, and are non-interest bearing.
During the years ended August 31, 2017, 2016 and 2015, the Company modified terms with existing or new lenders for loans payable aggregating $0, $100,500, and $85,000, respectively. Substantially all modifications consist in adding conversion terms to such notes.
During the years ended August 31, 2017, 2016 and 2015, the Company generated proceeds of $0, $70,500, and $109,500 from loans payable, respectively.
NOTE 5 – CONVERTIBLE DEBENTURES
At August 31, 2017, August 31, 2016, and August 31, 2015 convertible debentures consisted of the following:
|
|
Years Ended August 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
Convertible notes payable
|
|
$
|
840,791
|
|
|
$
|
840,791
|
|
|
$
|
764,196
|
|
Unamortized debt discount
|
|
|
-
|
|
|
|
32,083
|
|
|
|
16,668
|
|
Total
|
|
$
|
840,791
|
|
|
$
|
808,708
|
|
|
$
|
747,528
|
|
The convertible notes payable mature through January 2016, some of which are payable on demand and they bear interest at ranges between 6% and 15%. The convertible promissory notes are convertible at ratios varying between 45% and 50% of the closing price at the date of conversion through, at its most favorable terms for the holders, the average of the three lowest closing bids for a period of 5-30 days prior to conversion. As of August 31, 2017, an aggregate of $840,791 of convertible promissory notes have matured and remain unpaid.
During the years ended August 31, 2017, 2016 and 2015, the Company modified terms with existing or new lenders for convertible notes aggregating $0, $100,500, and $70,000, respectively. Substantially all modifications consist in adding conversion terms to such notes.
During the years ended August 31, 2017, 2016 and 2015, the Company issued 0, 739,976, and 801,104 shares of its common stock, respectively, to satisfy its obligations under conversion features of convertible debt aggregating $0, $249,727 and $31,443, respectively. During fiscal years 2016 and 2015, 260,456 and 100,979 shares of its common stock were issued pursuant to conversion notices and to satisfy interest expenses pursuant to certain convertible promissory notes amounting to $151,351 and $4,236, respectively which was recorded as interest expense.
During the years ended August 31, 2017, 2016 and 2015, the Company generated proceeds of $0, $50,000 and $160,000, respectively, from the issuance of convertible promissory notes payable.
NOTE 6 - DERIVATIVE LIABILITIES
The Company accounts for the embedded conversion features included in its convertible instruments as derivative liabilities. The aggregate fair value of derivative liabilities at August 31, 2017, 2016 and 2015 amounted to $740,953, $1,517,811 and $408,053 respectively. At each measurement date, the fair value of the embedded conversion features was based on the lattice binomial method using the following assumptions:
|
|
Years Ended August 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
Effective Exercise price
|
|
|
0.0095 – 0.00152
|
|
|
|
0.00005 – 0.0001
|
|
|
|
0.013 – 0.0208
|
|
Effective Market price
|
|
|
0.0019
|
|
|
|
0.0001
|
|
|
|
0.026
|
|
Volatility
|
|
|
85
|
%
|
|
|
248
|
%
|
|
|
208
|
%
|
Risk-free interest
|
|
|
1.13
|
%
|
|
|
0.45
|
%
|
|
|
0.27
|
%
|
Terms
|
|
365 days
|
|
|
365 days
|
|
|
365 days
|
|
Expected dividend rate
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
Changes in the derivative liabilities during the years ended August 31, 2017, 2016 and 2015 are as follows:
Balance at September 1, 2014
|
|
$
|
305,207
|
|
Embedded conversion features at issuance
|
|
|
150,646
|
|
Changes in fair value of derivative liabilities
|
|
|
(47,800
|
)
|
Balance, August 31, 2015
|
|
$
|
408,053
|
|
|
|
|
|
|
Balance at September 1, 2015
|
|
$
|
408,053
|
|
Embedded conversion features at issuance
|
|
|
102,751
|
|
Changes in fair value of derivative liabilities
|
|
|
1,007,007
|
|
Balance, August 31, 2016
|
|
$
|
1,517,811
|
|
|
|
|
|
|
Balance at September 1, 2016
|
|
$
|
1,517,811
|
|
Embedded conversion features at issuance
|
|
|
-
|
|
Changes in fair value of derivative liabilities
|
|
|
(776,858
|
)
|
Balance, August 31, 2017
|
|
$
|
740,953
|
|
NOTE 7 – ACCRUED COMPENSATION
As of August 31, 2017, 2016 and 2015 the Company owes $882,643, $677,947, and $514,593 respectively, in accrued compensation and expenses to certain directors/consultants. The amounts are non-interest bearing.
NOTE 8 - COMMON STOCK AND PREFERRED STOCK
Preferred Stock- Series 1 and 2
The designation of the Preferred Stock- Series 1 is as follows: Authorized 2,000,000 shares, par value of $0.001. One share of the Company’s Preferred Stock- Series is convertible into 53.04 shares of the Company’s common stock, at the holder’s option and with the Company’s acquiescence, and has three votes per share.
The designation of the Preferred Stock- Series 2 is as follows: Authorized 2,000,000 shares, par value of $0.001. One share of the Company’s Preferred Stock- Series is convertible into one share of the Company’s common stock, at the holder’s option and with the Company’s acquiescence, and has no voting rights.
In October 2014, 1,100,000 shares of Preferred Stock Series 1 Designation were issued to three officers of the Company. These shares are convertible at a ratio of 1 preferred share to 53.04 common shares. These shares are valued at $5,834 based on the trading price of the common shares of $0.0001 into which the preferred shares are convertible. This amount was recorded as compensation expense.
In October 2015, 325.000 shares of Preferred Stock Series 1 Designation were issued to three officers of the Company. These shares are convertible at a ratio of 1 preferred share to 53.04 common shares. These shares are valued at $5,470 based on the trading price of the common shares of $0.0001 into which the preferred shares are convertible. This amount was recorded as compensation expense.
In October 2015, the Company issued 15,912,000 shares of its common stock in connection the conversion of 300,000 shares of Preferred Stock Series 1 Designation.
Common Stock
On March 5, 2013, Digital Brand Media & Marketing Group, Inc. received approval from the Financial Industry Regulatory Authority (FINRA) for its 100 to 1 reverse stock split. All shares have been retroactively adjusted to reflect the 100 to 1 reverse stock split.
The Company approved a 1,000 to 1 Reverse Split of its shares of common stock, effective July 17, 2015. All reference to Common Stock shares and per share amounts have been retroactively restated to effect the reverse stock split as if the transaction had taken place as of the beginning of the earliest period presented. In addition, the authorized shares were reduced proportionately to 10,000,000 common shares.
The Authorized Shares were increased to 2,000,000,000 in April 4, 2016.
During the years ended August 31, 2017, August 31, 2016, and August 31, 2015, the Company issued 0, 464,935,149, and 700,205 shares of its common stock, respectively, to satisfy its obligations under conversion features of convertible debt aggregating $0, $82,876, and $27,207, respectively. Additionally, in August 31, 2016 and 2015 the Company issue 260,455,533, and 101,953, shares of its common stock were issued pursuant to conversion notices and to satisfy interest expenses and fees pursuant to certain convertible promissory notes amounting to $151,351 and $4,236, which was recorded as interest expense, respectively.
NOTE 9 - EMPLOYMENT AND CONSULTING AGREEMENTS
In April 2010 a term sheet was agreed with Neil Gray as Chairman and Executive Director of the Company. The term was an initial three years, renewable annually beginning on September 1st, the beginning of the fiscal year.
In September 2010 a term sheet was agreed with a Company Director, Linda Perry, for annual remuneration of $150,000 for her role as a consultant and as Executive Director for US interface to provide oversight regarding external regulatory reporting requirements. In addition, Ms. Perry is the lead executive for capital funding requirements and business development. The agreement had a rolling three-year term and was renewed in September 2013 and September 2016.
In April 2011 a term sheet was agreed with a Company Officer, Reggie James, where remuneration was split between his duties as Senior Vice President and Executive Director of DBMM and Digital Clarity. Mr. James was appointed Co-Chief Operating Officer during fiscal year 2013. In conjunction with his appointment to the Company’s Board of Directors, the agreement provides for a monthly compensation of $4,500.
In June 2012 a term sheet was agreed with a Company Officer, Steve Baughman, as Head of US Operations with a sign on bonus of 50,000 preferred shares, His compensation is performance-based, reflecting multiple projects and business development activities. Mr. Baughman was appointed Co-Chief Operating Officer during fiscal year 2013. The Company may award additional stock-based compensation, at its option.
NOTE 10 - COMMITMENTS AND CONTINGENCIES
Leases
Company has an annual renewable lease. In April 2012, Stylar Limited (a//k/a Digital Clarity) entered into a 5-year lease. Under the terms of the current lease the annual base rent was approximately $17,000. This office is located in the UK. The lease is currently on a month-to-month term for monthly rent of $1,416.
Legal Proceedings
1. The Company is involved in a litigation, Asher Enterprises, Inc. v. Digital Brand Media & Marketing Group, Inc. and Linda Perry, Index No. 600717/2014, in the Supreme Court of the State of New York, sitting in the County of Nassau. The Plaintiff alleges $337,500 in damages based on breach of contract allegations arising from the Company’s untimely periodic filings in December 2013. On September 18, 2014, the Court declined to grant the plaintiff’s application for default judgment and Linda Perry was removed as a defendant. The Court awarded judgment in favor of the Plaintiff on July 15, 2015 in the amount of $122,801.87, which does not include $25,000 paid in settlement efforts. On February 22, 2016 a Settlement Agreement was signed by the parties for a total of $85,000 to Asher Enterprises. Thereafter, the litigation continues.
From time to time, the Company has become or may become involved in certain lawsuits and legal proceedings which arise in the ordinary course of business. The Company intends to vigorously defend its positions. However, litigation is subject to inherent uncertainties and an adverse result in those or other matters may arise from time to time that may harm its financial position, or our business and the outcome of these matters cannot be ultimately predicted.
NOTE 11 - INCOME TAXES
For the years ended August 31, 2017, 2016 and 2015, the benefit for income taxes differed from the amounts computed by applying the statutory federal income tax rate at which rate the tax benefits is expected to occur. The reconciliation is as follows:
|
|
Years Ended August 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
Benefit computed at statutory rate
|
|
$
|
157,000
|
|
|
$
|
(295,000
|
)
|
|
$
|
(142,000
|
)
|
State tax (benefit), net of federal affect
|
|
|
31,000
|
|
|
|
(61,000
|
)
|
|
|
(30,000
|
)
|
Permanent differences (primarily change in fair value of derivative liability)
|
|
|
(188,000
|
)
|
|
|
253,000
|
|
|
|
77,000
|
|
Increase in valuation allowance
|
|
|
-
|
|
|
|
103,000
|
|
|
|
95,000
|
|
Net income tax benefit
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
The Company has net operating loss carry-forwards for income tax totaling purposes approximately $4.2 million at August 31, 2017 which expire at various times through 2037. A significant portion of these carry-forwards is subject to annual limitations due to “equity structure shifts” or “owner shifts” involving “five percent shareholders” (as defined in the Internal Revenue Code) which results in a more than fifty percent change in ownership.
The net deferral tax asset is as follows:
|
|
Years Ended August 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
Net operating loss carry-forward
|
|
$
|
1,043,000
|
|
|
$
|
1,043,000
|
|
|
$
|
941,000
|
|
Accrued compensation
|
|
|
130,000
|
|
|
|
172,000
|
|
|
|
130,000
|
|
Valuation allowance
|
|
|
(1,173,000
|
)
|
|
|
(1,215,000
|
)
|
|
|
(1,071,000
|
)
|
Net deferred tax asset
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
The valuation allowance increased by $424,000 during the fiscal year ended August 31, 2017.
NOTE 12 - FOREIGN OPERATIONS
As of August 31, 2017, a majority of revenues and assets are associated with subsidiaries located in the United Kingdom. Assets and revenues for the year ended August 31, 2017, were as follows:
|
|
United States
|
|
|
Great Britain
|
|
|
Total
|
|
Revenues
|
|
$
|
40,627
|
|
|
$
|
445,742
|
|
|
$
|
486,369
|
|
Total revenues
|
|
$
|
40,627
|
|
|
$
|
445,742
|
|
|
$
|
486,369
|
|
Identifiable assets at August 31, 2017
|
|
$
|
(16
|
)
|
|
$
|
155,950
|
|
|
$
|
115,934
|
|
As of August 31, 2016, all of our revenues and a majority of our assets are associated with subsidiaries located in the United Kingdom. Assets at August 31, 2016 and revenues for fiscal 2016 were as follows:
|
|
United States
|
|
|
Great Britain
|
|
|
Total
|
|
Revenues
|
|
$
|
-
|
|
|
$
|
468,601
|
|
|
$
|
468,601
|
|
Total revenues
|
|
$
|
-
|
|
|
$
|
468,601
|
|
|
$
|
468,601
|
|
Identifiable assets at August 31, 2016
|
|
$
|
(3,448
|
)
|
|
$
|
56,038
|
|
|
$
|
52,590
|
|
As of August 31, 2015, all of our revenues and a majority of our assets are associated with subsidiaries located in the United Kingdom. Assets at August 31, 2015 and revenues for fiscal 2015 were as follows:
|
|
United States
|
|
|
Great Britain
|
|
|
Total
|
|
Revenues
|
|
$
|
-
|
|
|
$
|
493,758
|
|
|
$
|
493,758
|
|
Total revenues
|
|
$
|
-
|
|
|
$
|
493,758
|
|
|
$
|
493,758
|
|
Identifiable assets at August 31, 2015
|
|
$
|
207
|
|
|
$
|
97,169
|
|
|
$
|
97,376
|
|
NOTE 13 - SUBSEQUENT EVENTS
The Company management has evaluated events occurring subsequent to August 31, 2017 through May 29, 2018, the date that these consolidated financial statements were issued, and nothing material has taken place. DBMM has focused on completing its delinquent annual 10-K’s for 2015 – 2016 -2017. Post filing this document the Company will immediately commence its Quarterly 1-3Q 2018 preparation and filing.
During the period from August 31, 2017 thru May 29, 2018, the Company raised $192,000 of proceeds from the issuance of new loans.