Company Quick10K Filing
Quick10K
Digital Brand Media & Marketing Group
10-Q 2019-05-31 Quarter: 2019-05-31
10-Q 2019-02-28 Quarter: 2019-02-28
10-Q 2018-11-30 Quarter: 2018-11-30
10-K 2018-08-31 Annual: 2018-08-31
10-Q 2018-05-31 Quarter: 2018-05-31
10-Q 2018-02-28 Quarter: 2018-02-28
10-Q 2017-11-30 Quarter: 2017-11-30
10-K 2017-08-31 Annual: 2017-08-31
10-Q 2015-05-31 Quarter: 2015-05-31
10-Q 2015-02-28 Quarter: 2015-02-28
10-Q 2014-11-30 Quarter: 2014-11-30
10-K 2014-08-31 Annual: 2014-08-31
10-Q 2014-05-31 Quarter: 2014-05-31
10-Q 2014-02-28 Quarter: 2014-02-28
10-Q 2013-11-30 Quarter: 2013-11-30
PKG Packaging of America 9,250
IPAR Inter Parfums 2,190
FANH Fanhua 1,610
EGOV NIC 1,110
ACIU AC Immune 351
AZRX Azurrx Biopharma 54
CURR Cure Pharmaceutical Holding 0
AQSP Acquired Sales 0
NHMD Nate's Food 0
MYDP Dougherty's Pharmacy 0
DBMM 2019-05-31
Part I. Financial Information
Note 1 - Organization, Basis of Presentation and Going Concern
Note 2 - Significant Accounting Policies
Note 3 - Property and Equipment
Note 4 - Loans Payable
Note 5 - Convertible Debentures
Note 6 - Officers Loans Payable
Note 7 - Derivative Liabilities
Note 8 - Common Stock and Preferred Stock
Note 9 - Commitments and Contingencies
Note 10 - Foreign Operations
Note 11 - Subsequent Events
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosure About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sale of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters To A Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits
EX-31.1 ex_149667.htm
EX-32.1 ex_149668.htm

Digital Brand Media & Marketing Group Earnings 2019-05-31

DBMM 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 dbmm20190531_10q.htm FORM 10-Q dbmm20190531_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549  

 


 

FORM 10-Q

 


 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended: May 31, 2019

 

TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE EXCHANGE ACT

For the transition period from                    to                  

 

Commission file number: 333-85072

 

DBMM GROUP

DIGITAL BRAND MEDIA & MARKETING GROUP, INC.

WWW.DBMMGROUP.COM

(Exact name of small business issuer as specified in its charter)

 

747 Third Avenue, New York, NY 10017

(Address of principal executive offices)

 

Florida

State of incorporation

59-3666743

IRS Employer Identification No.

 

(646) 722-2706

(Issuer's telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes ☒    No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such Files).    Yes ☒    No  ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer ☐                    Accelerated Filer ☐

Non-Accelerated Filer ☐          Smaller Reporting Company  ☒

Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)   Yes ☐   No ☒

 

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.001 par value

DBMM

OTC Markets

 

Indicate the number of shares outstanding of each of the Issuer’s classes of common stock, as of the latest practicable date:

 

Date

Shares Outstanding

July 12, 2019

757,718,631

 

 

 

 

INDEX

 

  

Page No

PART I. CONDENSED CONSOLIDATED FINANCIAL INFORMATION - UNAUDITED

  

 

 

Item 1. Condensed Consolidated Financial Statements

3

Condensed Consolidated Balance Sheets as of May 31, 2019 (unaudited) and August 31, 2018

3

Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Nine months ended May 31, 2019 and 2018 (unaudited)

4

Condensed Consolidated Statements of Changes in Stockholders’ Deficit for the Three and Nine months ended May 31, 2019 and 2018 (unaudited)

5

Condensed Consolidated Statements of Cash Flows for the Nine months ended May 31, 2019 and 2018 (unaudited)

6

Notes to Unaudited Condensed Consolidated Financial Statements

7

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

15

Item 3. Quantitative and Qualitative Disclosures About Market Risk

28

Item 4. Controls and Procedures

28

 

 

PART II. OTHER INFORMATION

  

 

 

Item 1. Legal Proceedings

29

Item 1A. Risk Factors

29

Item 2. Unregistered Sale of Equity Securities and Use of Proceeds

29

Item 3. Defaults Upon Senior Securities

29

Item 4. Submission of Matters to a Vote of Security Holders

29

Item 5. Other Information

29

Item 6. Exhibits

30

 

 

SIGNATURES

31

 

 

 

 

 

 

PART I.     FINANCIAL INFORMATION

ITEM I.   FINANCIAL STATEMENTS

 

DIGITAL BRAND MEDIA & MARKETING GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

   

(Unaudited)

         
   

May 31,

   

August 31,

 
   

2019

   

2018

 

ASSETS

               
                 

CURRENT ASSETS

               

Cash

  $ 20,754     $ 33,117  

Accounts receivable, net

    87,558       94,208  

Prepaid expenses and other current assets

    480       480  

Total current assets

    108,792       127,805  
                 

Property and equipment - net

    1,810       2,021  
                 

TOTAL ASSETS

  $ 110,602     $ 129,826  
                 

LIABILITIES AND STOCKHOLDERS' DEFICIT

               
                 

CURRENT LIABILITIES

               

Accounts payable and accrued expenses

  $ 356,325     $ 362,102  

Accrued interest

    423,854       333,431  

Accrued compensation

    1,223,155       1,070,156  

Loans payable, net

    611,727       440,000  

Derivative liability

    736,722       724,313  

Officers loans payable

    154,750       140,896  

Convertible debentures, net 

    840,791       840,791  

TOTAL LIABILITIES

    4,347,324       3,911,689  
                 

STOCKHOLDERS' DEFICIT

               

Preferred stock, Series 1, par value .001; authorized 2,000,000

shares; 1,995,185, and 1,995,185 shares issued and outstanding

    1,995       1,995  

Preferred stock, Series 2, par value .001; authorized 2,000,000

shares; 0 and 0 shares issued and outstanding

    -       -  

Common stock, par value .001; authorized 2,000,000,000

shares; 757,718,631, and 745,718,631, shares issued and outstanding

    757,718       745,718  

Additional paid in capital

    9,270,444       9,274,044  

Other comprehensive loss

    4,046       8,865  

Accumulated deficit

    (14,270,925 )     (13,812,485 )
                 

TOTAL STOCKHOLDERS' DEFICIT

  $ (4,236,722 )   $ (3,781,863 )
                 

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT

  $ 110,602     $ 129,826  

 

See Notes to Unaudited Condensed Consolidated Financial Statements

 

3

 

 

DIGITAL BRAND MEDIA & MARKETING GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

 

   

For the Three Months Ended May 31 ,

   

For the Nine Months Ended May 31,

 
   

(Unaudited)

   

(Unaudited)

 
   

2019

   

2018

   

2019

   

2018

 
                                 

SALES

  $ 88,530     $ 88,502     $ 329,232     $ 415,471  
                                 

COST OF SALES

    100,969       101,532       303,232       313,522  
                                 

GROSS PROFIT

    (12,439 )     (13,030 )     26,000       101,949  
                                 

COSTS AND EXPENSES

                               

Sales, general and administrative

    127,183       140,572       381,608       366,340  
                                 

TOTAL OPERATING EXPENSES

    127,183       140,572       381,608       366,340  
                                 

OPERATING (LOSS)

    (139,622 )     (153,602 )     (355,608 )     (264,391 )
                                 

OTHER (INCOME) EXPENSE

                               

Interest expense

    32,141       20,048       90,423       57,019  

Change in fair value of derivative liability

    34,406       (15,830 )     12,409       (33,879 )

TOTAL OTHER (INCOME) EXPENSE

    66,547       4,218       102,832       23,140  
                                 

NET (LOSS)

  $ (206,169 )   $ (157,820 )   $ (458,440 )   $ (287,531 )
                                 

OTHER COMPREHENSIVE LOSS

                               

Foreign exchange translation

    (1,047 )     481       (4,819 )     9,038  

COMPREHENSIVE (LOSS)

  $ (207,216 )   $ (157,339 )   $ (463,259 )   $ (278,493 )
                                 

NET LOSS PER SHARE

                               

   Basic and diluted

  $ (0.00 )   $ (0.00 )   $ (0.00 )   $ (0.00 )
                                 

WEIGHTED AVERAGE NUMBER OF SHARES

                         

   Basic and diluted

    757,718,631       745,718,631       757,718,631       745,718,631  

 

See Notes to Unaudited Condensed Consolidated Financial Statements

 

4

 

 

DIGITAL BRAND MEDIA & MARKETING GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT

 

   

For the Three Months Ended May 31 ,

   

For the Nine Months Ended May 31,

 
   

(Unaudited)

   

(Unaudited)

 
   

2019

   

2018

   

2019

   

2018

 
                                 
                                 

Series 1

                               

Preferred Stock

                               

Balance, beginning and end of period

  $ 1,995     $ 1,995     $ 1,995     $ 1,995  
                                 

Common stock and additional paid-in capital

                               

Balance, beginning of period

    10,028,162       10,019,762       10,019,762       10,019,762  

Issuance of shares of common stock

in connection with issuance of debt

            -       8,400       -  

Balance, end of period

    10,028,162       10,019,762       10,028,162       10,019,762  
                                 

Accumulated Deficit

                               

Balance, beginning of period

    (14,064,756 )     (13,485,786 )     (13,812,485 )     (13,356,075 )

Net loss

    (206,169 )     (157,820 )     (458,440 )     (287,531 )

Balance, end of period

    (14,270,925 )     (13,643,606 )     (14,270,925 )     (13,643,606 )
                                 

Other Comprehensive Income (Loss)

                               

Balance, beginning of period

    5,093       (16,404 )     8,865       (24,961 )

Other comprehensive income (loss)

    (1,047 )     481       (4,819 )     9,038  

Balance, end of period

    4,046       (15,923 )     4,046       (15,923 )
                                 

Total Stockholders' Deficit

    (4,236,722 )     (3,637,772 )     (4,236,722 )     (3,637,772 )

 

See Notes to Unaudited Condensed Consolidated Financial Statements

 

5

 

 

DIGITAL BRAND MEDIA & MARKETING GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

   

For the Nine Months Ended May 31,

 
   

(Unaudited)

 
   

2019

   

2018

 

CASH FLOWS FROM OPERATING ACTIVITIES

               

Net (loss)

  $ (458,440 )   $ (287,531 )
                 
Adjustments to reconcile net (loss) to net cash (used in) operating activities:                

Depreciation

    210       102  

Change in fair value of derivative liability

    12,409       (33,879 )

Debt discount amortization

    8,400       -  

Changes in operating assets and liabilities:

               

Accounts receivable

    6,650       20,511  

Prepaid expenses and other current assets

    -       1,015  

Accounts payable and accrued expenses

    (5,776 )     (55,989 )

Accrued interest

    90,423       57,019  

Accrued compensation

    153,000       127,588  
                 

NET CASH (USED IN) OPERATING ACTIVITIES

    (193,124 )     (171,164 )
                 
                 

CASH FLOWS FROM INVESTING ACTIVITIES

    -       -  
                 

CASH FLOWS FROM FINANCING ACTIVITIES

               
                 

Proceeds from loan payable

    171,727       192,000  

Net proceeds from officer loan payable

    13,853       -  
                 

NET CASH PROVIDED BY FINANCING ACTIVITIES

    185,580       192,000  
                 

NET (DECREASE) INCREASE IN CASH

    (7,544 )     20,836  
                 

EFFECT OF VARIATION OF EXCHANGE RATE OF CASH

HELD IN FOREIGN CURRENCY

    (4,819 )     9,038  
                 

CASH - BEGINNING OF PERIOD

    33,117       55,262  
                 

CASH - END OF PERIOD

    20,754       85,136  
                 

Supplemental disclosures of cash flow information:

               

Cash paid for interest

  $ -     $ -  

Cash paid for taxes

  $ -     $ -  

Non-cash investing and financing activities:

               

Common Stock issued in connection with debt

  $ 8,400     $ -  

 

See Notes to Unaudited Condensed Consolidated Financial Statements

 

6

 

 

DIGITAL BRAND MEDIA & MARKETING GROUP, INC.

NOTES TO UNAUDITED CONDENSED 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 of 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.

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all normal recurring adjustments considered necessary for a fair presentation have been included. Operating results for the nine months ended May 31, 2019 are not necessarily indicative of the results that may be expected for the year ending August 31, 2019. For further information refer to the financial statements and footnotes thereto included in the Company’s Form 10-K for the year ended August 31, 2018.

 

Going Concern

 

The accompanying unaudited condensed 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 outstanding loans and convertible notes payable aggregating $1.6 million at May 31, 2019 and doesn’t have sufficient cash on hand to satisfy such obligations. The Company has raised $185,580 net of payments, in the nine months ended May 31, 2019 from the issuance of new loans. The Company also has a non-binding Commitment Letter from an investor of $250,000 which also includes a right of first refusal on additional capital raise up to $3 million which will contribute to satisfying such obligations and fund any potential cash flow deficiencies from operations for the foreseeable future.

 

Accordingly, the accompanying unaudited condensed consolidated 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.

 

7

 

 

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Consolidation

 

The unaudited condensed 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 nine months or less to be cash equivalents. The Company had no cash equivalents as of May 31, 2019.

 

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 May 31, 2019, the Company recognized $ 0, as the allowance for doubtful accounts.

 

Property and Equipment

 

Property and equipment are 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 recognizes revenue in accordance with Financial Accounting Standards Board “FASB” Accounting Standards Codification “ASC” 606. A five-step analysis a must be met as outlined in Topic 606: (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations, and (v) recognize revenue when (or as) performance obligations are satisfied.  Provisions for estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded

 

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.

 

8

 

 

 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 May 31, 2019 and 2018.

 

Derivative Liabilities

 

The Company assessed the classification of its derivative financial instruments as of May 31, 2019, 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 nine-month period ended May 31, 2019 and 2018, 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., Binomial method), the expected volatility, the implied risk-free interest rate, as well as the expected dividend rate.

 

9

 

 

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 May 31, 2019, 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 May 31, 2019 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.

 

10

 

 

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.

 

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 implementation of this standard did not have a material impact on our results of operations.

 

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 condensed 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 consolidated financial statements. 

 

11

 

 

NOTE 3 – PROPERTY AND EQUIPMENT

 

Property and equipment consisted of the following:

 

   

Estimated Life

   

May 31, 2019 

   

August 31, 2018

 

Computer and office equipment

  3 to 5 years     $ 22,335     $ 22,335  
Less: Accumulated depreciation           (20,525 )     (20,314 )
          $ 1,810     $ 2,021  

 

Depreciation expense amounted to $210 and $102, for the nine-months ended May 31, 2019 and 2018 respectively.

 

NOTE 4 – LOANS PAYABLE

 

   

May 31, 2019 

   

August 31, 2018

 

Loans payable

  $ 611,727     $ 440,000  

 

The loans payable are due on demand, are unsecured, and bear interests at rates ranging between 2% to 12%. During the nine-month periods ended May 31, 2019 and 2018, the Company generated loan proceeds of $171,727 and $192,000 from the issuance of loans payable.

 

In connection with the issuance of the loans payable, the company issued 12,000,000 restricted common shares of its common stock during the nine-month period ended May 31, 2019.

 

NOTE 5 – CONVERTIBLE DEBENTURES

 

At May 31, 2019, and August 31, 2018 convertible debentures consisted of the following:

 

   

May 31, 2019 

   

August 31, 2018

 

Convertible notes payable

  $ 840,791     $ 840,791  

Unamortized debt discount

    -       -  

Total

  $ 840,791     $ 840,791  

 

The convertible notes payable matured through February 2017, and they bear interest at ranges between 6% and 15%. The convertible 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.

 

NOTE 6 – OFFICERS LOANS PAYABLE

 

   

May 31, 2019 

   

August 31, 2018

 

Officers loans payable

  $ 154,750     $ 140,896  

 

The loans payables are due on demand, are unsecured, and are non-interest bearing.

 

During the nine-month periods ended May 31, 2019 and 2018, the Company generated net loan proceeds of $13,853 and $0, respectively. Loans in the amount of $11,310 were repaid during the nine-month ended May 31, 2019.

 

12

 

 

NOTE 7 – 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 May 31, 2019, and August 31, 2018 amounted to $736,722 and $724,313 respectively.  At each measurement date, the fair value of the embedded conversion features was based on the lattice binomial method using the following assumptions:

 

   

31-May-19

   

31-Aug-18

 

Effective Exercise price

  0.0004 - 0.00064     0.0007 - 0.00112  

Effective Market price

  0.0008     0.0014  

Volatility

  62.86%     55.96%  

Risk-free interest

  2.21%     2.46%  

Terms

 

365 days

   

365 days

 

Expected dividend rate

  0%     0%  

 

 

Changes in the derivative liabilities during the nine-month period ended May 31, 2019 is as follows:

 

Balance at August 31, 2018

  $ 724,313  

Embedded conversion features at issuance

    -  

Changes in fair value of derivative liabilities

    12,409  

Balance, May 31, 2019

  $ 736,722  

 

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.

 

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 1 to 100 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 nine months ended May 31, 2019, the Company issued 12,000,000 in connection with the issuance of a note payable, the fair value of the shares amounted to $8,400 (see note 4).

 

13

 

 

NOTE 9 – COMMITMENTS AND CONTINGENCIES

 

Leases

 

DBMM's Corporate address is 747 Third Avenue, 2nd Floor, New York, NY 10017. The operating headquarters is located in the UK as Stylar limited, trading as Digital Clarity. DC is on a month-to-month lease at $1,416, as it is evaluating larger quarters.

 

Legal Proceedings

 

The Company was involved in a litigation, Asher Enterprises, Inc. v: Digital Brand Media & Marketing Group, Inc., Index No.600717/2014, in the Supreme Court of the State of New York, County of Nassau. The Plaintiff alleged $337,500 breach of contract principal and damages arising from an untimely periodic filing in 2013. On September 14, 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 $122,891.87, which did not include $25,000 paid in a subsequent settlement in February 2016. On June 18, 2018 the matter was settled between the parties with an Addendum to the Settlement Agreement, for a final payment of $65,000 which was paid in full on the same date. A Stipulation of Discontinuance was filed with the Court ending the litigation. A Satisfaction of Judgment through the Settlement Addendum was coincidently filed. The litigation is closed.

  

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 10 – FOREIGN OPERATIONS

 

As of May 31, 2019, a majority of our revenues and assets are associated with subsidiaries located in the United Kingdom. Assets at May 31, 2019 and revenues for the nine-month period ended May 31, 2019 were as follows unaudited:

 

   

United States

   

Great Britain

   

Total

 

Revenues

  $ -     $ 329,232     $ 329,232  

Total revenues

  $ -     $ 329,232     $ 329,232  

Identifiable assets at May 31, 2019

  $ 15,260     $ 95,342     $ 110,602  

  

As of May 31, 2018, a majority of our revenues and assets are associated with subsidiaries located in the United Kingdom. Assets at May 31, 2018 and revenues for the nine-month period ended May 31, 2018 were as follows unaudited:

 

   

United States

   

Great Britain

   

Total

 

Revenues

  $ 3,627     $ 411,844     $ 415,471  

Total revenues

  $ 3,627     $ 411,844     $ 415,471  

Identifiable assets at May 31, 2018

  $ 5,700     $ 79,436     $ 85,136  

 

NOTE 11 - SUBSEQUENT EVENTS

 

None. 

 

14

 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

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 1. “Financial Statements and Supplementary Data” of this Report.

 

Operations Overview/Outlook

 

The company is providing a document called the Creds Deck which provides a description to prospective clients of Digital Clarity’s value proposition. http://www.dbmmgroup.com/wp-content/uploads/2018/12/Digital-Clarity-Creds-Deck_DBMM_Nov2018.pdf

 

Operationally, DBMM’s plan is to continue the direction of the Company toward a scaled growth plan. The Company continued to focus on the positive, proven operating model and used that model to expand geographic reach with existing and new clients.

 

DBMM continues to build on its strengths. The company has 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.

 

Digital Experts are in demand

 

The world is changing, and technology is taking the lead. Today, everything is going digital -- entertainment, health, real estate, banking and even currencies. This is, however, understandable. In North America alone, 89% of the population are online (statitsa).

 

With everything turning to digital, it means companies are also jumping online to market their businesses. In order to survive the challenges of digital marketing, brands need to keep up with the latest trends. Successfully reaching one’s target audience is no longer just putting out TV and print ads. These days, social media is the new arena of digital marketers, as 3.3 billion people are active social media users.

 

Notably, according to Forbes January 2018 data, 24% of the 5,700 global marketers who were surveyed revealed that social media has been an important part of their marketing for the past five years.

 

To keep up with the ever-changing scene, digital marketing experts need to stay in step with the evolving tech trends. Social media marketing companies like ours work tirelessly to research consumers and what makes them engage with brands. We try to find the best online solutions that will cater to our clients’ end-users’ queries in the easiest and most cost-efficient way possible -- be it by developing new technology or adapting to trends.

 

Relentless Digital Growth Positions Digital Clarity as a Leader

 

The need for seasoned expertise and insight is in huge demand. Digital Clarity’s strength, heritage and reach in the digital marketing puts the DBMM brand in an excellent position for investment and growth. Digital Clarity’s strength in Search Engine Marketing, Analytics and Social Media means that the company is ready to feed on that demand and leapfrog into a powerful revenue focused vehicle.

 

15

 

 

Search Engine Marketing

 

The number of people using internet search engines is increasing year on year and is almost unfathomable. At the end of 2018, 51.2% of the world's population - 3.9 billion people - will be online. Mobile connections have skyrocketed too, with 96% of world's population now within reach of a cell network."  DailyMail.com in The Week December 23-28, 2018.

 

 

Digital Clarity helps companies ‘get found’ on search engines like Google. Using the above Market Share chart and the data from Internet live stats, we can see the number of daily searches on Google 3.5 billion, which equates to 1.2 trillion searches per year worldwide.

 

How machine learning is enhancing digital marketing strategy

 

Digital Clarity apply strategy to algorithmic based machine learning tools. The launch of Google’s new machine learning tool, RankBrain which contributes to search engine results, left many people wondering what impact machine learning would have in the realm of Search Engine Optimization (SEO).

 

With the tech industry going crazy for all things Artificial Intelligence (AI), Natural Language Processing (NLP), machine learning, and chatbots – companies like Digital Clarity help brands make sense of this ever-changing landscape.

 

Machine learning and Digital Marketing

 

Because machine learning is being used to solve a huge set of diverse problems with the help of data, channels, content, and context, as marketers, Digital Clarity stand to benefit from this information and phenomenon as a whole. But, as the information we gather grows, digital marketing as we know it is set to change. Digital Clarity will be at the forefront of this change.

 

Search Engine Optimization

 

From an SEO point of view, keywords could become less important. Search engines receive more revenue for ads when they provide users with higher quality content. As a result, the algorithm they use needs to be more focused on providing each user with content that will serve a specific purpose, rather than be packed with the right keyword density. Therefore, the need to start thinking about the quality of your content as a ranking factor on search engines. This is where Digital Clarity come and help shape content ‘in the right way’ to help it get found.

 

16

 

 

Pay Per Click (PPC) Campaigns

 

With Google launching new “smart” features such as Google Smart Bidding, Smart Display Campaigns, and In-Market Audience to help businesses maximize conversions, it is clear that the future of PPC lies in machine learning.

 

To become more strategic and take PPC campaigns to the next level for its clients, Digital Clarity:

 

Focus the metrics that are most valuable to your business

Understand obstacles that could get in the way of meeting your goals

Know the underlying performance drivers to make more strategic decisions

 

Content Marketing

 

Although still extremely important, the internet has become inundated with too much content. As mentioned above, to succeed, brands need to be creating content that is valuable to readers. To do this, you need to understand consumer trends, data and engagement. Machine learning tools alongside Digital Clarity’s strategic approach, it allows its clients to reduce the amount of time spent tracking data, as well as better decipher that data to create actionable tasks that will lead to success.

 

The Growth of Digital Marketing & Consultancy Services

 

 

The skill set historically owned by agencies offering disciplines such as UX, design, creativity, customer-centric data analytics and customer engagement is now being immersed with large consultancy businesses whose traditional bread and butter was Digital Transformation.

 

Accenture, Deloitte, IBM, KPMG, McKinsey and PricewaterhouseCoopers rank among the most aggressive players in acquiring and partnering with agencies such as Digital Clarity. They present not only an opportunity for Digital Clarity but also a prospective exit and investment opportunity.

 

Digital Marketing Services

 

2018 continued 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.

 

17

 

 

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.

 

The operating company remained cash flow positive through none-months of fiscal year 2019 despite the continuing challenging situations in the parent company which we are hoping can be rectified shortly. The Company outlook remains robust going forward on that basis.

 

Key Milestones

 

2019 continued neutral revenues due to external circumstances out of the company's control which placed enormous pressure on the operating business. Despite these circumstances, the client base is expanding in base number and the size of client serviced. Certain significant new clients representing a variety of industries were added to the client roster. Many of these clients choose to operate under an NDA as our clients see DBMM as a competitive advantage. Under that disclaimer, we cannot share all clients’ names, but here are a few key clients representing diverse verticals, as follows:

 

 

1.

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.

 

2.

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.

 

3.

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.

 

4.

Chantico Global Prestigious asset allocation advisors headquartered in Los Angeles, California, headed by CNBC TV Economist Gina Sanchez. Chantico has a Joint Venture Partnership with Oxford Economics in the UK servicing 1500 international corporations.

 

5.

Babcock Engineering

Defense contractor for the United Kingdom Ministry of Defense

 

6.

Abbey Road Institute

Launch of division of world famous studious to train the musicians of the future.

 

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, spans 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 is an AWARD-WINNING Digital Marketing Services Business

 

In 2018, the company was shortlisted for the coveted UK Search Awards 2018. It won the Top Award of Gold at the Digital Impact Awards 2018.

 

18

 

 

 

 

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 2018 awards are hosted by Katherine Ryan, will feature the very best in SEO & PPC campaigns, software and the teams and individuals behind them.

 

All categories will be judged by an influential and respected international judging panel. The judging is a robust, credible and transparent two-step process, involving pre-scoring and a face to face panel discussion.

 

THE DIGITAL IMPACT AWARDS 2018

 

Now in its 9th year, the Digital Impact Awards are the UK’s largest celebration of digital work in corporate communications.

 

The Digital Impact Awards sets the industry-wide benchmark in digital stakeholder engagement. The event honors the best corporate digital communications work in Europe.

 

This award celebrates the campaigns that best exemplify their successes, obstacles or effectiveness through measurable data. The strongest entries feature proprietary evaluation systems, an effective use of existing systems or solid analysis of metrics.

 

 

The in-depth evaluation strategy used between Digital Clarity allowed the company to understand the user journey and quality of leads from first click through to final sale.

 

Andrew Thomas, publishing editor of Communicate magazine and founder of the Digital Impact Awards, says, “Last year was one of the most competitive of years in the history of the awards programme. Yet this year’s awards signified the leaps and bounds that digital communications are continuing to make across the professional plateau. The sheer quality and character of the evening’s winners exemplifies not only the homogeneity of today’s digital communications, but equally its importance.”

 

19

 

 

Digital Clarity Shortlisted for Ecommerce Awards for Excellence for ProCook IN 2018

 

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%

PC 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_599_5068.html.

 

Key Differentiators in Choosing Digital Clarity

 

Why Digital Marketing is key requirement in any business

 

The UK Market

 

UK Digital Ad spend grew 15% year on year

 

20

 

 

Search is King

 

 

Source: Digital Ad spend report from IAB UK and PwC 2018

 

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.

 

 

 

Search makes up half (52%) of this, increasing on par at 15% to £3.3bn, next is non-video display at £1.33bn (+9%), then video display £967m (40%). Classifieds remains at £726m and other remained at £41m.

 

21

 

 

Outlook of the global digital marketing spend

 

Technavio’s market research analyst predicts the global digital marketing spending market to grow steadily at a CAGR of around 9% during the forecast period.

 

One of the major factors influencing the growth of digital marketing is its ability to track and monitor the outcome of spending on digital marketing efforts. With the help of digital marketing platforms, the marketers can view their customer's response and measure the success of the marketing campaign in real-time, without conducting an expensive market research.

 

Much of this market’s growth can be attributed to the fact that these platforms are interactive for users. Since the customer engagement rate for these campaigns is relatively higher than other marketing strategies, they are rapidly being adopted by enterprises to increase their customer base. The ability of strategically planned interactive campaigns to effectively engage clients will result in the augmented adoption of digital platforms during the forecast period.

 

Type-based segmentation of the digital marketing spending market

 

 

Search ads

 

Display ads

 

Social media

 

Email marketing

 

In this market research, analysts have estimated the search ads segment to be the largest market segment during the forecast period. In 2015, this market segment accounted for more than 33% of the total market share and is envisaged to retain its hold over the market until 2020 owing to the ability of search ads to show results based on search engine queries and appropriate keywords.

 

Geographical segmentation of the digital marketing spending market

 

 

Americas - North, Central and South America

 

APAC - Asia Pacific and Japan

 

EMEA - Europe, the Middle East and Africa

 

This segmentation analysis predicts the Americas to account for more than 45% of the total market share by 2020. In this region, the brands have a greater chance of monetizing their advertisements due to the availability of a broad base of the target audience. Factors such as the rapid shift toward online shopping will result in this market’s strong growth in the Americas.

 

Competitive landscape and key vendors

 

Digital advertising is the fastest-growing segment of the global market for advertising spending. The increasing use of smartphones and the availability of cheap internet services are the two major factors propelling the growth prospects for this market. More than 30% of the companies are planning to spend around 75% of their advertising expenditures on digital marketing within the next five years.

 

22

 

 

Growth Opportunities in the Market

 

In fiscal year 2019, the company will continue to take advantage of the global growth in Digital Marketing.

 

 

Annual growth trajectory positive, especially in active mobile social users, 39% penetration, up 5% from 2017.

 

Share of web traffic by device highly favors mobile at 52% (+4% year-on-year change), whilst Desktop remains in second place with only 43% of device share to all web pages, down by 3% year-on-year.

 

  

23

 

 

THE GROWTH OF DIGITAL GLOBALLY IN 2018

 

2018 has seen massive growth in the core areas of operation in which Digital Clarity operates, namely Social Media, Search Marketing, Analytics and Online Advertising.

 

 

The number of internet users worldwide in 2018 is 4.021 billion, up 7 percent year-on-year

 

The number of social media users worldwide in 2018 is 3.196 billion, up 13 percent year-on-year

 

The number of mobile phone users in 2018 is 5.135 billion, up 4 percent year-on-year

 

The global increase in social media usage since January 2017 is 13%. Saudi Arabia has the largest year-on-year increase in social media users since January 2017 (32%), a 17% increase compared to the global average. Other countries with the largest social media usage increase includes India, Indonesia and Ghana as technology is improving and social media becomes easily accessible to more of the population.

 

WORLDWIDE E-COMMERCE GROWTH OPPORTUNITIES

 

Retail e-commerce sales worldwide continue to grow exponentially year on year and projected to grow to $4.5 trillion by 2021. Online shopping is one of the most popular online activities worldwide, Goldman Sachs expects on-line shopping retail sales in China to grow to $1.7 trillion by 2020. Usage varies by region.

 

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

 

24

 

 

Retail Ecommerce’s Global Spread

 

 

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

 

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 $146.3 billion. 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. will initiate a significant effort to raise positive awareness of DBMM's growth potential 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 will target 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 all areas, the Company will act in the interests of all stakeholders.

 

In the full industry context of dramatic expansion of digital footprints, there has been no direct correlation between DBMM's revenues and its share price. Economic and industry analysts have opined that the industry multiple continues to grow to, in some cases, 25-30 times revenues. DBMM will expand its client and geographic scale, thus increasing revenues. There were matters outside of DBMM's control which caused growth to be in neutral. In 2019, after settling its external litigation with a toxic lender in the 4Q18, and bringing its filings up to date, the Company will resume its growth business plan as soon as the SEC Matter has been finalized. DBMM resumed its growth business plan. Now that the Company has capital infusion, 2019 will follow the model of a growing client base and geographic reach until it achieves a TBD level of profitability/ this benchmark will replicate successful industry models in digital technology and marketing.

 

25

 

 

FINANCIAL OVERVIEW/OUTLOOK

 

DBMM has been honing its commercial model since the acquisition of Digital Clarity (“DC”) in 2011 which has been cash-flow positive as an operating company since its acquisition. External events outside of DBMM's control has precluded the growth expected to this point, however, its margins will continue to be strong on an annual basis, and once the business reaches appropriate scale with assumed profitability and cross-over point, DBMM will be a very successful business for all of its stakeholders.

 

The growth trajectory anticipated is expected during 2019. Once that occurs, the clients benefit immediately due to a wider range of resources; the shareholders will benefit as the market cap grows. The media market multiple far exceeds the “old” manufacturing multiples, as digital technology and marketing has become one of the fastest growing industries in the world today.

 

DBMM's place in the sector is strong. The industry environment continues to grow exponentially and the future of digital marketing as an essential strategy for any consumer-facing business has been proven over-and-over as certain retail businesses are forced to close their doors for lack of or ineffective digital presence. DBMM's brand, Digital Clarity, increases its valuation with client case studies and industry awards resulting in its being considered a leader in the sector for its size. DBMM's increasing client base, coupled with decreasing certain kind of debt and expenses, positions the Company to attract mezzanine financing, something sought after by many and achieved by few.

 

Coincidently, 2019 results have slowed down temporarily due to Brexit unease in the UK and clients concern about trade issues with or without the European Union. After over 2 years, DBMM was able to attract new investors to provide the financing required to complete all delinquent filings and to keep DBMM current in SEC reporting, The Company received a commitment for future working capital in order to grow the Company in key markets, with the intent to move to DBMM profitability. At that point, DBMM would not require future financing until it was ready to acquire 1-2 additional companies to complement and further develop the digital marketing business. The Company also settled its long-standing litigation with a toxic lender, with the settlement fully paid, thus closing the proceeding. Growth capital will increase as the client base re-balanced.

 

Going forward, there will be an emphasis on investor awareness as soon as the SEC open matter has been dismissed. DBMM has been current in its filings since July 2018 and are encouraged by the outlook after normal trading has re-commenced. DBMM intends to make significant strides in aggressively widening its brand exposure using a variety of digital and social channels. There are investors around the globe who understand the digital marketplace and its increasing influence on consumer decisions. DBMM is targeting these new investors in the public market through a global digital and traditional, integrated campaign which will be run by Digital Clarity, with third parties, as required for distribution.

 

The expectations for fiscal-year 2019 remain to remove last hurdle of returning to normal trading, and move ahead, as planned, with a scaled, growth plan in multiple geographies to benefit all stakeholders, but particularly the shareholders.

 

NINE-MONTH PERIOD ENDED MAY 31, 2019

 

We had approximately $21,000 in cash and our working capital deficiency amounted to approximately $4.2 million at May 31, 2019.

 

During the nine-month period ended May 31, 2019, we used cash in our operating activities amounting to approximately $193,000. Our cash used in operating activities was comprised of our net loss from continuing operations of approximately $458,440 adjusted for the following:

 

Change in fair value of derivative liability of $12,409.

 

Additionally, the following variations in operating assets and liabilities impacted our cash used in operating activity:

 

A decrease in our accounts payable and accrued expenses of approximately $5,776.

 

An increase in our accrued salaries of approximately $153,000.

 

During the quarter ended May 31, 2019, we generated cash from financing activities of $185,580, which consist of the proceeds from the issuance of loan payables.

 

26

 

 

NINE-MONTH PERIOD ENDED MAY 31, 2018

 

We had approximately $85,000 in cash and our working capital deficiency amounted to approximately $3.6 million at May 31, 2018.

 

During the nine-month period ended May 31, 2018, we used cash in our operating activities amounting to approximately $171,000. Our cash used in operating activities was comprised of our net loss from continuing operations of approximately $287,000 adjusted for the following:

 

Change in fair value of derivative liability of $33,879 The measurement is set by ASC 815, and, primarily based on volatility, can vary significantly quarter to quarter. (See Note 2/Derivative Liabilities)

 

Additionally, the following variations in operating assets and liabilities impacted our cash used in operating activity:

 

A decrease in our accounts payable and accrued expenses of approximately $55,000 An increase in our accrued salaries of approximately $127,000.

 

During the nine-months ended May 31, 2018, we generated cash from financing activities of $192,000, which consist of the proceeds from the issuance of loan payables.

 

RESULTS OF OPERATIONS

 

Unaudited Consolidated Operating Results

 

   

For the Three Months  Ended May 31,

   

For the Nine Months  Ended May 31,

 
                   

Increase/

   

Increase/

                   

Increase/

   

Increase/

 
   

(Unaudited)

   

(Decrease)

   

Decrease

   

(Unaudited)

   

(Decrease)

   

Decrease

 
   

2019

   

2018

   

$ 2019 vs 2018

   

$ 2019 vs 2018

   

2019

   

2018

   

$ 2019 vs 2018

   

$ 2019 vs 2018

 
                                                                 

SALES

  $ 88,530     $ 88,502     $ 28       0 %   $ 329,232     $ 415,471     $ (86,239 )     -21 %
                                                                 

COST OF SALES

    100,969       101,532       (563 )     -1 %     303,232       313,522       (10,290 )     -3 %
                                                                 

GROSS PROFIT

    (12,439 )     (13,030 )     591               26,000       101,949       (75,949 )        
                                                                 
COSTS AND EXPENSES                                                                

Sales, general and administrative

    127,183       140,572       (13,389 )     -10 %     381,608       366,340       15,268       4 %
                                                                 
                                                                 

TOTAL OPERATING EXPENSES

    127,183       140,572       (13,389 )             381,608       366,340       15,268          
                                                                 

OPERATING (LOSS) 

    (139,622 )     (153,602 )     13,980       -9 %     (355,608 )     (264,391 )     (91,217 )     35 %
                                                                 
OTHER (INCOME) EXPENSE                                                                

Interest expense

    32,141       20,048       12,093       60 %     90,423       57,019       33,404       59 %

Change in fair value of derivative liability

    34,406       (15,830 )     50,236       -317 %     12,409       (33,879 )     46,288       -137 %
                                                                 

TOTAL OTHER (INCOME) EXPENSE

    66,547       4,218       62,329       -257 %     102,832       23,140       79,692       -78 %
                                                                 

NET (LOSS) 

  $ (206,169 )   $ (157,820 )   $ (48,349 )           $ (458,440 )   $ (287,531 )   $ (170,909 )        

 

(NM): not meaningful

 

27

 

 

We currently generate revenue through our Pay-Per-Click Advertising, Search Engine Optimization Services, Web Design, and Social Media.

 

For the three and nine-month period ended May 31, 2019 our primary sources of revenue are the Per-Click Advertising, Web Design and Search Engine Optimization Services. These primary sources amounted to 99% during the three and nine-month period ended May 31, 2019. Our secondary sources of revenue are our Social Media. These secondary sources amounted to approximately 1% of our revenues.

 

During the three and nine-month period ended May 31, 2019, our revenues were equivalent when compared to the prior year period primarily as a result of decrease in sales related to Web Design.

 

The legal and professional fees during the three and nine-month period ended May 31, 2019 when compared to the comparable prior year period, increased primarily due to services provided by professionals in connection with the Company’s filings.

 

Interest expense, which include interest accrued on certain notes and loans, increased during the three and nine-month period ended May 31, 2019 primarily attributable to the new loan payables. 

 

The increase on derivative liabilities is primarily attributable to the Company’s estimated volatility used in the assumptions to compute its fair value at May 31, 2019 when compared to May 31, 2018.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

 

As a “smaller reporting company”, as defined by Rule 10(f)(1) of Regulation S-K, the Company is not required to provide this information.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of disclosure controls and procedures.

 

Disclosure controls and procedures are our controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act, are recorded, processed, summarized and reported within the time period specified by the SEC’s rules and forms. Disclosure and control procedures are also designed to ensure that such information is accumulated and communicated to management, including our Principal Executive Officer and Principal Financial Officer, to allow timely decisions regarding required disclosures.

 

Based on our evaluation of disclosure controls and procedures (as defined in the Exchange Act Rules 13a-15(e) and 15d-15(e)) required by the Exchange Act Rules 13a-15(b) or 15d-15(b), our Executive Director, who also acts as the Principal Executive Officer and Principal Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were adequate and effective at the reasonable assurance level.

 

Changes in internal controls.

 

There were no changes in our internal control over financial reporting during the quarter ended May 31, 2019, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

28

 

 

PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings

 

1.The Company was involved in a litigation, Asher Enterprises, Inc. v: Digital Brand Media & Marketing Group, Inc., Index No.600717/2014, in the Supreme Court of the State of New York, County of Nassau. The Plaintiff alleged $337,500 breach of contract principal and damages arising from an untimely periodic filing in 2013. On September 14, 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 $122,891.87, which did not include $25,000 paid in a subsequent settlement in February 2016. On June 18, 2018 the matter was settled between the parties with an Addendum to the Settlement Agreement, for a final payment of $65,000 which was paid in full on the same date. A Stipulation of Discontinuance was filed with the Court ending the litigation. A Satisfaction of Judgment through the Settlement Addendum was coincidently filed. The litigation is closed.

 

2. The U.S. Securities & Exchange Commission instituted an Administrative Proceeding, File No. 3-17990, on May 16, 2017 to revoke the Company's registration statement because of delinquent filings. A hearing was held on August 9, 2017 and the Initial Decision to revoke the registration was dated November 16, 2017. The order was subsequently remanded by order of the U.S. Supreme Court in December 2017. The Company responded to the Remand with evidence of mitigating circumstances under a Protective Order and filed all its delinquent filings: a Super 10-K for 2015-2016-2017 on May 31, 2018 and 10-Q's for 2018 1Q, 2Q on June 22, 2018 and 3Q on July 15, 2018 10-K for 2018 on December 15, 2018, and 1Q 2019 on January 14, 2019. The latter 3 were filed on time.

 

On November 9, 2018 following agreement by the parties and stated in an order for the case to go forward based on the existing record with the exception of the aforementioned Initial Decision which has been vacated/withdrawn. A hearing was rescheduled for March 21, 2019, due to U.S. Governmental Shutdown.

 

Digital Brand entered a Motion to Dismiss the Proceedings on March 19, 2019, based on all filings being current as of July, 2018, and all filings to date have been filed on time for the 2019 fiscal year. The facts were presented at the Hearing. The Division did not support the dismissal in a response to which Digital Brand filed two (2) Amendments to the Consolidated 10-K for 2015-2016-2017 and 10-K for 2018 on April 23 and 24, 2019, respectively to correct language in question in Item 9A. The Matter is with the Judge and remains open. 

 

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.

 

Item 1A. Risk Factors

 

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this item.

 

Item 2. Unregistered Sale of Equity Securities and Use of Proceeds

 

None

 

Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4. Submission of Matters to a Vote of Security Holders

 

None.

 

Item 5. Other Information

 

None.

 

29

 

 

Item 6. Exhibits

 

31.1

  

Principal Executive Officer Rule 13a-14(a) Certification

Principal Financial Officer

Executive Director

 

 

 

32.1

  

Principal Executive Officer Sarbanes-Oxley Act Section 906 Certification

Principal Financial Officer 

Executive Director

  

  

  

 

30

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

DIGITAL BRAND MEDIA & MARKETING GROUP, INC.

 

Date: July 12, 2019

 

 

By: /s/ Linda Perry                                                   

Principal Executive Officer

Principal Financial Officer

Executive Director

 

 

 

 

 

 

31