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: February 29, 2020

 

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

April 8, 2020

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 February 29, 2020 (unaudited) and August 31, 2019

3

Condensed Consolidated Statements of Operations and Comprehensive Loss for the Six months ended February 29, 2020 and February 28, 2019 (unaudited)

4

Condensed Consolidated Statements of Changes in Stockholders’ Deficit for the Six months ended February 29, 2020 (unaudited)

5

Condensed Consolidated Statements of Cash Flows for the Six months ended February 29, 2020 and February 28, 2019 (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

33

Item 4. Controls and Procedures

33

 

 

PART II. OTHER INFORMATION

  

 

 

Item 1. Legal Proceedings

34

Item 1A. Risk Factors

34

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

34

Item 3. Defaults Upon Senior Securities

34

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

34

Item 5. Other Information

34

Item 6. Exhibits

35

 

 

SIGNATURES

36

 

 

 

 

 

PART I.     FINANCIAL INFORMATION

 

ITEM I.   FINANCIAL STATEMENTS

 

DIGITAL BRAND MEDIA & MARKETING GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

   

Unaudited

         
   

February 29,

   

August 31,

 
   

2020

   

2019

 

ASSETS

               
                 

CURRENT ASSETS

               

Cash

  $ 15,710     $ 17,563  

Accounts receivable, net

    38,665       58,172  

Prepaid expenses and other current assets

    470       470  

Total current assets

    54,845       76,205  
                 

Property and equipment - net

    272       1,502  
                 

TOTAL ASSETS

  $ 55,117     $ 77,707  
                 

LIABILITIES AND STOCKHOLDERS' DEFICIT

               
                 

CURRENT LIABILITIES

               

Accounts payable and accrued expenses

  $ 298,833     $ 378,916  

Accrued interest

    559,435       452,699  

Accrued compensation

    1,253,827       1,268,289  

Loans payable, net

    889,267       671,424  

Derivative liability

    758,648       772,732  

Officers loans payable

    83,162       142,430  

Convertible debentures, net 

    840,791       840,791  

TOTAL LIABILITIES

    4,683,963       4,527,281  
                 

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, and additional paid in capital

    10,028,162       10,028,162  

Other comprehensive income

    6,545       9,216  

Accumulated deficit

    (14,665,548 )     (14,488,947 )
                 

TOTAL STOCKHOLDERS' DEFICIT

  $ (4,628,846 )   $ (4,449,574 )
                 

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT

  $ 55,117     $ 77,707  

 

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

 

   

Unaudited

   

Unaudited

 
   

For the Three Months Ended

   

For the Six Months Ended

 
   

February 29,

   

February 28,

   

February 29,

   

February 28,

 
   

2020

   

2019

   

2020

   

2019

 
                                 

SALES

  $ 80,666     $ 118,057     $ 240,800     $ 240,702  
                                 

COST OF SALES

    92,055       98,611       193,337       202,263  
                                 

GROSS (LOSS) PROFIT

    (11,389 )     19,446       47,463       38,439  
                                 

COSTS AND EXPENSES

                               

Sales, general and administrative

    94,371       157,772       252,389       254,426  

Gain on extinguishment of debt

    -       -       (192,977 )     -  
                                 

TOTAL OPERATING EXPENSES

    94,371       157,772       59,412       254,426  
                                 

OPERATING LOSS

    (105,760 )     (138,326 )     (11,949 )     (215,987 )
                                 

OTHER (INCOME) EXPENSE

                               

Interest expense

    67,594       34,184       178,736       58,282  

Change in fair value of derivative liability

    (10,485 )     (1,035 )     (14,084 )     (21,998 )

TOTAL OTHER EXPENSE

    57,109       33,149       164,652       36,284  
                                 

NET LOSS

  $ (162,869 )   $ (171,475 )   $ (176,601 )   $ (252,271 )
                                 

OTHER COMPREHENSIVE LOSS

                               

Foreign exchange translation

    (1,469 )     (3,260 )     (2,671 )     (3,772 )

COMPREHENSIVE LOSS

  $ (164,338 )   $ (174,735 )   $ (179,272 )   $ (256,043 )
                                 

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

 

   

Unaudited

 
   

For the Six Months Ended

 
   

February 29,

   

February 28,

 
   

2020

   

2019

 
                 

Series 1

               

Preferred stock

         

Balance, beginning and end of period

  $ 1,995     $ 1,995  
                 

Common stock and additional paid-in capital

         

Balance, beginning of year

    10,028,162       10,019,762  

Issuance of shares of common stock

in connection with issuance of debt

    -       8,400  

Balance, end of period

    10,028,162       10,028,162  
                 
                 

Accumulated deficit

         

Balance, beginning of year

    (14,488,947 )     (13,812,485 )

Net income (loss)

    (176,601 )     (252,271 )

Balance, end of period

    (14,665,548 )     (14,064,756 )
                 

Other comprehensive income (loss)

         

Balance, beginning of year

    9,216       8,865  

Other comprehensive income (loss)

    (2,671 )     (3,772 )

Balance, end of period

    6,545       5,093  
                 

Total Stockholders' deficit

  $ (4,628,846 )   $ (4,029,506 )

 

See Notes to Unaudited Condensed Consolidated Financial Statements

 

5

 

DIGITAL BRAND MEDIA & MARKETING GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

   

Unaudited

 
   

For the Six Months Ended

 
   

February 29,

   

February 28,

 
   

2020

   

2019

 

CASH FLOWS FROM OPERATING ACTIVITIES

               

Net loss

  $ (176,601 )   $ (252,271 )
                 

Adjustments to reconcile net loss to net cash used in operating activities:

         

Depreciation

    1,751       100  

Change in fair value of derivative liability

    (14,084 )     (21,998 )

Debt discount amortization

    -       8,400  

Gain on extinguishment of debt

    (192,977 )     -  
                 

Changes in operating assets and liabilities:

               

Accounts receivable

    16,355       (6,353 )

Provision for bad debt

    1,294       -  

Prepaid expenses and other current assets

    -       -  

Accounts payable and accrued expenses

    (4,965 )     17,566  

Accrued interest

    106,736       58,282  

Accrued compensation

    102,000       102,000  
                 

NET CASH USED IN OPERATING ACTIVITIES

    (160,491 )     (94,274 )
                 

CASH FLOWS FROM INVESTING ACTIVITIES

               

Purchase of equipment

    (521 )     -  
                 

NET CASH USED IN INVESTING ACTIVITIES

    (521 )     -  
                 

CASH FLOWS FROM FINANCING ACTIVITIES

               
                 

Proceeds from loan payable

    217,843       106,209  

Officer loans payable (net repayments) net proceeds

    (59,268 )     13,690  
                 

NET CASH PROVIDED BY FINANCING ACTIVITIES

    158,575       119,899  
                 

NET INCREASE (DECREASE) IN CASH

    (2,437 )     25,625  
                 

EFFECT OF VARIATION OF EXCHANGE RATE OF CASH

               

HELD IN FOREIGN CURRENCY

    584       (3,772 )
                 

CASH - BEGINNING OF PERIOD

    17,563       33,117  
                 

CASH - END OF PERIOD

    15,710       54,970  
                 

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. (“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 six months ended February 29, 2020 are not necessarily indicative of the results that may be expected for the year ending August 31, 2020. 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, 2019.

 

Going Concern

 

The accompanying 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 $1.8 million at February 29, 2020 and doesn’t have sufficient cash on hand to satisfy such obligations. However, the Company generated proceeds of $158,575 from financing activities during the six months ending February 29, 2020. 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 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 six months or less to be cash equivalents. The Company had no cash equivalents as of February 29, 2020.

 

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 February 29, 2020, the Company recognized $25,224, 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

 

Revenue is recognized upon transfer of control of promised or services to customers in an amount that reflects the consideration we expect to receive in exchange for those services. We enter into contracts that can include various combinations of services, which are generally capable of being distinct and accounted for as separate performance obligations. Revenue is recognized net of any taxes collected from customers, which are subsequently remitted to governmental authorities.

 

Nature of Services

 

The Company generally provides its services to companies, primarily located in Europe but with international exposure. The Company generally provides its services ratably over the terms of the contract and bills such services at a monthly fixed rate. Some of the services are billed quarterly. The Company’s services are sold without guarantees.

 

Significant Judgments

 

Our contracts with customers sometimes often include promises to transfer multiple services to a customer. Determining whether services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. 

 

Judgment is required to determine the SSP for each distinct performance obligation. The Company uses a single amount to estimate SSP for items that are not sold separately, including set-up services, monthly search advertising services, and monthly optimization and management.

 

Contract Balances  

 

Timing of revenue recognition may differ from the timing of invoicing to customers. The Company records a receivable when revenue is recognized prior to invoicing, or unearned revenue when revenue is recognized subsequent to invoicing.

 

8

 

The allowance for doubtful accounts reflects our best estimate of probable losses inherent in the accounts receivable balance. We determine the allowance based on known troubled accounts, historical experience, and other currently available evidence. 

 

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. Included in these estimates are assumptions about the collection of its accounts receivable, converted amount of cash denominated in a foreign currency, and estimated amounts of cash, the derivative liability could settle, if not in common shares. 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 February 29, 2020 and February 28, 2019.

 

Derivative Liabilities

 

The Company assessed the classification of its derivative financial instruments as of February 29, 2020, 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.

 

9

 

During the six-month period ended February 29, 2020 and February 28, 2019, 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.

 

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 February 29, 2020, 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 February 29, 2020 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.

 

10

 

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.

 

Recently Issued Accounting Pronouncements

 

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. The adoption of ASU 2016-02 did not have a material impact on the Company’s 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 does not anticipate that adopting ASU-2016-15 will have a material impact on its consolidated financial statements and associated disclosures. 

 

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

 

February 29,

2020 

   

August 31,

2019 

 

Computer and office equipment

3 to 5 years

  $ 23,920     $ 23,399  

Less: Accumulated depreciation

      (23,648

)

    (21,897

)

      $ 272     $ 1,502  

 

Depreciation expense amounted to $1,751 and $100, for the six-month periods ended February 29, 2020 and February 28, 2019 respectively.

 

NOTE 4 – LOANS PAYABLE

 

   

February 29,

2020 

   

August 31,

2019 

 

Loans payable

  $ 889,267     $ 671,424  

 

The loans payables are due on demand, are unsecured, and are 2-12% interest bearing.

 

During the six-month periods ended February 29, 2020 and February 28, 2019, the Company generated loan proceeds of $217,843 and $106,209, respectively.

  

The company may have to provide additional consideration (which may be in cash, shares or other financial instruments) up to amounts accrued to satisfy its obligations under certain unsecured loans payable.

 

NOTE 5 – CONVERTIBLE DEBENTURES

 

At February 29, 2020, and August 31, 2019 convertible debentures consisted of the following:

 

   

February 29,

2020 

   

August 31,

2019 

 

Convertible notes payable

  $ 840,791     $ 840,791  

Unamortized debt discount

    -       -  

Total

  $ 840,791     $ 840,791  

 

The convertible notes payable matured through February 2019, and 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

 

   

February 29,

2020 

   

August 31,

2019 

 

Officers loans payable

  $ 83,162     $ 142,430  

 

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

 

During the six-month periods ended February 29, 2020 and February 28, 2019, the Company generated loan proceeds of $0 and $25,000, respectively.

 

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 February 29, 2020, and August 31, 2019 amounted to $758,648 and $772,732 respectively.  At each measurement date, the fair value of the embedded conversion features was based on the lattice binomial method using the following assumptions:

 

   

February 29,

2020

   

August 31,

2019

 

Effective Exercise price

    0.0012 - 0.0019       0.0003 - 0.0010  

Effective Market price

    0.0024       0.0006  

Volatility

    74.95%       78.95%  

Risk-free interest

    0.97%       1.76%  

Terms

 

365 days

   

365 days

 

Expected dividend rate

    0%       0%  

 

The expected volatility is based on the historical volatility of comparable companies.

 

Changes in the derivative liabilities during the six-month period ended February 29, 2020 is as follows:

 

Balance at August 31, 2019

  $ 772,732  

Embedded conversion features at issuance

    -  

Changes in fair value of derivative liabilities

    (14,084

)

Balance, February 29, 2020

  $ 758,648  

 

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.

 

13

 

NOTE 9 – COMMITMENTS AND CONTINGENCIES

 

Leases

 

The Company leases its facilities under non-cancellable operating leases which are renewable monthly. The leases have monthly base rents. The latest monthly base rent for the Company’s facilities ranges between $255 and $1,025, as it is evaluating larger quarters.

 

Total rental expense amounted to $8,883 for the six-month period ended February 29, 2020.

 

Legal Proceedings

 

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 February 29, 2020, a majority of our revenues and assets are associated with subsidiaries located in the United Kingdom. Assets at February 29, 2020 and revenues for the six-month period ended February 29, 2020 were as follows unaudited

 

   

United States

   

Great Britain

   

Total

 

Revenues

  $ -     $ 240,800     $ 240,800  

Total revenues

  $ -     $ 240,800     $ 240,800  

Identifiable assets at February 29, 2020

  $ 4,592     $ 50,525     $ 55,117  

 

As of February 28, 2019, a majority of our revenues and assets are associated with subsidiaries located in the United Kingdom. Assets at February 28, 2019 and revenues for the six-month period ended February 28, 2019 were as follows unaudited

 

   

United States

   

Great Britain

   

Total

 

Revenues

  $ -     $ 240,702     $ 240,702  

Total revenues

  $ -     $ 240,702     $ 240,702  

Identifiable assets at February 28, 2019

  $ 21,780     $ 130,751     $ 157,931  

 

NOTE 11 – SUBSEQUENT EVENTS

 

The Company has evaluated events and transactions for potential recognition or disclosure through April 8, 2020, which is the date the financial statements were available to be issued.

 

On March 11, 2020, the World Health Organization declared a pandemic related to the rapidly spreading coronavirus (COVID-19) outbreak, which has led to a global health emergency. The public-health impact of the outbreak is currently unknown and rapidly evolving, and the related health crisis could adversely affect the global economy, resulting in an economic downturn that could impact demand for our services.

 

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 8. "Financial Statements and Supplementary Data" of this Report.

 

Operations Overview/Outlook

 

The Company developed 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/2019/12/Digital-Clarity-Creds-Deck_DBMM_Nov2019.pdf

 

Operationally, fiscal year 2020 has been important in continuing the direction of the Company and steering it toward a scaled growth plan which has been in neutral while the Company addressed certain external challenges beyond its control. Nevertheless, 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 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.

 

Why 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, 95% of the population are online (statista).

 

With everything turning to digital, it means companies are also jumping online to market their businesses. And 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 3.5 billion people are active social media users.

 

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.

 

Search Engine Marketing

 

The number of people using internet search engines is increasing year on year and is almost unfathomable. In 2019 57% of the global population accessed the internet and by 2021 this figure is projected to grow to 65%.

 

All sources: Statista.com  

 

15

 

 

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 applies 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 stands 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:

 

Get to grips with 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 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

 

2019 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 2019 despite challenging situations in the parent company, the Company outlook remains robust for the foreseeable future.

 

Key Milestones

 

2019 revenues decreased due to external circumstances out of the companies 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. At any point in time, our clients represent a variety of industries. 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.

British Marine is 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 audited 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 acted 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 continues to work 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 year-after-year

 

Digital Clarity shortlisted for UK Search awards 2019

 

The UK Search Awards have been celebrating the best in 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.

 

Digital Clarity was shortlisted in the hotly contested B2B section in October 2019, ‘Best Use of Search’ along with client Bentley SYNCHRO, a global construction project management software company that supports the professional needs of those responsible for creating and managing the world’s infrastructure. The Company’s software has been used in managing and developing projects such as The Shard and Battersea Power Station amongst others.

 

18

 

 

For 2019, the Company was shortlisted for the coveted UK Search Awards 2019 having already won the Top Award of Gold at the Digital Impact Awards 2019.

 

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.

 

 

All categories were 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 

 

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.

 

19

 

 

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.”

 

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

 

 

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

 

20

 

Key Differentiators in Choosing Digital Clarity

 

Why Digital Marketing is key requirement in any business

 

SEARCH REMAINS KEY IN UK AS GROWTH CONTINUES INTO 2020 AND BEYOND

 

Total UK digital ad spend was up 13% year on year in the first six months of 2019, according to IAB UK’s half year Adspend update.

 

Conducted with PwC, the analysis shows that Display (video) and Search were the biggest drivers of growth between January and June 2019 – up 27% and 13% respectively.

 

Search now accounts for £3.7 billion of total H1 digital ad spend, while combined Display (video and non-video) is worth £2.8 billion, a 17% annual uplift. Non-video remains the largest Display format (up 8% YoY to £1.45 billion), but video formats are growing fast (up 27% to £1.32 billion).

 

 

THE NEED FOR PROFESSIONAL CONSULTANCY & OPPORTUNITY FOR MASSIVE GROWTH

 

Four consultancies lead 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.

 

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.

 

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.

 

GLOBAL AD SPEND CONTINUES

 

 

22

 

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.

 

DIGITAL CLARITY WELL POSITIONED TO SERVICE TOP INTERNATIONAL MARKETS

23

 

Growth Opportunities in the Market

 

In fiscal year 2020, the Company will continue to take advantage of the global growth in Digital Marketing.

 

 

DIGITAL CLARITY READY TO TAKE COMMERCIAL ADVANTAGE OF SOCIAL MEDIA GROWTH

 

Digital consumers are now more likely to say they use social to follow the news (40%) than they are to identify it as a platform for keeping in touch with friends (39%). Entertainment also now plays a key role in motivating digital consumers to engage with social media, ranking as the third most important reason for internet users (38%) but showing the highest growth.

 

The opportunities for social engagement, at all times of the day and in various locations, have facilitated the evolution of social platforms into entertainment hubs. It’s no longer about “social” activities in the purest sense, but more purposeful activities, particularly those based around content consumption. This helps to explain why motivations like news consumption, finding entertaining content, researching products, and watching sports have seen increases in the past few years.

 

 

24

 

THE GROWTH OF SOCIAL MEDIA E-COMMERCE 

 

Enabling consumers to finalize a purchase while remaining within social apps has been a goal for social platforms for some time now. Social commerce is seen to have the potential to be a major revenue generator and an important way to diversify revenue streams beyond advertising. Across Asia, networks like WeChat and Line have successfully facilitated commerce via their platforms, allowing consumers to carry out a range of commerce activities from booking taxis to paying for restaurant bills or items in-store.

 

But social commerce has been a tough sell in many Western markets. Online consumer habits here can be difficult to change, especially when it comes to the potentially sensitive information involved in financial transactions. Social media can play a big role in the purchase journey right up to the point of purchase, but the appetite to complete a final purchase within the platform remains low. Most will move to retail sites. These benefits must be intrinsically social or deeply embedded with payment systems, and must be grounded in consumer-engagement strategies, in order for social commerce to achieve the roaring success seen in APAC.

 

The prospect of using “buy” buttons on social media in the U.S. has not quite gained traction. The growing role of social networks as a way of researching products does, however, provide social video with a strong value-proposition in The Social Path to Purchase % who say they do the following furthering the social commerce agenda in this market. In the U.S.

 

 

25

 

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

 

26

 

Global eCommerce retail sales to hit $4.9 trillion by 2021

 

New studies projected that the worldwide retail eCommerce sales will reach a new high by 2021. Ecommerce businesses should anticipate a 265% growth rate, from $1.3 trillion in 2014 to $4.9 trillion in 2021. This shows a future of steady upward trend with no signs of decline

 

 

But, what’s even more interesting is the global eCommerce sales have been steadily eating up the worldwide retail market. In fact, by 2021, it will account for 17.5% of the total global retail sales.

 

27

 

Omnichannel shopping will become more prevalent

 

As the lines blur between the physical and digital environment, multiple channels will become more prevalent in customers’ path to purchase. This is evidenced by 73% of customers using multiple channels during their shopping journey. What it means for eCommerce is to understand how their customers buy, which marketing channels do they engage with, and their motivations and main drivers to purchase. In the simplest sense, omnichannel shopping means decoding what, where, when, why, and how people are purchasing the products you sell on a particular channel.

 

 

Every single touchpoint is important because it puts every single piece of the puzzle into a whole story. Knowing your customers’ touch points before they purchase will better inform your brand of how to promote your products and allocate your marketing budget. More and more people are doing their shopping on social media platforms. With the improvement of social media’s selling capabilities, social media platforms are more than just advertising channels. People can now conveniently and quickly purchase products on their chosen social media platform.

 

 

28

 

B2B eCommerce is a bigger giant

 

B2B (business-to-business) eCommerce is the online selling and marketing of products from one business to another. And when compared to the B2C (business-to-consumer) eCommerce industry, B2B eCommerce is projected to be two times higher than B2C by 2020.

 

 

 

In the US alone, B2B eCommerce sales will hit 1.184 trillion dollars by 2021.

 

The predominance of B2B ecommerce means that B2B businesses must improve and simplify their shopping journey, channeling the B2C ordering experience. The B2B shopping experience is a lot more complicated than that of a B2C buyer.

 

Because of the nature of the transaction, B2B buyers usually need to go through various steps, including sales representative interaction, negotiations, and approvals before they can make a successful purchase. In short, B2B eCommerce businesses must adapt to a more seamless transaction building advanced functionality quote management, price negotiation, easy ordering, order and inventory management for the B2B market.

 

According to Statista.com in 2019 the largest ecommerce markets are:

 

1.

China:

$740 billion

2.

United States:

$561 billion

3.

United Kingdom:

$93 billion

4.

Japan:

$87 billion

5.

Germany:

$77 billion

6.

France:

$55 billion

7.

South Korea:

$69 billion

8.

Canada:

$41 billion

 

29

 

MOST VALUABLE GLOBAL BRANDS

 

1.

Amazon:

$315.5 billion

2.

Apple:

$309.5 billion

3.

Google:

$309 billion

4.

Microsoft:

$251.2 billion

5.

Visa:

$177.9 billion

6.

Facebook:

$159 billion

7.

Alibaba:

$131.2 billion

8.

Tencent:

$130.9 billion

9.

McDonald’s:

$130.4 billion

10.

AT&T:

$108.4 billion

 

GROWTH IN INVESTOR AWARENESS AND OUTREACH.

 

During 2020, 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 Company had to defer its 2019 plans until certain SEC Matters regarding the delinquent filings brought current in July 2018, remain open. The strategic outreach will be 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. With capital infusion, 2020 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.

 

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 2020. 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, business development has slowed down temporarily due to Brexit unease in the UK and clients concern about trade issues with or without the European Union and global concerns about the COVID-19, and its near- and long-term implications. Since 2017, DBMM was able to attract new investors to provide the financing required to complete all delinquent filings beginning with the 2015-2016-2017 Super 10-K, 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.

 

30

 

Going forward, there will be an emphasis on investor awareness as soon as the SEC enters a Final Order for the initial decision issued November 12, 2019. DBMM has been current in its filings since July 2018 and are encouraged by the outlook after normal trading has re-commenced which will not occur until Final Order has been issued by the Commission. 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 2020 remains to return to normal trading following the dismissal of the SEC Administrative Proceeding regarding delinquent filings which were cured July 15, 2018. The Company intends to move ahead thereafter to the scaled, growth plan in multiple geographies to benefit all stakeholders, once the 2Q identified global pandemic’s effect is quantified and considered in business development. DBMM’s brand, Digital Clarity, has competitive advantage and intends to meet the challenge as it has in the past.

 

SIX-MONTH PERIOD ENDED FEBRUARY 29, 2020

 

We had approximately $16,000 in cash and our working capital deficiency amounted to approximately $4.6 million at February 29, 2020.

 

During the six-month period ended February 29, 2020, we used cash in our operating activities amounting to approximately $160,000. Our cash used in operating activities was comprised of our net loss from continuing operations of $176,601 adjusted for the following:

 

Change in fair value of derivative liability of $14,084.

 

Nonrecurring gain in extinguishment of debt of $ 192,977

 

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 $4,965

 

An increase in our accrued salaries of approximately $102,000

 

During the quarter ended February 29, 2020, we generated cash from financing activities of $158,575, which consist of the proceeds from the issuance of loan payables.

 

SIX-MONTH PERIOD ENDED FEBRUARY 28, 2019

 

We had approximately $55,000 in cash and our working capital deficiency amounted to approximately $4.0 million at February 28, 2019.

 

During the six-month period ended February 28, 2019, we used cash in our operating activities amounting to approximately $95,000. Our cash used in operating activities was comprised of our net loss from continuing operations of $252,271 adjusted for the following:

 

Change in fair value of derivative liability of $21,998.

 

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

 

An increase in our accounts payable and accrued expenses of approximately $17,566.

 

An increase in our accrued salaries of approximately $102,000.

 

During the quarter ended February 28, 2019, we generated cash from financing activities of $119,899, which consist of the proceeds from the issuance of loan payables.

 

31

 

RESULTS OF OPERATIONS

 

           

Unaudited Consolidated Operating Results

         
                                                                 
   

For the Three Months Ended

   

For the Six Months Ended

 
   

February 29,

   

February 28,

   

Increase/

   

Increase/

   

February 29,

   

February 28,

   

Increase/

   

Increase/

 
   

Unaudited

   

(Decrease)

   

Decrease

   

Unaudited

   

(Decrease)

   

Decrease

 
   

2020

   

2019

   

$ 2020 vs 2019

   

$ 2020 vs 2019

   

2020

   

2019

   

$ 2020 vs 2019

   

$ 2020 vs 2019

 
                                                                 

SALES

  $ 80,666     $ 118,057     $ (37,391 )     -32 %   $ 240,800     $ 240,702     $ 98       0.04 %
                                                                 

COST OF SALES

    92,055       98,611       (6,556 )     -7 %     193,337       202,263       (8,926 )     -4 %
                                                                 

GROSS PROFIT

    (11,389 )     19,446       (30,835 )             47,463       38,439       9,024          
                                                                 

COSTS AND EXPENSES

                                                               

Sales, general and administrative

    94,371       157,772       (63,401 )     -40 %     252,389       254,426       (2,037 )     -1 %

Gain on extinguishment of debt

    -       -       -       -       (192,977 )     -       (192,977 )     -  
                                                                 

TOTAL OPERATING EXPENSES

    94,371       157,772       (63,401 )             59,412       254,426       (195,014 )        
                                                                 

OPERATING LOSS

    (105,760 )     (138,326 )     32,566       -24 %     (11,949 )     (215,987 )     204,038       -94 %
                                                                 

OTHER (INCOME) EXPENSE

                                                               

Interest expense

    67,594       34,184       33,410       98 %     178,736       58,282       120,454       207 %

Change in fair value of derivative liability

    (10,485 )     (1,035 )     (9,450 )     913 %     (14,084 )     (21,998 )     7,914       -36 %
                                                                 

TOTAL OTHER EXPENSE

    57,109       33,149       23,960       1011 %     164,652       36,284       128,368       171 %
                                                                 

NET LOSS

  $ (162,869 )   $ (171,475 )   $ 8,606             $ (176,601 )   $ (252,271 )   $ 75,670          
                                                                 

(NM): not meaningful

                                                               

 

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

 

For the three and six-month period ended February 29, 2020 our primary sources of revenue are the Per-Click Advertising. This primary source amounted to 63% during the six-month period ended February 29, 2020. Our secondary sources of revenue are our Web Design and Social Media. These secondary sources amounted to approximately 6% of our revenues.  

 

During the six-month period ended February 29, 2020, our revenues were consistent when compared to the prior period. During the three-month period ended February 29, 2020, our revenues decreased, primarily as a result of decreased commercial activities related to the Coronavirus.

 

During the three and six-month period ended February 29, 2020, our cost of sales decreased primarily from staff salaries.

 

The sales, general and administrative expenses during the six-month period ended February 29, 2020 were consistent when compared to the prior period. During the three-month period ended February 29, 2020, our sales, general and administrative expenses decreased, primarily as a result of decreased in legal and professional fees in connection with the Company’s fillings.

 

Interest expense, which include interest accrued on certain notes and loans, increased during the six-month period ended February 29, 2020, due to an additional consideration to satisfy its obligations under certain unsecured loans payable. During the three-month period ended February 29, 2020, interest expense increased due to new loan payables compared to the prior period.

 

32

 

Gain on extinguishment of debt increased during the six-month period ended February 29, 2020, when compared to the comparable prior period. The increase is attributable to an analysis of certain liabilities performed by the Company during such period which deemed them extinguished pursuant to statute of limitations. Such analysis was not performed in the comparable prior period.

 

The decrease on derivative liabilities is primarily attributable due decrease in the Company’s estimated volatility used in the assumptions to compute its fair value at February 29, 2020 when compared to February 28, 2019.

 

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

 

Our management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) that is designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

 

As of the end of the period covered by this report, management, including our Principal Executive Officer and Principal Financial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Act.

 

Based upon the evaluation, our Management, including our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were effective as of February 29, 2020. Our management concluded that the consolidated financial statements included in this report fairly present, in all material respects, our financial position, results of operations and cash flows for the period presented in accordance with GAAP.

 

Changes in Internal Controls Over Financial Reporting:

 

There were no changes in our internal control over financial reporting during the quarter ended February 29, 2020 identified in connection with the evaluation thereof by our management, including our Principal Executive Officer and Principal Financial Officer, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

Remediation of Material Weakness:

 

In our Annual Report on Form 10-K, originally filed on December 14, 2018 and subsequently amended, based on management’s evaluation under the framework in “Internal Control—Integrated Framework,” our Principal Executive Officer and Principal Financial Officer originally concluded that the Company’s internal control over financial reporting was effective as of August 31, 2018. In light of management’s failure to include an affirmative conclusion as to the effectiveness of our internal control over financial reporting as required under Item 308(a) of Regulation S-K in our Annual Reports on Form 10-K filed with the Commission for the year[s] ended August 31, 2018, our management has concluded that our internal control over financial reporting was not effective as of August 31, 2018. The Company believes that it has implemented procedures in the preparation and filing of Form 10-K that will remediated for future periods such material weakness in internal controls.

 

33

 

PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings

 

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, its due date.

 

The Hearing for January 15, 2019 was re-scheduled because of government shutdown. Digital Brand entered a Motion to Dismiss the Proceedings on March 19, 2019 based on 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 Amendments to the Consolidated 10-K for 2015-2016-2017 and the 10-K for 2018 on April 23 and 24, 2019 respectively, and Amendments No. 2 on October 1, 2019 to supersede language in Part II, Item 9A. On November 12, 2019, Carol Fox Foelak, Administrative Law Judge, Securities & Exchange Commission ordered an Initial Decision/Dismissal of the Proceeding. The Dismissal becomes effective under Rule 360 of the Commission's Rules of Practice, 17 C.F.R., Section 201.360, following the Commission’s Order of Finality. On December 3, 2019 The Division of Enforcement Submitted a Petition for Review of Judge Carol Fox Foelak’s Initial Decision dismissing The Administrative Proceedings rendered on November 12, 2019. The Company filed a Motion for Summary Affirmance of The Initial Decision on December 20, 2019.

 

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.

 

34

 

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

  

  

  

 

 

35

 

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: April 8, 2020

 

By: /s/ Linda Perry                

Linda Perry

Principal Executive Officer

Principal Financial Officer

Executive Director

 

 

 

 

36

 

Digital Brand Media and ... (CE) (USOTC:DBMM)
Historical Stock Chart
From Sep 2020 to Oct 2020 Click Here for more Digital Brand Media and ... (CE) Charts.
Digital Brand Media and ... (CE) (USOTC:DBMM)
Historical Stock Chart
From Oct 2019 to Oct 2020 Click Here for more Digital Brand Media and ... (CE) Charts.