UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-K
 
[X]  ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 
FOR FISCAL YEAR ENDED: August 31, 2011
 
OR
 
[ ]  TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

Commission file number: 333-85072

RTG VENTURES, INC.
(Name of small business issuer in its charter)
 
Florida
59-3666743
(State or other jurisdiction of
incorporation or organization)
(IRS Employer
Identification No.)
 
c/o David Price, Esq.
1915 I Street NW, 5 th FL
Washington, DC 20006
(Address of principal executive offices)

(917) 488-6473
(Issuer's telephone number)

Securities registered under Section 12(b) of the Exchange Act:
 
Title of each class 
 
Name of exchange on
None
 
which registered
 
Securities registered under Section 12(g) of the Exchange Act:

None
(Title of class)

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [  ]  No [x]

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.   Yes [  ]  No [x]
 
 
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Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes [x]  No [ ]
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K(§229.405 of this chapter) is not contained herein, and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   [  ]
 
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
 
Large accelerated filer   [  ]
Accelerated filer          [  ]
 
Non-accelerated filer     [  ]
Smaller reporting company  [x]
 
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes [ ]  No  [X]
 
The aggregate market value of the issuer’s Common Stock (the only class of voting stock), held by non-affiliates was approximately $1,530,000 based on the average closing bid and ask price for the Common Stock on February 28, 2011 of $0.01 per share.
 
State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date:
 
Common Stock, par value $.001 per share:  
 
197,692,250
  (Class)
 
(Outstanding as of December 13, 2011)
 
DOCUMENTS INCORPORATED BY REFERENCE

None.
 
 
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FORM 10-K
For the Fiscal Year Ended August 31, 2011
 
TABLE OF CONTENTS
 
   
Page
PART 1
   
     
Item 1.
Description of Business
4
Item 1A.
Risk Factors
6
Item 1B.
Unresolved Staff Comments
7
Item 2:
Description of Property
7
Item 3.
Legal Proceedings
7
Item 4.
Removed and Reserved
7
     
PART II
   
     
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
7
Item 6.
Selected Financial Data
10
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operation
10
Item 8.
Consolidated Financial Statements and Supplementary Data
16
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
17
Item 9A(T).
Controls and Procedure
17
Item 9B.
Other Information
18
     
PART III
   
     
Item 10.
Directors and Executive Officers of the Registrant
18
Item 11.
Executive Compensation
21
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
24
Item 13.
Certain Relationships and Related Transactions
24
Item 14.
Principal Accountant Fees and Services
24
     
PART IV
   
     
Item 15.
Exhibits
25
     
Signatures
 
26
 
 
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  PART I

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report contains forward-looking statements. These forward-looking statements are based largely on our expectations and are subject to a number of risks and uncertainties, many of which are beyond our control. Actual results could differ materially from these forward-looking statements as a result of, among other factors, risks related to the large amount of our outstanding term loan; history of net losses and accumulated deficits; reliance on third parties to market, sell and distribute our products; future capital requirements; competition and technical advances; dependence on the oil services market for pipe and well cleaners; ability to protect our patents and proprietary rights; reliance on a small number of customers for a significant percentage of our revenues; and other risks. In light of these risks and uncertainties, there can be no assurance that the forward-looking information contained in this Annual Report will in fact occur.
 
Item 1. Description of Business
 
General

RTG Ventures, Inc. is an OTC:QB listed company. The Company was organized under the laws of the State of Florida on September 29, 1998.
 
 
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In 2006, the Company identified a business in digital technology, social media marketing and online global payment systems in the UK which lent itself to both organic growth and growth by acquisition. From that time, we have been evolving the Business Plan to maximize the opportunities and minimize the risks inherent in a challenging economic environment. All of these efforts were conducted under the contractual requirements of a Share Exchange Agreement. On March 20, 2007, we entered into a Share Exchange Agreement (the "Agreement") with Atlantic Network Holdings Limited, New Media Television (Europe) Limited ("NMTV"), and Certain Outside Stockholders Listed on Exhibit A thereto to acquire all of the outstanding shares of NMTV. Atlantic Network Holdings Limited is a Guernsey company limited by shares and NMTV is a United Kingdom private company limited by shares. The transaction was subject to the fulfillment of certain conditions, including the filing by the Company of all reports required to be filed by it under the Exchange Act and the satisfactory completion of the audit of NMTV's financial statements for each of its past three fiscal years.  The conditions of closing were not met by ANHL and the agreement was rescinded via 8-K/A on March 30, 2010.

RTG Ventures, Inc. entered into a Share Exchange Agreement (the “Exchange Agreement”), on March 31, 2010, with Cloud Channel Limited which was subsequently re-named as RTG Ventures (Europe) Limited in July 2010 (“RTG Ventures (Europe)”). Pursuant to the Exchange Agreement, the Company acquired 100% of the outstanding capital stock of RTG Ventures (Europe) from its stockholders for consideration consisting of Convertible Preferred Shares of RTG Ventures, Inc. according to the derivative valuation methodologies outlined in the Share Exchange Agreements of Bitemark MC Limited and Stylar Limited, a/k/a Digital Clarity Limited. RTG Ventures (Europe) has been valued 12 months forward “notionally” one year hence. An 8-K/A was filed in September 2010 containing audited financials of the acquisition which completed the transactions. Shareholders will be able to convert the preferred shares into common stock using the average share price of the 30 days preceding September 3, 2011 which provides a share price of $0.016083. The methodology provides for a valuation of 4X net profit. All preferred stock will be held by RTGV's transfer agent for the 12 month period ending September 3, 2011, until conversion.
 
In August, 2009, RTGV signed a Letter of Intent with International Financial Systems Ltd. (IFS) a private company, to include iPayu, another dimension in the payment systems division of our Business Plan as described on our website, www.rtgventures.com . The Letter of Intent became a joint venture with RTG Ventures (Europe) Ltd in April, 2010.

Initially and for the first year of operations, RTG Ventures was organized as three divisions: Media Systems, Payment Systems and Solutions, each of which contained both wholly-owned companies and joint ventures with independent business plans, strategies and management. In addition to servicing their discrete markets, these companies all contributed to RTG Ventures' total product offering for media rights owners.

Subsequent to the close of the fiscal year following substantial investment and rapid change within the three main operating sectors of the business, the Company has had a structural review of its total product and services offering. The review was carried out by the Board of Directors. The result was to bring technology development being outsourced directly into the Company to steward on a daily basis and any activities which were not revenue generating in the near term were eliminated. It was unanimously agreed that due to the shift in the market, the company would adopt a lean approach that focused on the relationships and partnerships built up over the year in the music arena as well as build on the early stage development of its CloudChannel product and to re-align and address the new social and analytics needs of the market. Within this shift, it was agreed that a new, more appropriate name be given to the technology that reflected the change and would allow the building of brand value in its own right. That effort is underway.

Certain business lines were eliminated from the Business Plan immediately. In October, 2011 the joint venture with iPayu was mutually withdrawn and in December, 2011 the acquisition of Bitemark Ltd. was rescinded. The companies reverted to the same position each held prior to the contracts. The rescission of the Bitemark Ltd. share purchase agreement is included as an exhibit to this filing for the 2011 fiscal year even though it constitutes a subsequent event.

As a further result of the review, the Company has also agreed to strategically focus 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 augmented to the technology offering would position the company in a strong, forward looking structure. Digital Clarity operates in the growing area of digital marketing that helps companies make the most the digital economy focusing on areas such as Search Engine Marketing (Google, Yahoo! & Bing), Social Media (Twitter, Facebook & LinkedIn) and Internet Strategy Planning including Design, Analytics and Mobile Marketing.

 
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RTG Ventures, Inc. offers Music & Entertainment Technology Solutions and Digital Marketing Services. Harnessing the strength of its acquired online marketing agency Digital Clarity, the company has developed a software platform that fills the needs of artists, management and labels in a complex and ever increasing social economy. Using Digital Clarity’s application in the social and marketing arena, RTG Ventures offers a unique value proposition of intelligent, analytics based technology with the support and insight of an experienced digital marketing team. RTG Ventures offers companies a complete, seamless and powerful solution in marketing, alongside cutting edge technology platforms for web, mobile and tablet devices.
 
The Company is committed to rolling out the services of both the technology and marketing  services offering of the business from its current base in London, England into larger markets in the United States, namely Los Angeles and New York. 

Sales and Marketing
 
Our sales team focuses on adding new advertisers to our business, while our business development and partnership initiatives focuses on adding new reseller partnerships, selectively adding new distribution partnerships and servicing existing partnerships. Our marketing department focuses on promoting our services through online customer acquisition, affiliate relationships, press coverage, strategic marketing campaigns and industry exposure. Advertising and promotion of our services is broken into four main categories: direct sales, reseller partnerships, online acquisition, and referral agreements.
 
Research and Development
 
The Company has a strong forward looking focus in building out a robust and lean platform that will provide revenue generation through the business model described.

There is a current need for investment in building out the development team and creating a proprietary infrastructure to scale the new technology platform and to market to end user.

Employees
 
In fiscal 2011 the Company had six full-time employees.

Competition

There is strong competition in the digital marketing arena, though with the right level of investment and marketing, Digital Clarity has a confident outlook in using its experience to win new business in both local and international markets. RTG Ventures, Inc. has significant business relationships in place.
 
Item 1A. Risk Factors

Smaller reporting companies are not required to provide the information required by this item .
 
 
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Item 1B. Unresolved Staff Comments
 
Not applicable.
 
Item 2. Description of Property
 
Our executive offices are located c/o David Price, Esq., Top Tier Strategies LLC, 1915 I Street NW, 5 th FL, Washington, DC 20006. We do not pay rent for our executive offices.  We currently have two offices located in the UK.  RTG Ventures (Europe) Ltd., a subsidiary of RTG Ventures, Inc. entered in to a one year lease commencing November 4, 2010. Under the terms of the lease the annual base rent is approximately $18,700. This office was located in London. RTG Ventures (Europe) Ltd. did not renew this lease. Stylar Ltd., a subsidiary of RTG Ventures (Europe) Ltd. entered in to a one year lease commencing July 15, 2011. Under the terms of the lease the annual base rent is approximately $50,000. This office is located in Guilford. Eventually we expect to open offices in Los Angeles and New York.
 
Item 3. Legal Proceedings
 
None
 
Item 4. Removed and Reserved
 
 
PART II
 
Item 5. Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
 
Market Information
 
Our common stock is currently listed for quotation on the OTC:QB under the symbol "RTGV."
 
 
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Per Share Market Price Data

The following table sets forth, for the fiscal quarters indicated, the high and low closing bid prices per share for our common stock, as reported by on PinkSheets.com. Such quotations reflect inter-dealer prices, without retail markup, markdown or commission and may not represent actual transactions.
 
Year Ended August 31, 2010:
High Bid
Low Bid
First Quarter
$0.080
$0.030
Second Quarter
$0.04
$0.02
Third Quarter
$0.045
$0.02
Fourth Quarter
$0.027
$0.01
     
Year Ended August 31, 2011:
High Bid
Low Bid
First Quarter
$0.026
$0.01
Second Quarter
$0.02
$0.0077
Third Quarter
$0.015
$0.0061
Fourth Quarter
$0.017
$0.003

The last reported sale price of our common stock on the OTC Electronic Bulletin Board on December 13, 2011 was $0.0028 per share.  As of December 13, 2011, there were 112 holders of record of our common stock as well as over 1,700 shareholders under beneficial ownership through brokerage firms.

Dividends

We have never declared any cash dividends with respect to our common stock. Future payment of dividends is within the discretion of our board of directors and will depend on our earnings, capital requirements, financial condition and other relevant factors. Although there are no material restrictions limiting, or that are likely to limit our ability to pay dividends on our common stock, we presently intend to retain future earnings, if any, for use in our business and have no present intention to pay cash dividends on our common stock.

Equity Compensation Plan Information

We did not issue any securities pursuant to equity compensation plans during the year ended August 31, 2011.
 
 
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Recent issuances of Unregistered Securities

In September 2009, we issued an aggregate of 2,500,000 shares of common stock to our directors and executive officers upon the exercise of options granted to such individuals (September 2009). The Company received a total of $125,000 as consideration for such exercise. These amounts were offset against officer compensation payable by the Company. We relied upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, as amended (the "Act"), for such issuance.

In September, 2009, 1,000,000 shares of common stock for $50,000 were issued to a non-affiliate for services rendered for investor relations awareness in recognition of the protracted close of the Share Exchange and to ensure continuation of services.

In October, 2009, 2,000,000 shares of common stock for $82,000 were issued to a non-affiliate for services rendered to provide the design, development, execution and maintenance of the Company's website, www.rtgventures.com . The Company owns the domain name and the site as a result of this transaction.

In October, 2009 the Company converted a convertible debenture for $25,000 at $0.01 and issued 2,500,000 million shares.

In December, 2009 the Company issued 2,500,000 shares of common stock for $90,000 to a consultant for business services regarding financial structure amid tactical analysis for a 12 month period.

In January, 2010, 3,000,000 shares of common stock for $90,000 were issued in connection with certain guarantees provided to the Company.

In April, 2010, 3,000,000 shares of common stock for $69,000 were issued to a Company officer as a sign-on bonus under the terms of the agreement for services. 1,500,000 shares of common stock for $34,500 were issued to another Company officer as a sign-on bonus under the terms of the agreement for services.

In May, 2010 the Company converted two convertible debentures totaling $25,000 at $0.015, for a total of 1,666,668 shares issued.

In May, 2010 the Company issued 266,666 shares as additional consideration associated with convertible debentures issued in November, 2009.
 
In June, 2010 the Company converted a convertible debenture for $15,000 at $0.015 at 0% interest and issued 1,000,000 million shares.

In June, 2010 the Company entered into a 2 year consulting agreement to ensure the trading public has an accurate understanding of the Company’s Business Plan and execution. $4,000,000 restricted shares were issued as payment valued at $72,000.
 
In July, 2010, 300,000 shares of common stock for $4,800 were issued to a company executive as a sign on bonus under terms of an employment contract.

In October, 2010, the Company entered into a three month consulting agreement. For the term of this agreement, the consultant shall receive an up-front retainer fee of 500,000 shares of restricted stock for $6,350. In addition the consultant shall receive an additional 1,000,000 shares of restricted stock in November, 2010 and another 1,000,000 shares of restricted stock in December, 2010. The contract was terminated prior to the issuance of the 1,000,000 restricted shares to be issued in December, 2010.
 
 
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In October, 2010 the Company converted a convertible debenture for $25,000 at $0.01 at 0% interest and issued 2,500,000 shares.

In November, 2010, 500,000 shares of common stock were issued for $5,900 to a consultant as a sign-on bonus under the terms of the agreement for services.

In December 2010, a note holder received 4,000,000 shares for $73,600 valued at $0.0184 per share in connection with the conversion of a portion of a loan payable.

In December 2010, 250,000 shares of common stock for $3,000 were issued to a company executive as a sign on bonus under terms of an employment contract.

In December 2010, 500,000 shares of common stock for $6,000 were issued to a company executive as a sign on bonus under terms of an employment contract.

In January, 2011 the Company converted a convertible debenture for $50,000 at $0.01 and issued 5,000,000 shares.

In January, 2011, a note holder received 3,092,538 shares for $37,110 valued at $0.012 per share in connection with the conversion of a portion of a loan payable.

In July 2011, 1,000,000 shares of common stock for $10,000 were issued to a company executive as a sign on bonus under terms of an employment contract.

In July 2011, a note holder received 10,000,000 shares of common stock for $115,000 in connection with the conversion of a portion of a loan payable.

In August 2011the Company cancelled 1,400,000 shares issued to a consultant. The company cancelled 1,200,000 shares of common stock issued in April 2009 and 200,000 shares issued in June, 2009. The shares were returned because of non-performance on the part of said consultant.

In August 2011, 1,500,000 shares of common stock for $23,850 were issued to a company executive as a sign on bonus under the terms of an employment agreement.

In August 2011, 1,572,327 shares of common stock for $25,000 were issued to a company executive in lieu of salary.

In August 2011, a note holder received 9,725,166 shares of common stock for $102,500 in connection with the conversion of a portion of a loan payable.

Item 6. Selected Financial Data
 
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 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation
 
Readers are cautioned that certain statements contained herein are forward-looking statements and should be read in conjunction with our disclosures under the heading "Forward-Looking Statements" on page 1. 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.

Background

RTG Ventures, Inc. is an OTC:QB listed company. Initially through the fiscal year 2011, RTG Ventures had been organized as three divisions: Media Systems, Payment Systems and Solutions, each of which contained both wholly-owned companies and joint ventures with independent business plans, strategies and management. After substantial investment and rapid change within the three main operating sectors of the business, the Company has had a structural review of its total offering. The offering has been promoted by both market forces in the technology and rights management and mobile payments arenas, alongside the positive prospective growth of its acquired digital marketing company, Stylar Limited a/k/a Digital Clarity Ltd.
 
 
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The review was carried out by the Board of Directors and it was unanimously agreed that due to the shift in the market, the company would adopt a lean approach that focused on the relationships and partnerships built up over the year in the music arena as well as build on the early stage development of its CloudChannel product, to re-align and address the new social and analytics needs of the market. Within this shift, it was agreed that a new, more appropriate name be given to the technology that reflected the change and would allow the building of brand value in its own right.

Payment Systems Division

The Company intended to roll-out a disruptive mobile payment platform built on a full banking system through a Joint Venture framework with UK’s International Financial Systems (IFS). Due to the growth in this sector by Internet, Media, Telecoms and Credit Card Companies, it was decided that the level of investment required indexed against the growth by competitive providers would leave the company exposed with a product that would struggle to progress in a highly competitive, well capitalized commercial environment. The joint venture between the RTG Ventures and International Financial Systems was mutually set aside in November 2011. Coincidently, the Payment Systems Division has been eliminated.
 
Media Systems Division

The Media Systems Division consisted of four separate yet complementary businesses. These were CloudChannel, ArchiveGo, FlowCaster and Audigist.

CloudChannel was the lead platform, with ArchiveGo and FlowCaster supporting the archive and streaming monetization element of the software platform. Audigist is the site established for independent artists and to which our partner Aderra has directed many artists who have no contractual relationships with record labels.

The software development of CloudChannel was outsourced to a company based in Ukraine. After a series of late development cycles and major changes in the need for a turnkey monetization platform,  it was decided to bring the development of this technology under the stewardship of RTG Ventures, digital marketing company Digital Clarity, a trading name of Stylar Limited.

The Solutions Division

The Solution Division comprised of Stylar Limited a/k/a Digital Clarity and Bitemark Limited (BMC), including NUA. NUA was a non-material business combination with BMC in order to provide retail support to the merchandising effort.

Digital Clarity remains a viable business, a 100% subsidiary of RTG Ventures, Inc.

The share purchase agreement with Bitemark Limited has been rescinded by RTG’s Board of Directors and included as an exhibit to this 10-K.

The Company has also agreed to focus on developing the business of its wholly owned and revenue generating online marketing services company, Stylar Limited. Stylar limited has the trading brand, Digital Clarity. With a deep DNA in its operating market, blending the services of an experienced augmented to the technology offering would position the company in a strong, forward looking structure. The company has focused on its core strengths with an intent to develop its technology vision in conjuction with the growth and identification of revenue streams.

Digital Clarity is a trading brand of wholly owned RTG Ventures, Inc Company, Stylar Limited. Currently through its office in London, England the Company operates in the growing area of digital marketing which helps companies make the most the digital economy focusing on areas such as Search Engine Marketing (Google, Yahoo! & Bing), Social Media (Twitter, Facebook & LinkedIn) and Internet Strategy Planning including Design, Analytics and Mobile Marketing.

Digital Clarity is a multi-service digital marketing agency which specializes in creating effective strategies and campaigns for clients across a range of vertical markets.
 
 
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Specializing in Search Engine Marketing, SEO Services, Social Media & Digital analytics, at present we work with both major brands and medium sized companies to help develop and leverage online brand presence and new customer acquisition.

Pay per Click Advertising (PPC)

Pay per click (PPC) (also called Cost per click) is an Internet advertising model used to direct traffic to websites, where advertisers pay the publisher (typically a website owner) when the ad is clicked. With search engines, advertisers typically bid on keyword phrases relevant to their target market. Content sites commonly charge a fixed price per click rather than use a bidding system. PPC "display" advertisements are shown on web sites with related content that have agreed to show ads.

Search Engine Optimization (SEO)

Search engine optimization (SEO) is the process of improving the visibility of a website or a web page in search engines via the "natural" or un-paid ("organic" or "algorithmic") search results. In general, the earlier (or higher ranked on the search results page), and more frequently a site appears in the search results list, the more visitors it will receive from the search engine's users. SEO may target different kinds of search, including image search, local search, video search, academic search, news search and industry-specific vertical search engines.

Analytics

The measurement, collection, analysis and reporting of internet data for purposes of understanding and optimizing web usage.

Email Marketing

Description: Email marketing is a form of direct marketing which uses email as a means of communicating commercial or fund-raising messages to an audience. In its broadest sense, every email sent to a potential or current customer could be considered email marketing.

SMS Marketing

Users of an SMS service can exchange text messages either from mobile to mobile or through a specialist internet website to a handset about anything from promotional offers, to general information regarding a product or service. Messages are usually sent using a short code system. Short codes are around 5 or 6 digits in length and work by asking customers to text a certain keyword to a specific code. E.g. ‘Text WIN to 84841’.

Web Design & Development

The process of planning and creating a website. Text, images, digital media and interactive elements are used by Digital Clarity’s designers to produce the page seen on the web browser.  As a whole, the process of web design can include conceptualization, planning, producing, post-production, research, and advertising. The site itself can be divided into it pages. The site is navigated by using hyperlinks commonly these are blue and underlined but can be made to look like anything the client wishes.

Off-Balance Sheet Arrangements

We are not currently a party to, or otherwise involved with, any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Recently Issued Accounting Pronouncements
 
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, could have a material effect on the accompanying financial statements.
 

 
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Reclassifications
 
Certain amounts in the prior period financial statements have been reclassified to conform with the current period presentation.
 
Significant and Critical Accounting Policies

Our discussion of the financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States. The preparation of our consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosure of any contingent assets and liabilities at the date of the financial statements. Management regularly reviews its estimates and assumptions, which are based on historical factors and other factors that are believed to be relevant under the circumstances. Actual results may differ from these estimates under different assumptions, estimates or conditions.

Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and potentially result in materially different results under different assumptions and conditions. See “Notes to Consolidated Financial Statements” for additional disclosure of the application of these and other accounting policies.

LIQUIDITY AND CAPITAL RESOURCES

RTG Ventures, Inc. spent a full year focused on developing a product called Cloud Channel through outsourcing technology development. Long term financing was not available until the product was demonstratable and ready to launch commercially. At the same time Digital Clarity, Ltd. was generating revenues. After the Board’s strategic review post-2011 fiscal year, we have migrated the technology in-house and are concentrating on activities which will grow Digital Clarity, Ltd. organically.

We had $62,111 cash at August 31, 2011. Our working capital deficit amounted to approximately $1.66 million at August 31, 2011.

During fiscal 2011, we used cash in our operating activities amounting to approximately $525,000. Our cash used in operating activities was comprised of our net loss from continuing operations of approximately $1.48 million adjusted for the following:

 
·
Fair value of shares issued of $46,150;
 
·
Amortization of debt discount of $123,672;
 
·
Impairment of Intangible of $156,908;
 
·
Loss on settlement of debt of $43,343;
 
·
Gain on write off of payables of $218,999;
 
·
Depreciation of $1,844; 

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 $168,000, resulting from slower payment processing due to our financial condition as well as an increase in expenditures of RTG Ventures (Europe).
 
·
An increase in our accrued salaries of approximately $656,000, resulting from an increase in staff as well as partial salary payments made due to our financial condition.
 
·
A decrease in our accounts receivable of $13,950 resulting from sales made by acquisition. 

During fiscal 2011, we generated cash from investing activities of approximately $80,037, which consist of cash acquired in connection to acquisition of Digital Clarity, Ltd. and 6,075 for purchase of fixed assets.

During fiscal 2011, we generated cash from financing activities of approximately $505,000, which consist of the proceeds from the issuance of loans, convertible notes, and capital contributions of approximately $560,000 offset by principal repayments on such debt amounting to approximately $53,000.

 
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During fiscal 2010, we used cash in our operating activities amounting to approximately $275,000. Our cash used in operating activities was comprised of our net loss from continuing operations of approximately $1.33 million adjusted for the following:

 
·
Fair value of shares issued of approximately $601,000;
 
·
Amortization of debt discount of $75,000;

Additionally, the following variations in operating assets and liabilities impacted our cash used in operating activity:
 
·
A decrease in our accounts payable and accrued liabilities expenses of approximately $250,000, resulting from an effort from management to lower expenses.
 
·
An increase in our accrued salaries of approximately $330,000, resulting from no salary payments made due to our financial condition.
 
·
An increase in due to related party of approximately $74,000, resulting from expenses paid by a related party on behalf of the Company in connection with an acquisition.

During fiscal 2011, we generated cash from financing activities of approximately $275,000, which consists of the proceeds from the issuance of loans, convertible notes, and capital contributions.
 
The Company may continue to face significant uncertainty relating to liquidity and intends to continue to search for additional sources of working capital, and to actively search for collaborative partners. Many of the existing contracts and initiatives require capital expenditure to move forward and management anticipates that delays will occur if long term funding is not identified.
 
 
RESULTS OF OPERATIONS

Comparison of the Results for the Years Ended August 31, 2011 and 2010
 
The fiscal year ending August 31, 2011was RTG Venture, Inc.’s first year as an operating company with revenues. There remains a development aspect to digital technology which must be separated.
 
We currently generate revenue through our Pay-Per-Click Advertising, Search Engine Marketing, Search Engine Optimization Services, Web Design, Social Media & Digital analytics.
 
Revenue for the years ended August 31, 2011 and 2010 was approximately $540,000 and $0, respectively. In 2011 our primary sources of revenue are the Per-Click Advertising, and Search Engine Optimization Services. These primary sources amounted to greater than 75% of our revenues or approximately $425,000. Our secondary sources of revenue are our Web Design Fees, Social Media and SMS Marketing. These secondary sources amounted to approximately 20% of our revenues or approximately $105,000. In 2010, the Company had not yet acquired its revenue producing subsidiary resulting in $0 revenue for the year.
 
We recognize revenue upon the completion of our performance obligation, provided that: (1) evidence of an arrangement exists; (2) the arrangement fee is fixed and determinable; and (3) collection is reasonably assured.

Cost of sales for the years ended August 31, 2011 and 2010 was approximately $460,000 and $0, respectively. In 2011, 99% of cost of sales included advertising, salaries and media spend. This resulted in gross margins of approximately $81,000 for the fiscal year 2011. In 2010, the Company had not yet acquired its revenue producing subsidiary resulting in $0 in cost of sales and $0 in gross profit for the year.

General and administrative costs decreased 18% to approximately $360,000 from approximately $440,000 for the fiscal years ended August 31, 2011 and 2010, respectively. This is primarily attributable to the streamlining of overhead in the parent company in the US resulting in a decrease in expenditures.

Payroll increased in 2011 by 56% to approximately $730,000 as a result of the Company’s addition of employees for running the day to day operations associated with RTG Ventures (Europe) Limited.

Professional fees (which include accounting/auditing, consulting and legal fees) decreased by approximately $90,000 for the fiscal year ended August 31, 2011. This is primarily a result of a decrease in shares issued for services to consultants. This decrease is due to streamlining of overhead in the parent company in the US resulting in a decrease in expenditures.
 
Amortization and depreciation for the years ended August 31, 2011 and 2010 was approximately $125,000 and $0 respectively. The increase is due to the amortization of debt discount of approximately $123,000 in 2011.

 
 
14

 
 
Interest expense for the years ended August 31, 2011 and 2010 was approximately $106,000 and $80,000 respectively. An increase of approximately $25,000 or 32% which is the result of interest associated with the additional notes payable issued in 2011.

Write off of payables totaled approximately $219,000 for the year ended August 31, 2011. Approximately $135,000 relates to a non refundable advance provided to the Company in connection with a potential merger that was never finalized. As a result of the circumstances and based on a legal evaluation the payable from 2009 has been written off to other income.
 
Loss on settlement of debt totaled approximately $43,000 for the year ended August 31, 2011 and was due to an issuance of shares to pay a loan in excess of the loan totaling approximately $67,000 and a gain on a settlement of salary owed to an employee of approximately $23,500.

Loss on impairment of goodwill of approximately $157,000 for the year ended August 31, 2011 is based on the acquisition of Stylar Limited. The Company has impaired the full amount of the goodwill.
 
 
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES 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.
 
 
15

 
 
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm
F-1
   
Consolidated Balance Sheets
F-2
   
Consolidated Statements of Operations
F-3
   
Consolidated Statements of Cash Flows
F-4
   
Consolidated Statement of Stockholders' Deficit
F-5
   
Notes to Consolidated Financial Statements
F-6

 
16

 
 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors
RTG Ventures, Inc.

We have audited the accompanying consolidated balance sheets of RTG Ventures, Inc. and Subsidiaries, as of August 31, 2011 and 2010 and the related consolidated statements of operations, stockholders’ deficit and cash flows for the years ended August 31, 2011 and 2010. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of RTG Ventures, Inc. and Subsidiaries as of August 31, 2011 and 2010, and the results of their operations and cash flows for the years ended August 31, 2011 and 2010, in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that RTG Ventures, Inc. and Subsidiaries will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has an accumulated deficit of approximately $8,935,000. The Company incurred a net loss for the year ended August 31, 2011 of approximately $1,477,000 and has negative working capital at August 31, 2011 of approximately $1,660,000. These factors, among others, raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 

/s/ Sherb & Co., LLP
Sherb & Co., LLP
Certified Public Accountants
New York, New York
December 14, 2011

 
 
F-1

 
 
RTG VENTURES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
 
   
August 31,
   
August 31,
 
   
2011
   
2010
 
             
ASSETS
             
CURRENT ASSETS
           
Cash
  $ 62,111     $ -  
Account receivable
    43,318       -  
Total current assets
    105,429       -  
                 
Property and equipment - net
    4,231       -  
                 
 TOTAL ASSETS
  $ 109,660     $ -  
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT
                 
CURRENT LIABILITIES:
               
Accounts payable and accrued expenses
  $ 303,535     $ 105,197  
Related party payable
    -       73,841  
Accrued salaries
    1,003,040       869,522  
Loan payable
    253,000       275,000  
Convertible debentures, net of debt discount
    209,120       125,000  
                 
TOTAL CURRENT LIABILITIES
    1,768,695       1,448,560  
                 
STOCKHOLDERS' DEFICIT
               
                 
Preferred stock, par value .001; authorized 2,000,000 shares; 263,772 and -0- shares issued and outstanding    
    264       -  
Common stock, par value .001; authorized 500,000,000 shares; 197,690,250 and 151,450,219 shares issued and outstanding, respectively      
    197,694       151,453  
Additional paid in capital
    7,080,069       5,857,949  
Other comprehensive loss
    (2,047 )     -  
Accumulated deficit
    (8,935,015 )     (7,457,962 )
                 
TOTAL STOCKHOLDERS' DEFICIT
    (1,659,035 )     (1,448,560 )
                 
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
  $ 109,660     $ -  
 
See Notes to Consolidated Financial Statements
 
 
F-2

 
 
RTG VENTURES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
 
   
Year ended August 31,
 
   
2011
   
2010
 
             
Revenues
  $ 539,068     $ -  
                 
Cost of sales
    457,916       -  
                 
Gross Profit
    81,152       -  
                 
Operating expenses:
               
General and administrative
    358,684       438,768  
Payroll expense
    728,542       468,102  
Legal and professional fees
    257,031       347,485  
Amortization and depreciation
    125,484       -  
                 
Total operating expenses
    1,469,741       1,254,055  
                 
Operating loss
    (1,388,589 )     (1,254,055 )
                 
Other income (expense):
               
Interest income (expense)
    (106,064 )     (80,333 )
Gain (loss) on foreign currency transactions
    (1,147 )     3,082  
Loss on settlement of debt
    (43,343 )     -  
Impairment of goodwill
    (156,908 )     -  
Gain from writeoff of payables
    218,998       -  
Total other income (expense)
    (88,464 )     (77,251 )
                 
Net loss
  $ (1,477,053 )   $ (1,331,306 )
                 
Foreign currency translation adjustment
    (2,047 )     -  
Comprehensive loss
  $ (1,479,100 )   $ (1,331,306 )
                 
Net loss per share:
               
Basic and dilute
  $ (0.01 )   $ (0.01 )
                 
Weighted average number of shares:
               
Basic and diluted
    171,617,899       142,036,062  
 
See Notes to Consolidated Financial Statements
 
 
F-3

 
 
RTG VENTURES, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
 
   
Year Ended August 31,
 
   
2011
   
2010
 
             
Cash flows from operating activities:
           
Net loss
  $ (1,477,053 )   $ (1,331,606 )
Adjustments to reconcile net loss to net cash used in operating activities:
               
Fair value of shares issued for compensation
    26,000       100,000  
Fair value of shares issued for services
    20,150       496,300  
Fair value of shares issued in payment interest expense
    -       5,333  
Depreciation
    1,844           
Amortization of debt discount
    123,672       -  
Impairment of goodwill
    156,908       -  
Loss on settlement of debt
    43,343       -  
Gain on write off of payable
    (218,999 )     -  
Beneficial conversion feature on notes payable
    -       75,000  
Changes in operating assets and liabilities:
               
Accounts receivable
    13,950          
Due to related party
    -       73,841  
Accrued compensation
    655,917       329,275  
Accounts payable and accrued expenses
    141,395       (23,143 )
Net cash used in operating activities
    (512,873 )     (275,000 )
                 
Cash flows used in investing activities:
               
Cash acquired in connection to acquisition of subsidiary
    80,037       -  
Purchase of fixed assets
    (6,075        
                 
Net cash provided by investing activities
    73.962       -  
                 
Cash flows from financing activities:
               
Proceeds from convertible notes payable
    337,653       190,000  
Proceeds from loans payable
    30,500       -  
Payments on convertible notes payable
    (53,000 )     -  
Capital contributions
    190,000       85,000  
                 
Net cash provided by financing activities
    505,153       275,000  
                 
Net increase in cash
    66,241       -  
                 
Effect of variation of exchange rate on cash held in foreign currency
    (4,131 )     -  
                 
Cash, beginning of year
    -       -  
                 
Cash, end of year
  $ 62,111     $ -  
                 
Supplemental disclosures of cash flow information:
               
Cash paid for interest
  $ 26,653     $ -  
Cash paid for income taxes
  $ -     $ -  
                 
Non-cash investing and financing activities:
               
                 
Assignment of shareholder debt
  $ 450,000     $ 140,000  
Conversion of convertible notes payable into common stock
  $ 100,000     $ 65,000  
Conversion of loans payable into common stock
  $ 367,500     $ -  
Conversion of accounts payable into common stock
  $ -     $ 125,000  
Fair value of preferred shares issued for acquisition
  $ 225,027     $ -  
Shares issued for accrued salaries
  $ 48,850     $ -  
 
See Notes to Consolidated Financial Statements
 
 
F-4

 
 
RTG VENTURES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
 
                           
Additional
   
Accumulated
   
Other
   
Total
 
   
Preferred Stock
   
Common Stock
   
Paid in
   
Deficit
   
Comprehensive
   
Stockholders'
 
   
Shares
   
Amount
   
Shares
   
Amount
   
Capital
   
Total
   
Loss
   
Deficit
 
Balance, August 31, 2009
    -     $ -     $ 126,216,885     $ 126,219     $ 4,931,550     $ (6,126,356 )   $ -     $ (1,068,587 )
                                                                 
Share based compensation
    -       -       -       -       100,000       -       -       100,000  
                                                                 
Shares issued for exercise of options
    -       -       2,500,000       2,500       122,500       -       -       125,000  
                                                                 
Shares issued for services
    -       -       12,500,000       12,500       375,500       -       -       388,000  
                                                                 
Beneficial conversion feature in connection with convertible debt
    -       -       -       -       75,000       -       -       75,000  
                                                                 
Shares issued in connection with conversion of debt
    -       -       2,500,000       2,500       22,500       -       -       25,000  
                                                                 
Shares issued for conversion of debentures @ $0.015 per share
    -       -       2,666,668       2,667       37,333       -       -       40,000  
                                                                 
Shares issued in connection with interest incurred
    -       -       266,666       267       5,066       -       -       5,333  
                                                                 
Shares issued in connection with employment term sheets
    -       -       4,800,000       4,800       103,500       -       -       108,300  
                                                                 
Capital contribution
    -       -       -       -       85,000       -       -       85,000  
                                                                 
Net loss
    -       -       -       -       -       (1,331,606 )     -       (1,331,606 )
                                                                 
Balance, August 31, 2010
    -       -       151,450,219       151,453       5,857,949       (7,457,962 )     -       (1,448,560 )
                                                                 
Shares issued in connection with conversion of debentures
    -       -       10,000,000       10,000       90,000       -       -       100,000  
                                                                 
Shares issued in connection with employment term sheets
    -       -       5,322,327       5,322       69,528       -       -       74,850  
                                                                 
Shares issued for services
    -       -       1,500,000       1,500       18,650       -       -       20,150  
                                                                 
Shares issued for payment of loan payable
    -       -       30,817,704       30,819       403,574       -       -       434,393  
                                                                 
Capital contribution
    -       -       -       -       190,000       -       -       190,000  
                                                                 
Beneficial conversion feature in connection with convertible debt
    -       -       -       -       224,205       -       -       224,205  
                                                                 
Shares issued in connection with purchase of subsidiary
    264,000       264       -       -       224,763       -       -       225,027  
                                                                 
Cancellation of shares issued for services
    -       -       (1,400,000 )     (1,400 )     1,400       -       -       -  
                                                                 
Net loss
    -       -       -       -       -       (1,477,053 )     -       (1,477,052 )
                                                                 
Other comprehensive loss
    -       -       -       -       -       -       (2,047 )     (2,047 )
                                                                 
Balance, August 31, 2011
    264,000     $ 264     $ 197,690,250     $ 197,694     $ 7,080,069     $ (8,935,015 )   $ (2,047 )   $ (1,659,035 )
 
See Notes to Consolidated Financial Statements
 
 
F-5

 
RTG VENTURES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
NOTE 1 – ORGANIZATION, BASIS OF PRESENTATION AND GOING CONCERN

Nature of Business and History of the Company

RTG Ventures, Inc. is an OTC:QB listed company. The Company was organized under the laws of the State of Florida on September 29, 1998

In 2006, the Company identified a business in digital technology, social media marketing and online global payment systems in the UK which lent itself to both organic growth and growth by acquisition. From that time, we have been evolving the Business Plan to maximize the opportunities and minimize the risks inherent in a challenging economic environment. All of these efforts were conducted under the contractual requirements of a Share Exchange Agreement. On March 20, 2007, the Company entered into a Share Exchange Agreement (the "Agreement") with Atlantic Network Holdings Limited, New Media Television (Europe) Limited ("NMTV"), and Certain Outside Stockholders Listed on Exhibit A thereto to acquire all of the outstanding shares of NMTV. Atlantic Network Holdings Limited is a Guernsey company limited by shares and NMTV is a United Kingdom private company limited by shares. The transaction was subject to the fulfillment of certain conditions, including the filing by the Company of all reports required to be filed by it under the Exchange Act and the satisfactory completion of the audit of NMTV's financial statements for each of its past three fiscal years.  The conditions of closing were not met by ANHL and the agreement was rescinded via 8-K/A on March 30, 2010.
 
On March 31, 2010, RTG Ventures, Inc. entered into a Share Exchange Agreement (the “Exchange Agreement”) with Cloud Channel Limited which was subsequently re-named as RTG Ventures (Europe) Limited in July 2010 (“RTG Ventures (Europe)”). Pursuant to the Exchange Agreement, the Company acquired 100% of the outstanding capital stock of RTG Ventures (Europe) from its stockholders for consideration consisting of Convertible Preferred Shares of RTG Ventures, Inc. according to the valuation methodologies outlined in the Share Exchange Agreements of RTG Ventures (Europe) subsidiaries Bitemark MC Limited and Stylar Limited, a/k/a Digital Clarity Limited. RTG Ventures (Europe) has been valued 12 months forward using forecasts submitted by them and agreed by the Company as notional valuations. An 8-K/A was filed in September 2010 containing audited financials which completed the transactions. Shareholders will be able to convert the preferred shares into common stock using the average share price of the 30 days preceding the conversion. The methodology provides for a valuation of 4X net profit for Stylar Limited. All preferred stock will be held by RTGV's transfer agent for the 12 month period ending September 3, 2011. See footnotes 13 and 14 for additional information.
   
In August, 2009, RTGV signed a Letter of Intent with International Financial Systems Ltd. (IFS) a private company, to include iPayu, another dimension in the payment systems division of our Business Plan as described on our website, www.rtgventures.com . The Letter of Intent became a joint venture with RTG Ventures (Europe) Ltd in April, 2010.

Initially and for the first year of operations, RTG Ventures was organized as three divisions: Media Systems, Payment Systems and Solutions, each of which contained both wholly-owned companies and joint ventures with independent business plans, strategies and management. In addition to servicing their discrete markets, these companies all contributed to RTG Ventures' total product offering for media rights owners.

Subsequent to the close of the fiscal year following substantial investment and rapid change within the three main operating sectors of the business, the Company has had a structural review of its total product and services offering. The review was carried out by the board of directors. The result was to bring technology development being outsourced directly into the Company to steward on a daily basis and any activities which were not revenue generating in the near term were eliminated. It was unanimously agreed that due to the shift in the market, the company would adopt a lean approach that focused on the relations built up over the year in the music arena as well as build on the early stage development of its CloudChannel product, to re-align and address the new social and analytics needs of the market. Within this shift, it was agreed that a new, more appropriate name be given to the technology that reflected the change and would allow the building of brand value in its own right. That effort is underway.
 
Certain business lines were eliminated from the Business Plan immediately. In October, 2011 the joint venture with iPayu was mutually withdrawn and in December, 2011 the acquisition of Bitemark was rescinded. The companies reverted to the same position each held prior to the contracts.  The Corporate Resolution for the rescission of the Bitemark Share Purchase Agreement is included as an exhibit to this filing for 2011 eventhough it constitutes a subsequent event.
As a further result of the review, the Company has also agreed to strategically focus 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 augmented to the technology offering would position the company in a strong, forward looking structure. Digital Clarity operates in the growing area of digital marketing that helps companies make the most the digital economy focusing on areas such as Search Engine Marketing (Google, Yahoo! & Bing), Social Media (Twitter, Facebook & LinkedIn) and Internet Strategy Planning including Design, Analytics and Mobile Marketing.
 
 
F-6

 
 
RTG VENTURES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
RTG Ventures, Inc. offers Music & Entertainment Technology Solutions and Digital Marketing Services. Harnessing the strength of its acquired online marketing agency Digital Clarity, the company has developed a software platform that fills the needs of artists, management and labels in a complex and ever increasing social economy. Using Digital Clarity’s application in the social and marketing arena, RTG Ventures offers a unique value proposition of intelligent, analytics based technology with the support and insight of an experienced digital marketing team. RTG Ventures offers companies a complete, seamless and powerful solution in marketing, alongside cutting edge technology platforms for web, mobile and tablet devices.
 
The Company is committed to rolling out the services of both the technology and marketing  services offering of the business from its current base in London, England into larger markets in the United States, namely Los Angeles and New York. 

Going Concern
 
The accompanying consolidated financial statements have been prepared on a going concern basis. The Company has incurred an accumulated deficit of approximately $8,935,000 and had negative working capital at August 31, 2011 of approximately $1,663,000.The Company has incurred net losses of approximately $1.5 million during the year ended August 31, 2011. The Company's ability to continue as a going concern is dependent upon its ability to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due, and to generate profitable operations in the future. Management plans to continue to provide for its capital requirements by seeking long term finance which may be in the form of additional equity securities and debt. The outcome of these matters cannot be predicted at this time and there are no assurances that if achieved, the Company will have sufficient funds to execute its business plan or generate positive operating results.

These matters, among others, raise substantial doubt about the ability of the Company to continue as a going concern. These financial statements do not include any adjustments to the amounts and classification of assets and liabilities that may be necessary should the Company be unable to continue as a going concern.

For all periods prior to August 31, 2010, the Company considered itself a development stage enterprise. During the year ended August 31, 2011, the Company has generated approximately $540,000 in revenue and made significant progress toward achieving its intended business plan in becoming a full-service digital media and monetization company with an integrated value proposition unique in the industry. As a result of the generation of significant revenue as well as a result of the Company development we no longer consider ourselves a development stage enterprise.

  The accompanying consolidated financial statements have been prepared, in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany transactions have been eliminated in consolidation.
 
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

Basis of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary RTG Ventures (Europe), Ltd. All significant inter-company transactions are eliminated.

Cash and Cash Equivalents

Cash and cash equivalents consist primarily of cash in banks. The Company considers cash equivalents to include all highly liquid investments with original maturities of three months or less to be cash equivalents.
 
 
F-7

 
RTG VENTURES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)
 
Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are recorded at the invoiced amount and do not bear interest. Accounts receivable are presented net of allowance for doubtful accounts.

The Company has a policy of reserving for uncollectible accounts based on its best estimate of the amount of probable credit losses in its existing accounts receivable. The Company periodically reviews its accounts receivable to determine whether an allowance is necessary based on an analysis of past due accounts and other factors that may indicate that the realization of an account may be in doubt. Account balances deemed to be uncollectible are charged to the bad debt expense after all means of collection have been exhausted and the potential for recovery is considered remote. At August 31, 2011 and 2010, the Company recognized $24,818 and $0 as allowance for doubtful accounts, respectfully.

Property and Equipment

Property and equipment is stated at cost, less accumulated depreciation.  Depreciation is provided using the straight-line method over the estimated useful lives of the related assets (primarily three to five years).

Revenue Recognition

The Company follows the guidance of ASC Topic 605, formerly, SAB 104 for revenue recognition. In general, the Company records revenue when persuasive evidence of an arrangement exists, services have been rendered, the sales price to the customer is fixed or determinable, and collectability is reasonably assured.

Revenues from services are recognized when the services are performed, evidence of an arrangement exists, the fee is fixed and determinable and collectability is probable.
 
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.

Reclassifications
 
Certain amounts in the prior period financial statements have been reclassified to conform with the current period presentation.
 
Income Taxes

The Company accounts for income taxes utilizing the liability method of accounting.  Under the liability method, deferred taxes are determined based on differences between financial statement and tax bases of assets and liabilities at enacted tax rates in effect in years in which differences are expected to reverse.  Valuation allowances are established, when necessary, to reduce deferred tax assets to amounts that are expected to be realized.
 
 
F-8

 
 
RTG VENTURES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)
 
Computation of Net Loss Per 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 net income per share is computed by dividing net income for the period by the weighted-average number of common share equivalents during the period. Common stock equivalents arise from the issuance of stock options and warrants. Dilutive earnings per share is not shown as the effect is anti-dilutive. There were no common stock equivalents at August 31, 2011 for fiscal year ended August 31, 2011.

Fair Value of Financial Instruments
 
Effective January 1, 2008, the Company adopted FASB ASC 820-Fair Value Measurements and Disclosures, or ASC 820, for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition for fair value to be applied to existing generally accepted accounting principles that require the use of fair value measurements establishes a framework for measuring fair value and expands disclosure about such fair value measurements. The adoption of ASC 820 did not have an impact on the Company’s financial position or operating results, but did expand certain disclosures.
 
ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below:
 
Level 1:
Observable inputs such as quoted market prices in active markets for identical assets or liabilities
 
Level 2:
Observable market-based inputs or unobservable inputs that are corroborated by market data
 
Level 3:
Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions.
 
The Company did not have any Level 2 or Level 3 assets or liabilities as of August 31, 2011, with the exception of its convertible notes payable.  The carrying amounts of these liabilities at August 31, 2011 approximate their respective fair value based on the Company’s incremental borrowing rate.
 
Cash is considered to be highly liquid and easily tradable as of August 31, 2011 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 for 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.
 
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.

Customer Concentration

Two of the Company's customers accounted for approximately 27% and 16% respectively of its revenues during the year ending August 31, 2011. The Company did not have any sales in 2010.
 
 
F-9

 
RTG VENTURES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)

Foreign Currency Translation

Assets and liabilities of subsidiaries operating in foreign countries are translated into U.S. dollars using both 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.

Impairment of Goodwill

Goodwill is tested for potential impairment at least annually, and whenever events or changes in circumstances suggest that the carrying value may be impaired. Judgment regarding the existence of impairment indicators are mainly based on operating results, changes in the manner of the use of the acquired assets or the Company’s overall business strategy, and market and economic trends.  As of August 31, 2011 the Company determined that the goodwill of $156,908 should be fully impaired based on the non profitable position of the subsidiary.  In addition, management has also taken into account the going concern issues of the parent company as an additional reason to impair the intangible.

Recently Issued Accounting Pronouncements

A variety of accounting standards have been issued or proposed by FASB that do not require adoption until a future date.  We regularly review all new pronouncements that have been issued since the filing of our Form 10-K for the year ended August 31, 2010 to determine their impact, if any, on our financial statements. The Company does not expect the adoption of any of these standards to have a material impact once adopted.

NOTE 3 - PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

     
AUGUST 31,
 
 
Estimated life
 
2011
 
Computer and office equipment
3 to 5 years
 
$
6,075
 
Less: Accumulated depreciation
     
(1,844
)
     
$
4,231
 

Depreciation expense amounted to $1,844 for the year ended August 31, 2011.

NOTE 4 - LOAN PAYABLE

In July 2010 an officer of the Company sold $140,000 of debt to a shareholder. The debt was due on demand and bears no interest.

In 2011 an officer of the Company sold $450,000 of debt to the same shareholder. The debt is due on demand and bears no interest. During the year the Company issued approximately 30,817,704 shares as partial payment of the loan valued at $434,392, in which $367,500 related to the principal portion and $66,892 was recorded as a loss on debt settlement. The balance remaining is $228,500 as of August 31, 2011

In 2011 a shareholder loaned the Company $30,500. The debt is due on demand and bears no interest.

During the fiscal year ended August 31, 2009, certain shareholders advanced $135,000 to the Company in anticipation of the completion of a merger. The capital infusion was intended to facilitate the merger. The advances bear no interest. The conditions of closing were not met and the agreement was rescinded on March 30, 2010. This balance was carried as a loan payable in 2010. As of August 31, 2011,  the Company has recognized the $135,000 as other income.
 
 
F-10

 
RTG VENTURES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
NOTE 5 – CONVERTIBLE NOTES PAYABLE

At August 31, 2011 and August 31, 2010 convertible debentures and loans payable consisted of the following:

   
August 31,
   
August 31,
 
   
2011
   
2010
 
Convertible notes payable
 
$
309,653
   
$
125,000
 
Unamortized debt discount
   
(100,533
)
   
-
 
Total 
 
$
209,120
   
$
125,000
 
 
In November, 2009, the Company issued convertible debentures for a total of $25,000 at 0% interest. The notes matured in May, 2010 and were converted into shares of the Company’s common stock at $.015 per share as of that date and 1,666,668 shares were issued.

In December, 2009 the Company issued a convertible debenture in the amount of $15,000 at 0% interest. The notes matured in June, 2010 and were convertible into shares of the Company’s common stock at $.015 per share as of that date and 1,000,000 shares were issued.

In February, 2010 the Company issued convertible debentures in the amount of $50,000 at 0% interest. The notes matured in August 2010 and were convertible into shares of the Company’s common stock at $.01 per share at that date. 5,000,000 shares were issued October, 2010.

In March, 2010, the Company issued a convertible debenture in the amount of $25,000 at 0% interest. The note matured in September 2010 and was convertible into shares of the Company’s common stock at $.01 per share. This note is currently in default.

In May, 2010, the Company issued a convertible debenture in the amount of $50,000 at 0% interest. The note matured in November 2010 and was convertible into shares of the Company’s common stock at $.01 per share at that date. 5,000,000 shares were issued January 2011.

In September, 2010 the Company converted a convertible debenture for $25,000 at $0.01 and issued 2,500,000 shares of common stock.

In September 2010, the Company entered into an agreement with a third party non-affiliate to an 8% interest bearing convertible debenture for $53,000 due in nine months. The balance can be paid in full or can be converted into shares on or after March 26, 2011 at an average share price computed on the 30 days prior to conversion. This convertible note contains round down provisions relative to the conversion price of the note.  Effective September 1, 2010 the Company adopted (FASB ASC 815-40-15-5) ("ASC 815") " Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity's Own Stock " which outlines new guidance for being indexed to an entity's own stock and the resulting liability or equity classification based on that conclusion.  The adoption of ASC 815 affects the accounting for convertible instruments and warrants with provisions that protect holders from declines in the stock price ("down - round" provisions).  In connection with this debenture, the Company recorded a $44,828 discount on debt, related to the beneficial conversion feature of the note, to be amortized over the life of the note or until the note was converted or repaid. In March 2011, the Company repaid in full this convertible debenture. 
 
  In October, 2010 the Company converted a convertible debenture for $25,000 at $0.01 and issued 2,500,000 shares of common stock.

In March, April, May and July 2011, the Company entered into agreements with a third party non-affiliate to four 8% interest bearing convertible debentures for $203,000 due in nine months. The balance can be paid in full or can be converted into shares on or after December 8, 2011, January 4, 2012, February 16, 2012 and April 7, 2011 respectively at an average share price computed on the 30 days prior to conversion.  In connection with these debentures, the Company recorded a $207,705 discount on debt, related to the beneficial conversion feature of the note to be amortized over the life of the note or until the note was converted or repaid.
 
In March 2011, the Company received $81,653 from a non-affiliated third party in the form of a convertible debenture at 0% interest and is due on demand. This note is convertible into approximately 8,000,000 shares of common stock.

During the years ended August 31, 2011 and 2010 the Company amortized charges of $123,672 and $75,000, respectively of debt discount related to beneficial conversion features associated with the issuance of these debentures.

 
F-11

 
RTG VENTURES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 – DUE TO RELATED PARTY

As of August 31, 2010, a related party paid $73,841 in various expenses on behalf of the Company in anticipation of the completion of a merger. The conditions of closing were not met and the agreement was rescinded in 2011. As of August 31, 2011 and as a result of the rescission of the agreement the Company has recognized the remaining balance of $73,841 as other income.

NOTE 7 – ACCRUED PAYROLL

For the years ended August 31, 2011 and 2010 the Company owes $1,003,040 and $869,522 respectively, in accrued salary to its employees. The amounts are non-interest bearing.
NOTE 8 - COMMON STOCK AND PREFERRED STOCK

As of August 31, 2011 we had authorized 2,000,000 shares of $.001 par value preferred stock, of which 264,000 were outstanding.

As of August 31, 2011 we had authorized 500,000,000 shares of $.001 par value common stock, of which 197,692,250 were issued and outstanding.

In June 2011, the  shareholders had approved an increase in our share capital allowing for an increase in the number of authorized common shares from 300,000,000 to 500,000,000. The amended articles of incorporation were filed with the state of Florida on June 22, 2011.

In September 2009, we issued an aggregate of 2,500,000 shares of common stock to our directors and executive officers upon the exercise of options granted to such individuals (September 2009). The Company received a total of $125,000 as consideration for such exercise. These amounts were offset against officer compensation payable by the Company. We relied upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, as amended (the "Act"), for such issuance.

In September, 2009, 1,000,000 shares of common stock for $50,000 were issued to a non-affiliate for services rendered for investor relations awareness in recognition of the protracted close of the Share Exchange and to ensure continuation of services.

In October, 2009, 2,000,000 shares of common stock for $82,000 were issued to a non-affiliate for services rendered to provide the design, development, execution and maintenance of the Company's website, www.rtgventures.com . The Company owns the domain name and the site as a result of this transaction.

In October, 2009 the Company converted a convertible debenture for $25,000 at $0.01 and issued 2,500,000 shares.

In December, 2009 the Company issued 2,500,000 shares of common stock for $90,000 to a consultant for business services regarding financial structure amid tactical analysis for a 12 month period.
 
In January, 2010, 3,000,000 shares of common stock for $90,000 were issued in connection with certain guarantees provided to the Company.

In April, 2010, 3,000,000 shares of common stock for $69,000 were issued to a Company officer as a sign-on bonus under the terms of the agreement for services. 1,500,000 shares of common stock for $34,500 were issued to another Company officer as a sign-on bonus under the terms of the agreement for services.

In May, 2010 the Company converted two convertible debentures totaling $25,000 at $0.015, for a total of 1,666,668 shares issued.

In May, 2010 the Company issued 266,666 shares as additional consideration associated with convertible debentures issued in March, 2010.
 
In June, 2010 the Company converted a convertible debenture for $15,000 and issued 1,000,000 shares.

In June, 2010 the Company entered into a 2 year consulting agreement to ensure the trading public has an accurate understanding of the Company’s Business Plan and execution. 4,000,000 restricted shares were issued as payment valued at $76,000.

In July, 2010, 300,000 shares of common stock for $4,800 were issued to a company executive as a sign on bonus under terms of an employment contract.

 
F-12

 
RTG VENTURES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 
NOTE 8 - COMMON STOCK AND PREFERRED STOCK (continued)

During the year ended August 31, 2011, the Company issued 10 million shares of common stock valued at $100,000 as payment for convertible loans payable. In addition the Company issued 30,817,704 shares of common stock valued at $434,392 of which $367,500 was to pay principal portion of loans payable and the remaining $66,892 was recorded as loss on debt settlement.
 
In September, 2010 the Company converted a convertible debenture for $25,000 at $0.01 and issued 2,500,000 shares.

In September, 2010 the Company converted a convertible debenture for $25,000 at $0.01 and issued 2,500,000 shares.

On October 11, 2010, the Company entered into a three month consulting agreement. For the term of this agreement, the consultant shall receive an up-front retainer fee of 500,000 shares of restricted stock for $6,350. In addition the consultant shall receive an additional 1,000,000 shares of restricted stock on November 11, 2010 for $13,800 and another 1,000,000 shares of restricted stock on December 11, 2010. The contract was terminated prior to the last equity payment.

In October 2010, a note holder received 4,000,000 shares of common stock valued at $54,000 in connection with the conversion of a portion of a loan payable of which $46,000 relates to the principal portion and $8,000 was recorded as a loss on settlement.
 
In November, 2010, 500,000 shares of common stock were issued for $7,000 to a consultant as a sign-on bonus under the terms of the agreement for services.
 
In December 2010, 250,000 shares of common stock for $3,000 were issued to a company executive as a project bonus under the terms of services.

In December 2010, 500,000 shares of common stock for $6,000 were issued to a company executive as a sign on bonus under the terms of services.
 
In April 2011, 1,000,000 shares of common stock for $10,000 were issued to a company executive as a sign on bonus under the terms of services.
In August 2011the Company cancelled 1,400,000 shares issued to a consultant. The company cancelled 1,200,000 shares of common stock issued in April 2009 and 200,000 shares issued in June, 2009. The shares were returned because of non-performance on the part of said consultant.

In August 2011, 1,500,000 shares of common stock for $23,850 were issued to a company executive as a sign on bonus under the terms of services.
In August 2011, 1,572,327 shares of common stock for $25,000 were issued to a company executive in lieu of salary.
 
NOTE 9 - INCOME TAXES
 
For the years ended August 31, 2011 and 2010, the benefit for income taxes differed from the amounts computed by applying the statutory federal income tax rate of 34 percent to loss before provision for income taxes. The reconciliation is as follows:
 
 
F-13

 
RTG VENTURES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
NOTE 9 - INCOME TAXES (continued)

   
Year Ended August 31,
 
   
2011
   
2010
 
Benefit computed at statutory rate
 
$
(501,000)
   
$
(453,000
)
State tax (benefit), net of federal affect
   
(59,000)
     
(53,000
)
Permanent differences (primarily non deductible compensation)
   
126,000
     
222,000
 
Increase in valuation allowance
   
434,000
     
284,000
 
                 
Net income tax benefit
 
$
-
   
$
-
 

The Company has net operating loss carry-forwards for income tax totaling purposes approximately $3,210,000 at August 31, 2011 which expire at various times through 2031. A significant portion of these carry-forwards is subject to annual limitations due to "equity structure shifts" or "owner shifts" involving "five percent shareholders" (as defined in the Internal Revenue Code) which results in a more than fifty percent change in ownership.

The net deferral asset is as follows:

Tax benefit of net operating loss carry-forward
 
$
1,220,000
 
Accrued officer compensation
   
345,000
 
Compensation paid with options
   
103,0000
 
Valuation allowance
   
(1,668,000
)
         
Net deferred tax asset
 
$
-
 
 
NOTE 10 - LITIGATION

The Company is not currently involved in any litigation.
 
NOTE 11 - EMPLOYMENT AND CONSULTING AGREEMENTS

In April 2006, the Company entered into three year employment and consulting agreements with two officers for annual remuneration of $185,000 and $120,000, the contracts are rolling, renewable annual contracts thereafter. Options to purchase 2,500,000 common shares will be granted each September that the agreement is in effect, beginning in September, 2007. Such option will be granted at market prices and expire after five years from the date of the grant. The contracts concluded on March 31, 2010. No further accruals took place after March 31, 2010.
 
 
F-14

 
RTG VENTURES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 - EMPLOYMENT AND CONSULTING AGREEMENTS (continued)

In September 2010 a term sheet was agreed with a company officer for annual remuneration of $150,000 with Ms. Linda Perry for her role as a consultant and as Executive Director and US interface to provide oversight regarding external regulatory reporting requirements. In addition, she is lead executive for capital funding requirements and business development.

In April, 2010 a term sheet was agreed with a Company officer for annual remuneration of £100,000 ($160,000) for the Chairman and Director of the Company, Mr. Neil Gray. Mr. Gray may receive a bonus totaling 50-75% of his base salary after certain Company performance objectives are achieved following the first year of operation. In 2010, Mr. Gray as a sign on bonus received 3.0 million restricted shares.
 
In April, 2010 a term sheet was agreed with a Company officer for annual remuneration of £100,000 ($160,000) for the President and CEO of the Company, Mr. Dominic Hawes-Farley. In 2010 the President and CEO received 1.5 million restricted shares as a sign on bonus. Mr. Hawes-Fairley resigned on September 16, 2011.

On October 11, 2010, the Company entered into a three month consulting agreement for the purpose of consulting for equity and bond placements as well as financial relations, public relations and research services. For the term of this agreement, the consultant shall receive an up-front retainer fee of 500,000 shares of restricted stock. In addition the consultant shall receive an additional 1,000,000 shares of restricted stock on November 11, 2010 and another 1,000,000 shares of restricted stock on December 11, 2010. The contract was terminated December 10 and as such, the last payment was not paid.

In September 2010, the Company entered into a three year agreement with an officer of the company for annual remuneration of $150,000. The officer will perform all duties as executive director and chair the nomination/compensation and audit committees.

In November, 2010, a term sheet was agreed with a consultant in the media systems division. 500,000 shares of common stock were issued to the consultant as a sign-on bonus under the terms of the agreement for services. 

In December, 2010, a term sheet was agreed with a consultant in the payment systems division. 500,000 shares of common stock were issued to the consultant under the terms of the agreement for services.

NOTE 12 – CAPITAL CONTRIBUTION

In July 2010 an officer of the Company made contributions of $85,000 to assist with various professional fees. These contributed funds are considered as paid in capital.

In November 2010 an officer of the Company made contributions of $95,000 to assist with various professional fees. These contributed funds are considered paid in capital.
 
In February, 2011 an officer of the Company made contributions of $95,000 to assist with various professional fees. These contributed funds are considered paid in capital.

NOTE 13 – ACQUISITION
 
RTG Ventures, Inc. acquired 100% of the shares of RTG Ventures (Europe) Ltd., 10,000 (Ten Thousand) ordinary shares at £ .0001 per share par value. RTG shall issue and transfer 263,772 preferred shares which convert into its common stock. The conversion rate is calculated and agreed by RTG.  It is acknowledged and approved by both Boards that the majority of these shares are to be consideration for acquisitions and asset purchases to be completed by RTG Ventures, Inc.. All shares held in escrow will be voted by management.
   
 
F-15

 
RTG VENTURES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 – ACQUISITION (continued)

Stylar Limited

Pursuant to the Exchange Agreement, the Company acquired 100% of the outstanding capital stock of RTG Ventures (Europe) from its stockholders for consideration consisting of Convertible Preferred Shares of RTG Ventures, Inc. according to the derivative valuation methodology outlined in the Share Exchange Agreement of Stylar Limited, a/k/a Digital Clarity Limited. Stylar Limited was notionally valued 12 months forward. The accounting date of the acquisition was September 3, 2010 and the transaction was accounted for as a purchase of a business under Accounting Standards Codification ("ASC") 805, Business Combinations.

The valuation methodology resulted in a purchase price agreed to by both parties of $225,027. Shareholders will be able to convert the preferred shares into common stock using the average share price of the 30 days preceding September 3, 2011 which provides a share price of $0.016083. The result of the agreed upon purchase price would be the issuance of 263,772 shares of preferred stock at a ratio of 1 to 53.04 shares of common stock.
 
The following table summarizes the estimated fair values of the assets and liabilities assumed at the date of acquisition:

   
Stylar
Limited
 
ASSETS
 
 
 
       
Current assets
 
$
137,307
 
         
LIABILITIES
       
         
Current liabilities
   
69,188
 
         
Fair value of  net assets
 
$
87,922
 
Purchase price
   
225,027
 
Excess purchase price over fair value (goodwill)
  $
156,908
 
 
The purchase price resulted in the Company recognizing goodwill of $156,908. The transaction was accounted for under the purchase method in accordance with ASC 805 .

In accordance with ASC 305 and as of August 31, 2011 the Company determined that the goodwill of $156,908 should be fully impaired. 
 
 
F-16

 
RTG VENTURES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 
NOTE 14 – RESCISSION OF SHARE EXCHANGE AGREEMENT

Bitemark MC Limited.

On September 3, 2010, the Company acquired 100% of the common stock of Bitemark MC Ltd (“Bitemark”), according to the derivative valuation methodology outlined in the Share Exchange Agreement of Bitemark Limited (BMC).

In June 2011 Bitemark MC Ltd was   liquidated and is no longer operating.  The original Share Purchase Agreement was rescinded leaving both companies in the same position prior to the first agreement between the parties. Since this dissolution occurred during the fiscal period, management determined that a deconsolidation would be appropriate in this case and therefore, the original transaction recorded in September 2010 was reversed.

NOTE 15 - FOREIGN OPERATIONS

As of August 31, 2011, all of our revenues and a majority of our assets are associated with subsidiaries located in the United Kingdom. Assets at August 31, 2011 and revenues for fiscal 2011 were as follows:

   
United States
   
Great Britain
       
Total
 
Revenues
 
$
-
   
$
539,068
       
$
539,068
 
Total revenues
 
$
-
   
$
539,068
       
$
539,068
 
Identifiable assets at August 31,  2011
 
$
19,949
   
$
89,711
       
$
109,660
 
 
 
F-17

 
 
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

There are not currently and have not been any disagreements between us and our accountants on any matter of accounting principles, practices or financial statement disclosure.

ITEM 9A(T). CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

As of August 31, 2011, our management, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15(b) promulgated under the Exchange Act. Based upon that evaluation, our management concluded that, as of August 31, 2011, our disclosure controls and procedures were effective in ensuring that material information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, including ensuring that such material information is accumulated and communicated to our management, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting
 
The Company is in a start-up mode, with its operations solely in the UK, therefore, one board member is charged with US interface to ensure all regulatory and control requirements are met.

Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Exchange Act Rule 13a-15(f). Our internal control system was designed to provide reasonable assurance to our management and the Board of Directors regarding the preparation and fair presentation of published financial statements. All internal control systems, no matter how well designed have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Our management assessed the effectiveness of our internal control over financial reporting as of August 31, 2011. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control – Integrated Framework - Guidance for Smaller Public Companies (the COSO criteria). On September 3, 2010, the Company filed an 8-K acquiring two companies operating in the UK, as such, materially affected the systems in place. After one year of operations management is centralizing its activities in the US going forward. This will provide further assurance that the internal controls regarding financial systems are in a state of continuous improvement.

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Our management's report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management's report in this annual report.
 
 
17

 
 
ITEM 9B. OTHER INFORMATION.

There are no items requiring disclosure hereunder.

PART III MANAGEMENT
 
Item 10. Directors, Executive Officers and Corporate Governance
 
Executive Officers and Directors
 
The following table sets forth certain information, as of August 31, 2010, with respect to our directors and executive officers.

Directors serve until the next annual meeting of the stockholders; until their successors are elected or appointed and qualified, or until their prior resignation or removal. Officers serve for such terms as determined by our board of directors. Each officer holds office until such officer’s successor is elected or appointed and qualified or until such officer's earlier resignation or removal. No family relationships exist between any of our present directors and officers.
 
Name
 
Position
Neil Gray
 
Chairman and Executive Director
     
Reggie James
 
Senior Vice President and Executive Director
     
Linda Perry
 
Executive Director, Chair Nomination/Compensation and Audit Committees
 
The following is a brief account of the business experience of each of our Directors and Executive Officers:
 
Neil Gray . Mr. Gray has served as Chairman and Executive Director of RTG Ventures, Inc. since April 1, 2010. Between 1999 and 2007, Gray was involved as an officer and equity participant of a privately held UK based Healthcare Group. Prior to leaving the group, a stable, conservative growth model was created to establish growth organically and by acquisition through operational knowledge and accurate prediction of cash flow/interest rates within the group’s debt/equity structure. The group’s interests were not restricted to the UK with alliances and interests developed into the European Union.
 
From 1994 to 1999, a “Hands On” approach to operational involvement and investment with personal financial incentives was garnered whist working in different cultural and geographical locations. These locations were Africa (South-West and West), South America (Equatorial), Spain (Mainland and The Canary Islands) and the Black Sea. The projects developed and entered into were engineering, textiles and import/export with the UK and EU.
 
 
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The initial development of Gray’s understanding of business strategy was as part of a “think tank” team of individuals in a UK based insurance company between 1989 and 1994. The team’s role was to understand, develop and test their ideas against actuarial professionals. Gray sought out risk management knowledge and understanding of the global business of his employer during this time.
 
Gray’s formative years were spent as an employee of a UK based electrical engineering firm based in Northern England from 1985 to 1989 and in the engineering department of a British Coal deep mine colliery between 1979 and 1985.
 
Linda Perry . As of April 1, 2010 Ms. Perry serves as Executive Director and Chair Nomination/Compensation and Audit Committees. She had served as our President, Chief Executive Officer and a Director until March 31, 2010 (excepting the period from April 19, 2005 to April 24, 2006). She has had an extensive career in global and entrepreneurial businesses. Prior to that time, from 2001-2002, she was the senior advisor to the Board of Directors of The Balli Group, where her role was to integrate the acquisition of Klockner & Co. The acquisition resulted in the creation of the world's largest steel, multi-metal, distribution and trading company. Between 1999-2001, she was appointed a director and a member of the Executive Committee of Churchill Insurance Group, Plc., a division of the Credit Suisse Group. Ms. Perry was President of GWR Enterprises, Inc., from 1997-1999, focused on new business opportunities through private equity and special situation investments. She was a senior executive at ExxonMobil Corporation from 1983-1996, holding general management positions with global responsibility in finance, marketing and organization (described as corporate governance, management succession and executive compensation.) The latter role was under the aegis of the Board of Directors, entitled Compensation, Organization and Executive Development Committee/COED, of which she was a member. Ms. Perry holds an MBA from Harvard University. She has been a visiting lecturer/professor at IMD, Lausanne, Switzerland, INSEAD, Fontainebleau, France and the Stern School of Business at New York University throughout her career.

Reggie James. As of April 1, 2011, Mr. Reggie James has served as Senior Vice President of Marketing and Communications and Executive Director. Mr. James also is the Managing Director of Digital Clarity, Ltd.
 
Mr. James has been involved in the commercial element of the internet since its inception and has been instrumental in driving forward business models that are common place today.

Mr. James is founder of Digital Clarity, a leading Digital Advertising Agency and a wholly owned business of RTG Ventures, Inc.

The company helps major brands and medium sized companies take advantage 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.
 
Mr. James launched the European division of a VoIP technology company that became the first dot com to list of the Singapore Stock Exchange that was acquired by Spice Communications. In turn, Spice has been acquired by Idea Cellular, the 3rd largest mobile services operator in India.

Mr. James is also the co-founder of an internet analytics technology software house as well as shareholder in an AIM listed marketing services company. AIM is the London Stock Exchange’s international market for smaller growing companies.

Previously, Mr. James was involved with publishing groups VNU & Ziff-Davis where he launched titles such as Management Consultancy and IT Week. Prior to launching Digital Clarity, Mr. James was part of the global sales team at leading search company AltaVista where he managed global brands such as Compaq and Hewlett Packard (HP). AltaVista is now part of Yahoo! Inc.  
 
 
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Board Committees
 
We currently have standing committees on our Board of Directors. The audit committee and compensation committee are listed below.
 
Audit Committee
 
We have established an Audit Committee of the Board of Directors, for which a charter is being developed. The Audit Committee's duties will be to recommend to our Board of Directors the engagement of independent auditors to audit our financial statements and to review our accounting and auditing principles. The audit committee will review the scope, timing and fees for the annual audit and the results of audit examinations performed by the internal auditors and independent public accountants, including their recommendations to improve the system of accounting and internal controls. The Audit Committee will at all times be composed exclusively of directors who are, in the opinion of our Board of Directors, free from any relationship which would interfere with the exercise of independent  judgment as a committee member and who possess an understanding of financial statements and generally accepted accounting principles.
 
Compensation Committee
 
We have established a Compensation Committee of the Board of Directors. The compensation committee will review and approve our total remuneration, including compensation of executive officers. The Compensation Committee will also administer our stock option plans and recommend and approve grants of stock options under such plans.
 
Compensation of Directors
 
All directors are officers and their compensation is included on the summary compensation table (Item 11).

Compliance with Section 16(A) of the Exchange Act
 
Our common stock was not registered pursuant to Section 12 of the Exchange Act during the fiscal year ended August 31, 2011. Accordingly, our officers, directors and principal shareholders were not subject to the beneficial ownership reporting requirements of Section 16(a) of the Exchange Act during such year.
 
Code of Ethics
 
On December 1, 2004 we adopted a Code of Ethics that applies to our Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer and Controller and to persons performing similar functions. A copy of our Code of Ethics was previously filed as an Exhibit to our annual report on Form 10-KSB for the year ended August 31, 2004. A copy of our Code of Ethics will be provided to any person requesting same without charge. To request a copy of our Code of Ethics please make written request to RTG Ventures, Inc., to the attention of our Chief Executive Officer.
 
 
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Item 11. Executive Compensation

SUMMARY COMPENSATION TABLE

None of our executive officers or employees received compensation in excess of $100,000 during the year ended August 31, 2011, or 2010, except as follows:

Name and
Fiscal year
           
All
principal
Ended
   
Other
Options/
Restricted
LTIP
other
position
August 31,
Salary
Bonus
Compensation
SARs
stock awards
Payouts
Compensation
                 
Dominic Hawes-Farley
2011
160,671(1)
0
0
0
0
0
0
President/CEO/Director
2010
(2)
     
1,500,000 (3)
   
                 
Neil Gray
2011
160,671(4)
0
0
0
0
0
0
Chairman/Executive Director
2010
(5)
     
3,000,000 (6)
   
 
               
Reggie James
2011
170,414(7)
0
0
0
1,000,000 (9)
0
0
Executive Director/Senior Vice President
2010
(8)
     
250,000 (10)
   
 
               
Linda Perry
2011
150,000 (11)
0
0
0
0
0
0
Executive Director
2010
107,917 (12)
0
0
0
0
0
0
 
(1)
For the fiscal year ending August 31, 2011, Mr. Hawes-Fairley earned $166,071 of which $69,905 has been paid in cash and $48,850 in equivalent equity for a total of $118,755.
 
(2)
For the fiscal year ending August 31, 2010 Mr. Hawes-Fariley did not earn in excess of $100,000 in compensation.
 
(3)
Mr. Hawes-Farley received a sign on bonus in 2010 of 1,500,000 shares. Mr. Hawes-Fairley resigned on September 16, 2011.
   
(4)
For the fiscal year ending August 31, 2011, Mr. Gray earned $166,071 of which $0 has been paid.
   
(5)
For the fiscal year ending August 31, 2010 Mr. Gray did not earn in excess of $100,000 in compensation.
 
 
(6)
Mr. Gray received a sign on bonus in 2010 of 3,000,000 shares.
 
 
(7)
For the fiscal year ending August 31, 2011, Mr. James earned $170,414 of which $170,414 has been paid.
   
(8)
For the fiscal year ending August 31, 2010 Mr. James was not an employee of the Company.
 
 
(9)
For the fiscal year ending August 31, 2011 and 1,000,000 restricted shares as a sign on bonus.
   
(10) In 2010 Mr. James received 250,000 restricted shares as a project bonus.
 
 
(11)
For the fiscal year ended August 31, 2011, Ms. Perry earned $150,000 of which $0 has been paid.
 
 
(12)
For the fiscal year ending August 31, 2010, Ms. Perry earned $107,917 through August 31, 2010 of which $0 has been paid. She was not compensated from April 1, 2011 – August 31, 2011
 
 
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OPTION/SAR GRANTS IN LAST FISCAL YEAR
 
No stock appreciation rights were granted to the named executives during the fiscal years ended August 31, 2011 and 2010.
 
  Long Term Incentive Plan Awards
 
We made no long-term incentive plan awards to the named executive officers during the fiscal year ended August 31, 2011.
 
Employment Contracts, Termination of Employment, and Change-in-Control Arrangements
 
Employment Agreement
 
Effective April 24, 2006, the Company entered into an employment agreement with its President and Chief Executive Officer, Linda Perry. The Agreement was for an initial three year term and thereafter was renewed annually on a rolling basis and terminable by either party upon 12 months' prior written notice. As consideration for her services, the Company agreed to a base salary of $185,000. Ms. Perry received 1,500,000 5-year options on each September 1 that the Agreement is in effect, beginning on September 1, 2007. Such options had an exercise price equal to the market price of our common stock on the date of grant. The contract concluded March 31, 2010.

In September 2010 a term sheet was agreed with a company officer for annual remuneration of $150,000 for her role as a consultant and as Executive Director as US interface to provide oversight external regulatory reporting requirements. In addition, she is lead executive for capital funding requirements and business development.

In April, 2010 a term sheet was agreed with a Company officer for annual remuneration of £100,000 ($160,000) for the Chairman and Director of the Company, Mr. Neil Gray. Mr. Gray may receive a bonus totaling 50-75% of his base salary after certain Company performance objectives are achieved following the first year of operation. In 2010, Mr. Gray as a sign on bonus received 3.0 million restricted shares.
 
In April, 2010 a term sheet was agreed with a Company officer for annual remuneration of £100,000 ($160,000) for the President and CEO of the Company, Mr. Dominic Hawes-Farley. In 2010 the President and CEO received 1.5 million restricted shares as a sign on bonus. Mr. Hawes-Farley resigned on September 16, 2011.
 
 
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Consulting Agreements
 
In December, 2009 the Company entered into a consulting agreement for business services regarding financial structure amid tactical analysis. The period is for twelve months and payment was 2,500,000 restricted shares.
 
In June, 2010 the Company entered into a consulting agreement to ensure the trading public has an accurate understanding of the Company’s Business Plan and execution. The period is for two years and payment was 4,000,000 restricted shares.

On October 11, 2010, the Company entered into a three month consulting agreement for the purpose of consulting for equity and bond placements as well as financial relations, public relations and research services. For the term of this agreement, the consultant shall receive an up-front retainer fee of 500,000 shares of restricted stock. In addition the consultant shall receive an additional 1,000,000 shares of restricted stock on November 11, 2010 and another 1,000,000 shares of restricted stock on December 11, 2010. The contract was terminated December 10 and as such, the last payment was not paid.

In November, 2010, the Company entered into a one year agreement with a consultant in the media systems division. 500,000 shares of common stock were issued to the consultant as a sign-on bonus under the terms of the agreement for services. 

In December, 2010, the Company entered into a one year agreement with a consultant in the payment systems division. 500,000 shares of common stock were issued to the consultant under the terms of the agreement for services.

Report on Repricing of Options/Sars
 
During the fiscal year ended August 31, 2011 we did not adjust or amend the exercise price of any stock options or SARs.
 
 
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Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The following table sets forth information with respect to the beneficial ownership of our common stock known by us as of August 31, 2011 by (i) each person or entity known by us to be the beneficial owner of more than 5% of our common stock, (ii) each of our directors, (iii) each of our executive officers, and (iv) all of our directors and executive officers as a group. The percentages in the table have been calculated on the basis of treating as outstanding for a particular person, all shares of our common stock outstanding on such date and all shares of our common stock issuable to such holder in the event of exercise of outstanding options, warrants, rights or conversion privileges owned by such person at said date which are exercisable within 60 days of such date. Except as otherwise indicated, the persons  listed below have sole voting and investment power with respect to all shares of our common  stock owned by them, except to the extent such power may be shared with a spouse.

Name of Beneficial Owner and/or Beneficially Own Shares of Common Stock percentage owned:

(1) Neil Gray
   
6,000,000
     
3.04
%
(2) Reggie James
   
1,250,000
     
0.63
%
(3) Lancer Corp. (Owned 100% by Mr. Barrington J. Fludgate)
   
13,500,000
         
      Mr. Barrington J. Fludgate
   
11,625
         
      Mr. Mark Fludgate (son of Mr. Barrington Fludgate)
   
2,000,000
         
Total for Mr. Barrington Fludgate
   
15,511,625
     
7.85
%
(4) Linda Perry
   
16,060,781
     
8.12
%
All Directors and Executive Officers as a Group (3 persons)
   
23,310,781
     
11.79
%

Item 13. Certain Relationships and Related Transactions
None.
 
Item 14. Principal Accountant Fees and Services.
 
Audit Fees.
 
The aggregate fees billed to us by our principal accountants for services rendered during the fiscal years ended August 31, 2011 and 2010 are set forth in the table below:
 
   
August 31,
2011
   
August 31,
2010
 
Audit Fees(1)
 
$
43,000
   
$
29,500
 
 
(1) Audit fees represent fees for professional services provided in connection with the audit of our annual financial statements and review of our quarterly financial statements and audit services provided in connection with other statutory or regulatory filings.