DigitalTown (DGTW) 10-Q 14 Jul 15 2015 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	3 Months Ended
	May. 31, 2015	Jul. 10, 2015
Document And Entity Information
Entity Registrant Name	Digitaltown, Inc.
Entity Central Index Key	1,065,598
Document Type	10-Q
Document Period End Date	May 31, 2015
Amendment Flag	false
Current Fiscal Year End Date	--02-28
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		33,646,422
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2,015

Consolidated Balance Sheets (Un

Consolidated Balance Sheets (Unaudited) - USD ($)	May. 31, 2015	Feb. 28, 2015
Current assets:
Cash	$ 233,079	$ 14,660
Accounts receivable	383	447
Prepaid domain name renewal fees	146,650	59,629
Total current assets	380,112	74,736
Property and equipment, net	4,884	5,817
Total assets	384,996	80,553
Current liabilities:
Accounts payable	75,682	152,646
Accounts payable – related parties	$ 1,720	61,282
Notes payable-related party		75,000
Accrued payroll	$ 15,543	549
Deferred officer compensation		352,292
Total current liabilities	$ 92,945	$ 641,769
Commitments and contingencies
Common stock, $0.01 par value, 2,000,000,000 shares authorized, 33,646,422 and 31,138,422 shares issued and outstanding at May 31, 2015 and February 28, 2015, respectively	$ 336,464	$ 311,384
Additional paid-in-capital	$ 29,569,223	$ 28,614,679
Stock payable		11,500
Subscriptions receivable		(625,482)
Accumulated deficit	$ (29,613,636)	(28,873,297)
Total stockholders’ equity (deficit)	292,051	(561,216)
Total liabilities and stockholders’ equity (deficit)	$ 384,996	$ 80,553

Consolidated Balance Sheets (Pa

Consolidated Balance Sheets (Parenthetical) - shares	May. 31, 2015	Feb. 28, 2015
Statement of Financial Position [Abstract]
Common stock, $0.01 par value, authorized	2,000,000,000	2,000,000,000
Common stock, $0.01 par value, issued and outstanding	33,646,422	31,138,422

Consolidated Statements of Oper

Consolidated Statements of Operations - USD ($)	12 Months Ended
	May. 31, 2015	May. 31, 2014
Income Statement [Abstract]
Revenues	$ 583	$ 200
Cost of revenues	39,534	45,623
Gross profit (loss)	(38,951)	(45,423)
Operating expenses:
Selling, general and administrative expenses	434,654	134,867
Loss from operations	(473,605)	$ (180,290)
Other income (expense)
Gain on settlement of accounts payable	26,899
Loss on conversion of deferred officer compensation into equity	$ (293,633)
Other income		$ 53
Total other income (expense)	$ (266,734)	53
Loss before income taxes	$ (740,339)	$ (180,237)
Income tax provision
Net loss	$ (740,339)	$ (180,237)
Net loss per common share – basic and diluted	$ (0.02)	$ (0.01)
Weighted average number of common shares outstanding – basic and diluted	31,656,422	30,432,644

Consolidated Statements of Cash

Consolidated Statements of Cash Flows (Unaudited) - USD ($)	12 Months Ended
	May. 31, 2015	May. 31, 2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$ (740,339)	$ (180,237)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	933	$ 1,136
Gain on settlement of accounts payable	(26,899)
Loss on settlement of deferred officer compensation	293,633
Stock-based compensation expense	351,373	$ 59,417
Accounts receivable	64
Prepaid domain name renewal fees	(87,021)	$ (80,411)
Accounts payable	(50,064)	(1,977)
Accounts payable – related parties	(59,562)	35,640
Accrued payroll	14,994	477
Deferred officer compensation	(20,443)	37,500
Net cash used in operating activities	$ (323,331)	$ (128,455)
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from note payable -related party	$ 15,000	$ 75,000
Payments on notes payable -related party	$ (90,000)
Payments received on stockholder subscriptions receivable		$ 5,000
Proceeds from issuance of common stock	$ 616,750	5,000
Net cash provided by financing activities	541,750	85,000
Net change in cash and cash equivalents	218,419	(43,455)
Cash and cash equivalents, beginning of period	7,134	50,589
Cash and cash equivalents, end of period	233,079	$ 7,134
Non-Cash Transactions:
Issuance of common stock for stock payable	11,500
Settlement of deferred officer accrued compensation with stock receivable	$ 331,849

Basis of Presentation

Basis of Presentation	3 Months Ended
	May. 31, 2015
Accounting Policies [Abstract]
Basis of Presentation	Note 1. Basis of Presentation The accompanying unaudited consolidated financial information has been prepared by DigitalTown, Inc. (the “Company”) in accordance with accounting principles generally accepted in the United States of America (“U.S.”) (“U.S. GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (“SEC”). Accordingly, it does not include all of the information and notes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair statement of this financial information have been included. Financial results for the interim period presented are not necessarily indicative of the results that may be expected for the fiscal year as a whole or any other interim period. This financial information should be read in conjunction with the audited consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended February 28, 2015.

Nature of Business and Summary

Nature of Business and Summary of Significant Accounting Policies	3 Months Ended
	May. 31, 2015
Accounting Policies [Abstract]
Nature of Business and Summary of Significant Accounting Policies	Note 2. Nature of Business and Summary of Significant Accounting Policies Nature of Business and Going Concern The Company was founded in 1982 under the laws of the State of Minnesota as Command Small Computer Learning Center, Inc., a computer training company and operated under several different names in the computer hardware and training sector. In 2005, the Company began acquiring domain names. On March 1, 2007, the Company changed its name to DigitalTown, Inc. and began developing a business plan to develop a platform to monetize their domain names. The Company’s headquarters are located at 11974 Portland Avenue, Burnsville, MN 55337, and its telephone and facsimile numbers are (952) 890-2362 and (952) 890-7451, respectively. The Company's Internet address is www.digitaltown.com. The Company’s common stock is traded in the over-the-counter market under the ticker DGTW. The Company’s consolidated financial statements have been prepared using U.S. GAAP applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has a working capital deficit, recurring losses, and negative cash flows from operations. These matters raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result from the outcome of this uncertainty. At May 31, 2015, the Company had an accumulated deficit of $29,613,636. Subsequent to May 31, 2015, the Company has not received any proceeds from the sale of its common stock. The Company anticipates that expected future proceeds from additional financing through the sale of its common stock or other equity-based securities, and additional sales and/or leases of existing domain names will be sufficient to meet its working capital and capital expenditure needs through at least May 31, 2016. In the event that the Company is unable to obtain additional capital in the future, the Company would be forced to further reduce operating expenses and/or cease operations altogether. Principles of Consolidation The Company files consolidated financial statements that include its wholly-owned subsidiaries Tiger Media and The School Network, Inc. All material intercompany accounts and transactions have been eliminated in consolidation. Reclassifications Certain prior period amounts in the consolidated statement of cash flows have been reclassified to conform to the current period presentation. Proceeds from related party notes payable received in the prior period have been reclassified from the prior period classification. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP 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 revenues and expenses during the reporting period. Actual results could differ from those estimates. Accounts Receivable Accounts receivable arose from the sale of and commission earned from display advertising. The Company evaluates collectability of accounts receivable based on a combination of factors including the age of the receivable or a specific customer’s inability to meet its financial conditions. In these circumstances, the Company records an allowance to reduce the receivable to an amount it deems collectible. The Company has determined that an allowance for doubtful accounts is not necessary as of May 31, 2015. Prepaid Domain Names The annual domain name renewal fees are currently being amortized over one year. The increase in prepaid domain name renewal fees as of May 31, 2015 compared to February 28, 2015 is due to the large number of domain name renewals that come due during the quarter ended May 31 as compared to the other quarters of the year. Revenue Recognition The Company recognizes revenue when the following four criteria have been met: Persuasive evidence that an agreement exists Delivery has occurred The price is fixed and determinable Collectability is reasonably assured The Company recognizes revenue from certain third party agreements which allow display advertising to be placed on individual spirit sites within DigitalTown’s network. Per these agreements, the Company receives commissions based on a percentage of the per click or per-impression revenue generated by these ads. The Company recognizes these commissions received as revenue. Income Taxes Deferred tax assets (net of any valuation allowance) and liabilities resulting from temporary differences, net operating loss carryforwards and tax credit carryforwards are recorded using an asset-and-liability method. Deferred taxes relating to temporary differences and loss carryforwards are measured using the tax rate expected to be in effect when they are reversed or are realized. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be ultimately realized. The Company has recorded a full valuation allowance against the net deferred tax asset due to the uncertainty of realizing the related future benefits. The Company accounts for income taxes pursuant to Financial Accounting Standards Board (“FASB”) guidance. This guidance prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company’s adoption of these provisions specifically related to uncertain tax positions resulted in no cumulative effect adjustment. The Company believes its income tax filing positions and deductions will be sustained upon examination and, accordingly, no reserves or related accruals for interest and penalties have been recorded at May 31, 2015 or February 28, 2015. In accordance with the guidance, the Company has adopted a policy under which, if required to be recognized in the future, interest related to the underpayment of income taxes will be classified as a component of interest expense and any related penalties will be classified in operating expenses in the statements of operations. The Company has three open years of tax returns subject to examination. Stock-Based Compensation, Including Options and Warrants The Company recognizes the cost of stock-based compensation plans and awards in operations on a straight-line basis over the respective vesting period of the awards. The Company measures and recognizes compensation expense for all stock-based payment awards made to employees, directors, consultants and advisors. The compensation expense for the Company's stock-based payments is based on estimated fair values at the time of the grant. The Company estimates the fair value of stock-based payment awards on the date of grant using the Black-Scholes option pricing model. This option pricing model involves a number of assumptions, including the expected lives of stock options, the volatility of the public market price for the Company's common stock and interest rates. Stock-based compensation expense recognized during the period is based on the value of the portion of stock-based payment awards that are ultimately expected to vest. Recently Issued Accounting Pronouncements In June 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-12, Compensation – Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. The new guidance requires that share-based compensation that require a specific performance target to be achieved in order for employees to become eligible to vest in the awards and that could be achieved after an employee completes the requisite service period be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant-date fair value of the award. Compensation costs should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. If the performance target becomes probable of being achieved before the end of the requisite service period, the remaining unrecognized compensation cost should be recognized prospectively over the remaining requisite service period. The total amount of compensation cost recognized during and after the requisite service period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest. The requisite service period ends when the employee can cease rendering service and still be eligible to vest in the award if the performance target is achieved. This new guidance is effective for fiscal years and interim periods within those years beginning after December 15, 2015. Early adoption is permitted. Entities may apply the amendments in this Update either (a) prospectively to all awards granted or modified after the effective date or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. The adoption of ASU 2014-12 is not expected to have a material impact on the Company’s financial position or results of operations. In June 2014, the FASB issued ASU No. 2014-10: Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation, to improve financial reporting by reducing the cost and complexity associated with the incremental reporting requirements of development stage entities. The amendments in this update remove all incremental financial reporting requirements from U.S. GAAP for development stage entities, thereby improving financial reporting by eliminating the cost and complexity associated with providing that information. The amendments in this Update also eliminate an exception provided to development stage entities in Topic 810, Consolidation, for determining whether an entity is a variable interest entity on the basis of the amount of investment equity that is at risk. The amendments to eliminate that exception simplify U.S. GAAP by reducing avoidable complexity in existing accounting literature and improve the relevance of information provided to financial statement users by requiring the application of the same consolidation guidance by all reporting entities. The elimination of the exception may change the consolidation analysis, consolidation decision, and disclosure requirements for a reporting entity that has an interest in an entity in the development stage. The amendments related to the elimination of inception-to-date information and the other remaining disclosure requirements of Topic 915 should be applied retrospectively except for the clarification to Topic 275, which shall be applied prospectively. For public companies, those amendments are effective for annual reporting periods beginning after December 15, 2014, and interim periods therein. Early adoption is permitted. The adoption of ASU 2014-10 is not expected to have a material impact on the Company’s financial position or results of operations.

Deferred officer Compensation

Deferred officer Compensation	3 Months Ended
	May. 31, 2015
Compensation Related Costs [Abstract]
Deferred Officer Compensation	Note 3. Deferred Officer Compensation Richard Pomije, the former CEO, CFO and Chairman of the Company has elected to forego a portion of his salary at various times due to the Company’s limited operating funds. These amounts do not accrue interest and are due and payable as funds become available in the future. During the three months ended May 31, 2015

Stockholders Equity

Stockholders Equity	3 Months Ended
	May. 31, 2015
Equity [Abstract]
Stockholders Equity	Note 4. Stockholders’ Equity Stock Transactions During the three months ended May 31, 2015, the Company entered into stock purchase agreements and issued 2,467,000 restricted common shares at $0.25 per share, for total cash proceeds of $616,750. The restricted common shares were valued based at the market price on the grant date. In addition, 41,000 restricted common shares were issued during this period related to the $11,500 of proceeds received and recorded as stock payable as of February 28, 2015 as the shares had not yet been issued as of February 28, 2015. See the following two paragraphs for further information related to the $11,500 stock payable balance as of February 28, 2015. During the three months ended February 28, 2015, the Company entered into stock purchase agreements at $0.25 per share for total cash proceeds of $9,000 for which the 36,000 restricted common shares were not issued as of February 28, 2015. The $9,000 was included in the stock payable balance of $11,500 as of February 28, 2015 and was shown as issued stock when the shares were issued during the first quarter of fiscal 2016 ended May 31, 2015. On May 6, 2014, the Company entered into a stock purchase agreement and issued 5,000 restricted common shares at $0.50 per share, for total cash proceeds of $2,500. The restricted common shares were valued based at the market price on the grant date. The stockholder purchased 10,000 shares for $5,000 but the transfer agent only issued 5,000 shares (in February 2015). The other $2,500 received on May 6, 2014 was recorded as stock payable as of February 28, 2015 and was shown as issued stock when the shares were issued during the first quarter of fiscal 2016 ended May 31, 2015. On April 25, 2014, the Company entered into a stock purchase agreement and issued 10,000 restricted common shares at $0.50 per share, for total cash proceeds of $5,000. The restricted common shares were valued based at the market price on the grant date. Stock Warrants As of May 31 , 2015 On April 3, 2015, one consultant was issued 300,000 warrants as compensation to purchase shares of the Company stock at the closing price as of April 2, 2015 of $0.15 per share. The warrants vested immediately and are exercisable until April 3, 2025. The total estimated value using the Black-Scholes Model, based on a volatility rate of 122% and a call option value of $0.14 was $42,808. On May 5, 2015, Jeffrey Mills, a Director, was issued 200,000 warrants as compensation to purchase shares of the Company stock at the closing price as of May 4, 2015 of $0.25 per share. The warrants vested immediately and are exercisable until May 5, 2025. The total estimated value using the Black-Scholes Model, based on a volatility rate of 125% and a call option value of $0.24 was $47,817. On May 5, 2015, one consultant was issued 200,000 warrants as compensation to purchase shares of the Company stock at the closing price as of May 4, 2015 of $0.25 per share. The warrants vested immediately and are exercisable until May 5, 2025. The total estimated value using the Black-Scholes Model, based on a volatility rate of 125% and a call option value of $0.24 was $47,817. On May 5, 2015, one consultant was issued 50,000 warrants as compensation to purchase shares of the Company stock at the closing price as of May 4, 2015 of $0.25 per share. The warrants vested immediately and are exercisable until May 5, 2025. The total estimated value using the Black-Scholes Model, based on a volatility rate of 125% and a call option value of $0.24 was $11,954. On May 5, 2015, Darvin Habben, Chairman of the Board, was issued 400,000 warrants as compensation to purchase shares of the Company stock at the closing price as of May 4, 2015 of $0.25 per share. The warrants vested immediately and are exercisable until May 5, 2025. The total estimated value using the Black-Scholes Model, based on a volatility rate of 125% and a call option value of $0.24 was $95,634. On April 21, 2014, the Company canceled 300,000 stock purchase warrants issued to four consultants on January 10, 2014. The Company utilized the following key assumptions in computing the fair value of the warrants using the Black-Scholes pricing model: April 3, May 5, 2015 2015 Weighted-average volatility 122% 125% Expected dividends None None Expected term (in years) 10.00 10.00 Weighted-average risk-free interest rate 1.92% 2.19% Weighted-average fair value of warrants granted $0.14 $0.24 The Company recorded stock-based compensation expense of $246,030 and $0 for all outstanding stock warrants for the three months ended May 31 , 2015

Stock Options

Stock Options	3 Months Ended
	May. 31, 2015
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Stock Options	Note 5. Stock Options The Company has one stock option plan called The 2006 Employee Stock and Option Plan. As of May 31 , 2015 For the three months ended May 31 , 2015 For stock options granted during the three months ended May 31 , 2015 May 5, 2015 Weighted-average volatility 125% Expected dividends None Expected term (in years) 5.00 Weighted-average risk-free interest rate 1.54% Weighted-average fair value of options granted $0.21 The total fair value of the stock options granted by the Company for the three months ended May 31 , 2015 For the three months ended May 31 , 2014 For stock options granted during the three months ended May 31 , 2014 March 18, 2014 Weighted-average volatility 155% Expected dividends None Expected term (in years) 5.75 Weighted-average risk-free interest rate 0.71% Weighted-average fair value of options granted $0.4113 The total fair value of the stock options granted by the Company for the three months ended May 31 , 2014 Total stock compensation expense for all option grants was $105,343 and $59,417 for the three months ended May 31 , 2015 , 2015 , 2015 and 2014 The following table summarizes information about the Company’s stock options: Number of Options Weighted Average Exercise Price Weighted Average Remaining Contract Life (years) Aggregate Intrinsic Value (1) Outstanding - February 28, 2015 3,450,000 $ 0.864 - - Granted 500,000 0.250 - - Canceled or expired (2,750,000) 1.000 - - Exercised - - - - Outstanding – May 31, 2015 1,200,000 $ 0.365 8.71 - Exercisable – May 31, 2015 1,200,000 $ 0.365 8.71 - (1) The intrinsic value of an option is the amount by which the fair value of the underlying stock exceeds its exercise price. In May 2015, Richard Pomije resigned as CEO, President, CFO and Chairman of the Board but continues to be an employee of the Company. Due to his resignation, Mr. Pomije forfeited 2,750,000 options that were granted in October 2011.

Related Party Transactions

Related Party Transactions	3 Months Ended
	May. 31, 2015
Related Party Transactions [Abstract]
Related Party Transactions	Note 6. Related Party Transactions Lease with Director/Stockholder Since December 16, 2006, the Company has leased from Jeffrey L. Mills, a director and stockholder of the Company, approximately 2,650 square feet of space used for offices and operations equipment storage at 11974 Portland Avenue, Burnsville, Minnesota. In November 2011, the Company entered into a three-year lease renewal through December 15, 2014 at a monthly rent of $2,650 for the period of December 16, 2011 to December 15, 2012, $2,750 for the period of December 16, 2012 to December 15, 2013, and $2,850 for the period of December 16, 2013 to December 15, 2014, with the option to renew the lease for an additional term of one year at a monthly rent of $3,500. Effective September 1, 2014, the existing lease was terminated and the two parties agreed to a month-to-month agreement requiring rental payments of $1,050 per month. Mr. Mills invoiced the Company $3,150 and $8,550 for the three months ended May 31, 2015 and 2014, respectively. At May 31, 2015 and February 28, 2015, the Company owed Mr. Mills $0 and $24,065, respectively, pertaining to the lease. Accounts Payable – Related Parties The Company had accounts payable balances due to related parties of $1,720 at May 31, 2015, which consisted of $1,720 due to Richard Pomije. The balance at February 28, 2015 was $61,282 which consisted of $37,217 due to Richard Pomije and $24,065 due to Jeffrey Mills. Deferred Officer Compensation The Company owes deferred officer compensation to Richard Pomije, the former CEO, CFO and Chairman of the Company as of May 31, 2015 and February 28, 2015 of $0 and $352,292, respectively. See Note 3 for additional information. Notes Payable – Related Party On April 22, 2014, the Company signed an unsecured promissory note with Richard Pomije, former CEO, CFO and Chairman for a working capital loan of $75,000, due in one year at an annual interest rate of 5%. On December 1, 2014, the Company signed an additional unsecured promissory note with Richard Pomije for a working capital loan of $10,000 due in one year at an annual interest rate of 4%. On August 14, 2014, the Company made a $10,000 principal payment on the $75,000 note payable leaving a remaining principal balance of $75,000 on the two notes payable as of February 28, 2015. On April 3, 2015, the Company signed an additional unsecured promissory note with Richard Pomije for a working capital loan of $15,000 due in one year at an annual interest rate of 4%. In May 2015, the Company paid off all three notes payable resulting in no notes payable owed as of May 31, 2015. Accrued interest of $3,657 and $2,945 related to the $75,000 note payable is included in accounts payable as of May 31, 2015 and February 28, 2015, respectively, and accrued interest of $266 and $99 related to the $10,000 and $15,000 notes payable is included in accounts payable – related parties as of May 31, 2015 and February 28, 2015, respectively. Common Stock Subscriptions Receivable The Company has stock subscriptions receivable due from a stockholder as of May 31, 2015 and February 28, 2015 of $0 and $625,482, respectively. See Notes 8 and 11 for additional information.

Commitments and Contingencies

Commitments and Contingencies	3 Months Ended
	May. 31, 2015
Commitments and contingencies
Commitments and Contingencies	Note 7. Commitments and Contingencies The Company is exposed to asserted and unasserted claims encountered in the normal course of business. In the opinion of management, the resolution of these matters will not have a material adverse effect on the Company's financial position or results of operations. On August 22, 2011, the Company entered into a nine-month agreement with Enable Consulting, LLC (“Enable”) to complete the design and development of the Company’s Sales Center Application. The Company committed up to $66,000 for the development and maintenance support of this software application through May 31, 2012. On June 27, 2012, the Company signed an amendment to its existing contract with Enable to establish payment terms for the remaining balance due Enable of $36,000 and prioritize the remaining unresolved maintenance items which Enable was to have completed by August 15, 2012. The Company paid $13,500 on June 29, 2012. As of May 31, 2015, the maintenance items remain unresolved and the Company has a balance due Enable of $22,500, which is included in accounts payable. On December 8, 2010, the Company entered into a five-year strategic partnership agreement with the National Interscholastic Athletic Administrators Association (“NIAAA”). The NIAAA and DigitalTown will work together to establish a national, standardized system for recording schedules, scores, rosters and statistics for interscholastic sports teams and individual students. Pursuant to the agreement, the Company has committed to pay the expenses related to this strategic partnership; however, any expenses in excess of $5,000 must be preapproved by the Company. The Company has committed to deposit $50,000 for such expenses for the first fiscal year of the contract which the Company has paid as of February 29, 2012. In addition, as of May 31, 2015, the Company has paid $20,000 of the $50,000 due for the second fiscal year of the contract and the balance due of $30,000 is included in accounts payable. In addition, the Company has committed to donate 25% of the annual net sponsorship revenue in the scheduling and stats areas of its websites, with a total annual donation cap of $3,000,000, to yet to be named program funds that promote youth activities and the NIAAA. Lastly, the Company has committed to a minimal revenue share of $100,000 per year with the future launch of its beta 3 software. As of May 31, 2015, the Company has not yet launched its beta 3 software nor has it generated any net sponsorship revenue.

Common Stock Subscriptions Rece

Common Stock Subscriptions Receivable	3 Months Ended
	May. 31, 2015
Equity [Abstract]
Common Stock Subscriptions Receivable	Note 8. Common Stock Subscriptions Receivable Prior to May 11, 2015, the Company had the following stock subscription agreements outstanding all of which were due from a related party: (See Note 11 for further information). 2007 Agreements On October 5, 2007, the Company received subscriptions for 1,300,000 restricted common shares at $2.50 per share (total value of $3,250,000). Significant terms of the original subscription agreement are as follows: · The price per share of $2.50 was based on the closing price on October 4, 2007. · At 24 months, 1/36 payments are due monthly. · The Company, at its option, may call up to 1/12 of the gross receivable per month if the preceding 30-day average trading price is at or above $7.00 per share with minimum trading volume of 5,000 shares per day. · If the purchaser sells these common shares, the purchaser shall be entitled to an amount equal to 200% of the original purchase price of each share and the Company shall be entitled to 50% of any additional net sales proceeds from the stock sale. On February 25, 2010, due to the economic downturn and the market value decline of the Company’s stock, which was trading below $2.50 per share, the Company amended the pricing terms of the subscription agreements received by the Company on October 5, 2007. The amendment changed the following significant terms of the subscription agreement: The parties agree that the Initial Pricing terms in the Confidential Binding Term Sheet dated October 5, 2007 of the Agreement will be amended to state as follows: 1. The Subscriber offers to purchase shares of the Company for $0.75 per share. After the price adjustment, the revised total value of this subscription agreement is $975,000. The following other provisions of the Initial Pricing and Final Pricing terms in the Confidential Binding Term Sheet dated October 5, 2007 of the Agreement will be deleted, and are not enforceable by either party: · Beginning October 5, 2009, and each month thereafter, 1/36 payments are due on the 5 th · The Company, at its option, may call up to 1/12 of the (gross) receivable note per month if the preceding 30-day average trading price is at or above $7.00 per share. Minimum trading volume must be 5,000 shares per day. · As total consideration for the purchase and sale of the Company’s stock, purchaser shall ultimately pay to the Company the following amount (the “Purchase Price”): A. Purchaser shall first be entitled to an amount equal to 200% of the face amount of each share. B. After the purchaser receives the amount in A above, the Company shall be entitled to 50% of any additional net sales proceeds of the stock. Net sales proceeds shall mean the gross proceeds received from the sale of the stock, less reasonable brokerage commissions. C. Final adjusted net sales proceeds will be wired to the Company within 7 days from the final settlement of the sale of stock sold. The outstanding balance owed on the revised 2007 subscription agreements at May 31, 2015, is $0. 2010 Agreement Material terms of the subscription agreement received by the Company on June 22, 2010, for 400,000 restricted common shares at $0.75 per share (total value of $300,000) are as follows: · Payment is due in full in 60 months. · At 24 months, the Company can demand at its option, monthly 1/36 payments on the subscription agreement. · The Company has the option to charge simple annual interest of up to 4%. · The Company will provide downside protection of up to 30% of the stock price upon conversion. The outstanding balance owed on the 2010 subscription agreement at May 31, 2015 is $0. Summary For the three months ended May 31, 2015, the Company did not receive any stock subscription payments and as of May 31, 2015, the Company had related party stock subscriptions receivable aggregating $625,482 for the 2007 and 2010 agreements. The following tables summarize information about the stock subscriptions receivable: Receivable balance at February 29, 2008 $ 5,030,795 Cash collected (523,832) Receivable balance at February 28, 2009 4,506,963 Cash collected (337,500) 2007 Subscription agreement pricing revised (1) (2,275,000) Receivable balance at February 28, 2010 1,894,463 New subscription agreement (2) 300,000 Cash collected (771,809) Receivable balance at February 28, 2011 1,422,654 Cash collected (123,000) Receivable balance at February 29, 2012 1,299,654 Cash collected (320,800) Receivable balance at February 28, 2013 978,854 Cash collected (337,459) Receivable balance at February 28, 2014 641,395 Cash collected (15,913) Receivable balance at February 28, 2015 625,482 Cash collected - Settlement with former CEO (see Note 11) (625,482) Receivable balance at May 31, 2015 $ - Summary of outstanding subscriptions: 2007 subscriptions $ - 2010 subscription - Total $ - (1) Amendment to the terms of the subscription agreements received by the Company on October 5, 2007 for 1,300,000 restricted common shares reducing the price paid per share from $2.50 to $0.75. (2) New subscription agreement received on June 22, 2010.

Earnings (Loss) Per Share

Earnings (Loss) Per Share	3 Months Ended
	May. 31, 2015
Accounting Policies [Abstract]
Earnings (Loss) Per Share	Note 9. Earnings (Loss) Per Share The Company computes earnings per share using two different methods, basic and diluted, and presents per share data for all periods in which statements of operations are presented. Basic earnings per share are computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding. Diluted earnings per share are computed by dividing net income (loss) by the weighted average number of shares of common stock and common stock equivalents outstanding. The following tables provide a reconciliation of the numerators and denominators used in calculating basic and diluted earnings (loss) per share for the three month periods ended May 31, 2015 and 2014: Three months ended May 31, 2015 2014 Basic earnings (loss) per share calculation: Net loss to common shareholders $ (740,339) $ (180,237) Weighted average number of common shares outstanding 31,656,422 30,432,644 Basic net loss per share $ (0.02) $ (0.01) Diluted earnings (loss) per share calculation: Net loss to common shareholders $ (740,339) $ (180,237) Weighted average number of common shares outstanding 31,656,422 30,432,644 Stock options (1) - - Warrants (2) - - Diluted weighted average common shares outstanding 31,656,422 30,432,644 Diluted net loss per share $ (0.02) $ (0.01) (1) At May 31, 2015 and 2014, there were outstanding stock options equivalent to 1,200,000 and 4,285,000 common shares, respectively. The stock options are anti-dilutive at May 31, 2015 and 2014 and therefore, have been excluded from diluted earnings (loss) per share. (2) At May 31, 2015 and 2014, there were outstanding warrants equivalent to 2,225,000 and 120,000 common shares, respectively. The warrants are anti-dilutive at May 31, 2015 and 2014 and therefore, have been excluded from diluted earnings (loss) per share.

Gain on Settlement of Accounts

Gain on Settlement of Accounts Payable	3 Months Ended
	May. 31, 2015
Accounting Policies [Abstract]
Gain on Settlement of Accounts Payable	Note 10. Gain on Settlement of Accounts Payable During the quarter ended May 31, 2015, the Company settled an accounts payable amount owed to a vendor with a balance of $44,899 as of February 28, 2015 for $18,000 resulting in a gain on settlement of accounts payable of $26,899.

Loss on Conversion of Deferred

Loss on Conversion of Deferred Officer Compensation into Equity	3 Months Ended
	May. 31, 2015
Compensation and Retirement Disclosure [Abstract]
Loss on Conversion of Deferred Officer Compensation into Equity	Note 11. Loss on Conversion of Deferred Officer Compensation into Equity On May 11, 2015, Richard Pomije, the former CEO, CFO and Chairman of the Company agreed to accept the stock subscriptions receivable in lieu of his deferred officer accrued compensation. As of May 11, 2015 (date of agreement), the balance recorded as deferred officer compensation was $331,849 and the balance recorded as stock subscriptions receivable was $625,482. The agreement resulted in a loss on conversion of deferred officer compensation of $293,633.

Subsequent Events

Subsequent Events	3 Months Ended
	May. 31, 2015
Subsequent Events [Abstract]
Subsequent Events	Note 12. Subsequent Events There were no subsequent events through the date that the financial statements were issued.

Nature of Business and Summar18

Nature of Business and Summary of Significant Accounting Policies (Policies)	3 Months Ended
	May. 31, 2015
Accounting Policies [Abstract]
Nature of Business and Going Concern	Nature of Business and Going Concern The Company was founded in 1982 under the laws of the State of Minnesota as Command Small Computer Learning Center, Inc., a computer training company and operated under several different names in the computer hardware and training sector. In 2005, the Company began acquiring domain names. On March 1, 2007, the Company changed its name to DigitalTown, Inc. and began developing a business plan to develop a platform to monetize their domain names. The Company’s headquarters are located at 11974 Portland Avenue, Burnsville, MN 55337, and its telephone and facsimile numbers are (952) 890-2362 and (952) 890-7451, respectively. The Company's Internet address is www.digitaltown.com. The Company’s common stock is traded in the over-the-counter market under the ticker DGTW. The Company’s consolidated financial statements have been prepared using U.S. GAAP applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has a working capital deficit, recurring losses, and negative cash flows from operations. These matters raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result from the outcome of this uncertainty. At May 31, 2015, the Company had an accumulated deficit of $29,613,636. Subsequent to May 31, 2015, the Company has not received any proceeds from the sale of its common stock. The Company anticipates that expected future proceeds from additional financing through the sale of its common stock or other equity-based securities, and additional sales and/or leases of existing domain names will be sufficient to meet its working capital and capital expenditure needs through at least May 31, 2016. In the event that the Company is unable to obtain additional capital in the future, the Company would be forced to further reduce operating expenses and/or cease operations altogether.
Principles of Consolidation	Principles of Consolidation The Company files consolidated financial statements that include its wholly-owned subsidiaries Tiger Media and The School Network, Inc. All material intercompany accounts and transactions have been eliminated in consolidation.
Reclassifications	Reclassifications Certain prior period amounts in the consolidated statement of cash flows have been reclassified to conform to the current period presentation. Proceeds from related party notes payable received in the prior period have been reclassified from the prior period classification.
Use of Estimates	Use of Estimates The preparation of financial statements in conformity with U.S. GAAP 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 revenues and expenses during the reporting period. Actual results could differ from those estimates.
Accounts Receivable	Accounts Receivable Accounts receivable arose from the sale of and commission earned from display advertising. The Company evaluates collectability of accounts receivable based on a combination of factors including the age of the receivable or a specific customer’s inability to meet its financial conditions. In these circumstances, the Company records an allowance to reduce the receivable to an amount it deems collectible. The Company has determined that an allowance for doubtful accounts is not necessary as of May 31, 2015.
Prepaid Domain Names	Prepaid Domain Names The annual domain name renewal fees are currently being amortized over one year. The increase in prepaid domain name renewal fees as of May 31, 2015 compared to February 28, 2015 is due to the large number of domain name renewals that come due during the quarter ended May 31 as compared to the other quarters of the year.
Revenue Recognition	Revenue Recognition The Company recognizes revenue when the following four criteria have been met: Persuasive evidence that an agreement exists Delivery has occurred The price is fixed and determinable Collectability is reasonably assured The Company recognizes revenue from certain third party agreements which allow display advertising to be placed on individual spirit sites within DigitalTown’s network. Per these agreements, the Company receives commissions based on a percentage of the per click or per-impression revenue generated by these ads. The Company recognizes these commissions received as revenue.
Income Taxes	Income Taxes Deferred tax assets (net of any valuation allowance) and liabilities resulting from temporary differences, net operating loss carryforwards and tax credit carryforwards are recorded using an asset-and-liability method. Deferred taxes relating to temporary differences and loss carryforwards are measured using the tax rate expected to be in effect when they are reversed or are realized. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be ultimately realized. The Company has recorded a full valuation allowance against the net deferred tax asset due to the uncertainty of realizing the related future benefits. The Company accounts for income taxes pursuant to Financial Accounting Standards Board (“FASB”) guidance. This guidance prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company’s adoption of these provisions specifically related to uncertain tax positions resulted in no cumulative effect adjustment. The Company believes its income tax filing positions and deductions will be sustained upon examination and, accordingly, no reserves or related accruals for interest and penalties have been recorded at May 31, 2015 or February 28, 2015. In accordance with the guidance, the Company has adopted a policy under which, if required to be recognized in the future, interest related to the underpayment of income taxes will be classified as a component of interest expense and any related penalties will be classified in operating expenses in the statements of operations. The Company has three open years of tax returns subject to examination.
Stock-Based Compensation, Including Options and Warrants	Stock-Based Compensation, Including Options and Warrants The Company recognizes the cost of stock-based compensation plans and awards in operations on a straight-line basis over the respective vesting period of the awards. The Company measures and recognizes compensation expense for all stock-based payment awards made to employees, directors, consultants and advisors. The compensation expense for the Company's stock-based payments is based on estimated fair values at the time of the grant. The Company estimates the fair value of stock-based payment awards on the date of grant using the Black-Scholes option pricing model. This option pricing model involves a number of assumptions, including the expected lives of stock options, the volatility of the public market price for the Company's common stock and interest rates. Stock-based compensation expense recognized during the period is based on the value of the portion of stock-based payment awards that are ultimately expected to vest.
Recently Issued Accounting Pronouncements	Recently Issued Accounting Pronouncements In June 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-12, Compensation – Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. The new guidance requires that share-based compensation that require a specific performance target to be achieved in order for employees to become eligible to vest in the awards and that could be achieved after an employee completes the requisite service period be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant-date fair value of the award. Compensation costs should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. If the performance target becomes probable of being achieved before the end of the requisite service period, the remaining unrecognized compensation cost should be recognized prospectively over the remaining requisite service period. The total amount of compensation cost recognized during and after the requisite service period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest. The requisite service period ends when the employee can cease rendering service and still be eligible to vest in the award if the performance target is achieved. This new guidance is effective for fiscal years and interim periods within those years beginning after December 15, 2015. Early adoption is permitted. Entities may apply the amendments in this Update either (a) prospectively to all awards granted or modified after the effective date or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. The adoption of ASU 2014-12 is not expected to have a material impact on the Company’s financial position or results of operations. In June 2014, the FASB issued ASU No. 2014-10: Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation, to improve financial reporting by reducing the cost and complexity associated with the incremental reporting requirements of development stage entities. The amendments in this update remove all incremental financial reporting requirements from U.S. GAAP for development stage entities, thereby improving financial reporting by eliminating the cost and complexity associated with providing that information. The amendments in this Update also eliminate an exception provided to development stage entities in Topic 810, Consolidation, for determining whether an entity is a variable interest entity on the basis of the amount of investment equity that is at risk. The amendments to eliminate that exception simplify U.S. GAAP by reducing avoidable complexity in existing accounting literature and improve the relevance of information provided to financial statement users by requiring the application of the same consolidation guidance by all reporting entities. The elimination of the exception may change the consolidation analysis, consolidation decision, and disclosure requirements for a reporting entity that has an interest in an entity in the development stage. The amendments related to the elimination of inception-to-date information and the other remaining disclosure requirements of Topic 915 should be applied retrospectively except for the clarification to Topic 275, which shall be applied prospectively. For public companies, those amendments are effective for annual reporting periods beginning after December 15, 2014, and interim periods therein. Early adoption is permitted. The adoption of ASU 2014-10 is not expected to have a material impact on the Company’s financial position or results of operations.

Stockholders Equity (Tables)

Stockholders Equity (Tables)	3 Months Ended
	May. 31, 2015
Equity [Abstract]
Fair Value of Warrants	April 3, May 5, 2015 2015 Weighted-average volatility 122% 125% Expected dividends None None Expected term (in years) 10.00 10.00 Weighted-average risk-free interest rate 1.92% 2.19% Weighted-average fair value of warrants granted $0.14 $0.24

Earnings (Loss) Per Share (Tabl

Earnings (Loss) Per Share (Tables)	3 Months Ended
	May. 31, 2015
Accounting Policies [Abstract]
Reconciliation of Earnigns Per Share	Three months ended May 31, 2015 2014 Basic earnings (loss) per share calculation: Net loss to common shareholders $ (740,339) $ (180,237) Weighted average number of common shares outstanding 31,656,422 30,432,644 Basic net loss per share $ (0.02) $ (0.01) Diluted earnings (loss) per share calculation: Net loss to common shareholders $ (740,339) $ (180,237) Weighted average number of common shares outstanding 31,656,422 30,432,644 Stock options (1) - - Warrants (2) - - Diluted weighted average common shares outstanding 31,656,422 30,432,644 Diluted net loss per share $ (0.02) $ (0.01) (1) At May 31, 2015 and 2014, there were outstanding stock options equivalent to 1,200,000 and 4,285,000 common shares, respectively. The stock options are anti-dilutive at May 31, 2015 and 2014 and therefore, have been excluded from diluted earnings (loss) per share. (2) At May 31, 2015 and 2014, there were outstanding warrants equivalent to 2,225,000 and 120,000 common shares, respectively. The warrants are anti-dilutive at May 31, 2015 and 2014 and therefore, have been excluded from diluted earnings (loss) per share.