For a company that’s been around since 1999, you’d think Dubli (Omnito) would have had plenty of time to fine tune its business model into profitability.

Things were looking pretty bleak this time last year, with Dubli reporting $13.9 million dollars in losses.

The good news? Dubli managed to reduce their losses in 2016.

The bad news? The company still managed to blow through $10.3 million dollars.

Dubli’s annual 10-K filing reveals revenue dropped from $21.3 million in 2015 to $17.7 million in for 2016.

Gross income decreased to $6.9 million in fiscal year 2016 from $8.2 million in fiscal year 2015 as a result of the lower sales.

The net result is a $10.3 million loss for Dubli in 2016.

That figure is $3.6 million less than Dubli lost in 2015.

Dubli don’t attribute the decline in losses to an improvement product sales or viability of their business model, but instead claim it’s

a result of a decrease of $4.0 million in non-cash equity compensation and a $509,000 decrease in the fair value of a derivative liability partially offset by an increase of $1.5 million in rent and office expenses.

Four figures in particular stood out to me:

  1. $14.2 million in revenue from “membership subscription fees and commission income”
  2. $2.8 million in revenue from “business license fees”
  3. $10.8 million in expenses for “cost of revenues” and
  4. $17.4  in expenses for “selling, general and administrative expenses”

All up, Dubli’s cost of doing business was just $242,052 less than their revenue sources combined. And that’s not taking into consideration the $6.8 million additional cost of generating that revenue.

Despite ongoing sustained losses, Dubli executives were collectively compensated over $1.5 million dollars. Another $829,000 was spent on executive travel allowances.

I couldn’t find an Income Disclosure Statement on the Dubli website revealing what the average earnings for a Dubli affiliate was for 2016. Nor is this information provided in the 10-K form.

As mentioned above, $14.2 million out of Dubli’s $17.7 million revenue for 2016 was generated via membership subscription fees and commission income.

Elsewhere in the report, Dubli acknowledge

regulations applicable to network marketing organizations generally are directed at preventing fraudulent or deceptive schemes, often referred to as “pyramid” or “chain sales” schemes, by ensuring that product sales ultimately are made to consumers.

Consumers for Dubli appears to include affiliates, with their being no specific distinction between Dubli affiliates and retail customers.

With that in mind, Dubli claim revenue is

generated primarily from

(a) business license fees paid by BAs and Partner Program business customers who established customer websites for their own customers;

(b) membership subscription fees from BAs and their customers’ VIP membership packages;

(c) commission income from participating online stores

We know (b) is the primary revenue generator, which begs the question how many retail VIP membership customers does Dubli have?

This information is not publicly disclosed by Dubli.

What I can tell you is that Dubli affiliates are ‘required to purchase membership products for resale‘.

These memberships are sold to Dubli affiliates in “bundles”.

Whether Dubli checks if VIP memberships purchased by affiliates are infact resold to retail customers is unclear.

At the time of publication Japan is the largest source of traffic to both the Dubli (73%) and Dubli Network (40%) websites.

Dubli state that for 2016,

revenue generated from foreign operations represented approximately 71% of total revenue.

Underscoring the ineffectiveness of Dubli’s affiliate-base, the company acknowledges that to date it has yet to award any affiliate with a land parcel in the Cayman Islands.

Dubli acquired 15 undeveloped lots back in 2010. The lots were

intended to provide incentive rewards to the best performing DubLi Network Business Associates upon attaining certain performance objectives.

The company also claims its focus has shifted away from affiliates to

obtaining business clients, and, through these business clients, obtaining individual shoppers in large numbers” specifically targets business with a customer-base of over 50,000.

Either way, with the expense of doing business consistently outweighing revenue brought in for a number of years now, Dubli obviously needs to change its business model.

So what’s happening in 2017?

Well, rather than address what appears to be an unsustainable business model, the company has announced its intention to roll out an Ominto branded mobile app.

As far as I can tell, there are no plans to make any changes to the membership side of the business.

Dubli is currently keeping itself afloat via ‘cash generated from equity financing and debt financing and short term advances‘.

What do you think the chances of an Ominto mobile app generating enough revenue to offset millions of dollars in losses next year are?