DIGITAL BRAND MEDIA & MARKETING GROUP, INC. Readers are cautioned that certain statements contained herein are forward-looking statements and should be read in conjunction with our disclosures under the heading "Forward-Looking Statements" above. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. This discussion also should be read in conjunction with the notes to our consolidated financial statements contained in Item 8. "Financial Statements and Supplementary Data" of this Report. OPERATIONS OVERVIEW/OUTLOOK
The Company developed a document called the Creds Deck which provides a description to prospective clients of Digital Clarity's value proposition http://www.dbmmgroup.com/wp-content/uploads/2020/11/Digital-Clarity-Creds-Deck_DB64F.pdf.
Coronavirus lockdown has halted many business processes starting from manufacturing, supply chain to logistics, and marketing. Digital Clarity is no exception, and the negative impact is measurable.
Some businesses have closed or paused their digital marketing activities temporarily, because of this uncertainty. That mindset results in drastically decreased online traffic, sales, engagement, conversation, and pushed down search ranking.
Digital marketing is not a quick-fix solution to gain momentum. Therefore, it does not give companies visibility overnight. Many companies using digital marketing techniques such as search engine optimization (SEO) or social media marketing, are already aware that implementations take three to four months' time to achieve positive results. Our company mantra remains, "ROI is our DNA." This means that although there has been a slowdown in existing business and new business development has also slowed considerably there is a need for reinforcement of the digital values proposition to bring or maintain a company's brand front and center. Operationally, fiscal year 2020 has been important in continuing the direction of the Company and steering it toward a scaled growth plan which has been in neutral while the Company addressed certain external challenges beyond its control. This has also been impacted by the worldwide pandemic of Covid-19. Nevertheless, The Company continued to focus on the positive, proven operating model and used that model to a certain maintain of existing clients and through its digital infrastructure, is perfectly placed to expand geographic reach to new clients in 2021. Through a turbulent 2020 to date, DBMM continues to build on its strengths. Like the rest of the world, the effect of Covid-19 and the Pandemic that still persists are a paramount concern, the Company has strong relationships within the market will continue to extend its business focus to a wide variety of industry verticals. The heart of the business is its marketing consultancy.DBMM Group's main business Digital Clarity works in the area of Digital Marketing. Understanding each client and developing the model to individualize the outlook has been essential and is differentiating and is its competitive advantage. This kind of close relationship with its clients resulted in Digital Clarity being considered a close professional and trusted advisor.
WHY DIGITAL EXPERTS ARE IN DEMAND
The world is changing, and technology is taking the lead. Today, everything is going digital -- entertainment, health, real estate, banking and even currencies. This is, however, understandable. InNorth America alone, 95% of the population are online (statista). With everything turning to digital, it means companies are also jumping online to market their businesses. And to survive the challenges of digital marketing, brands need to keep up with the latest trends. Successfully reaching one's target audience is no longer just putting out TV and print ads. These days, social media is the new arena of digital marketers, with Statista claiming 4.6 billion people are active social media users as ofOctober 2020 . To keep up with the ever-changing scene, digital marketing experts need to stay in step with the evolving tech trends. Social media marketing companies like ours work tirelessly to research consumers and what makes them engage with brands. We try to find the best online solutions that will cater to our clients' end-users' queries in the easiest and most cost-efficient way possible -- be it by developing new technology or adapting to trends. 15
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RELENTLESS DIGITAL GROWTH POSITIONS DIGITAL CLARITY AS A LEADER
The need for seasoned expertise and insight is in huge demand. Digital Clarity's strength, heritage and reach in the digital marketing puts the DBMM brand in an excellent position for investment and growth. Digital Clarity's strength in Search Engine Marketing, Analytics and Social Media means that the Company is ready to feed on that demand and leapfrog into a powerful revenue focused vehicle.
SHOPPERS STILL USE A MIX OF DIGITAL TOUCHPOINTS DURING COVID-19 ALONG THE BUYING JOURNEY
? In the discovery and evaluation part
of the journey, search engines,
social media feeds, and influencers
are popular ways for shoppers to get
product inspiration outside a
brand's properties.
? In the buying part of the journey,
there are new types of purchase
points emerge. Mobile wallets are
behind e-mail as a place to make
purchases. And 14% of shoppers are
making purchases through social
media
Customers Still Face Silos Across Channels - THE DIGITAL LANDCAPE THROUGH THE PANDEMIC
? Customers are accessing multiple
touchpoints during a purchase but
there is a significant disconnect
within companies.
? 75% of consumers expect consistent
interactions across all
departments.
? However, 58% say that they feel
like they're communicating with
separate departments and not one
company.
? And when it comes to service
issues, 70% of customers expect all
of the reps to have the same
information about them, but 64% say
that they have to re-explain
issues.
DIGITAL SALES ARE BECOMING MORE ACTIVE THAN HOLIDAY PERIOD
? In today's environment, unified
channels and customer service are
more important than ever, as
non-essential businesses closed
their doors to help slow the spread
of Covid-19. This meant that
retailers and shoppers alike had to
pivot overnight to a digital-only
reality.
? Digital sales growth by 18% in Q1
2020 compared to Q1 2019
? We see traffic growth by 13% in Q1
2020 compared to Q1 2019. - Desktop
and Social Surge in Traffic - In
addition to the rise in digital
commerce and traffic, there are two
more unusual trends.
? The first relates to desktop
traffic. In Q1 2019, desktop traffic
declined by 9%, but grew by 9% in Q1
2020. With people stuck inside and
not on the move, there's a
pronounced switch to desktop traffic
and purchases.
? Another trend is that traffic from
social media has grown quickly. In
Q1 2019, the share of traffic coming
from social media was 6%. This
jumped to 8% for Q1 2020.
VERTICALS EXPERIENCE DIFFERENT ORDER GROWTH - THE SURGE IN DIGITAL COMMERCE IS NOT EVENLY DISTRIBUTED
? Home related goods clearly saw
astonishing growth, up 70% in Q1
2020.
? Learning and active apparel
experienced growth over 35% in
digital orders in Q1 2020.
? However, luxury and general apparel
only grew around 10% in Q1 2020,
which is lower than their Q1 2019
performances.
AREAS THAT DIGITAL CLARITY EXCEL ARE AREAS THAT NEED TO BE CONSIDERED TODAY
? Market from Home - Deploy campaigns
quickly from home, collaborate
across teams and keep marketers
engaged with apps
? Engage Customers with Empathy -
Listening to customers, use
real-time data to better understand
their current situation and needs
? Personalize Digital
Communications - Accelerate digital
channel adoptions, deliver the
right message, to the right person,
at the right time
? Optimize Budget Spends - Digital
Clarity unify marketing performance
and make real-time decisions to
minimize the negative impact
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SOURCES FROM: DELOITTE DIGITAL AND SALESFORCE 2020
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Among, its range of services, Digital Clarity help companies 'get found' on search engines like46.02 billion U.S. dollars , up from37.99 billion U.S. dollars in the preceding quarter.
HOW MACHINE LEARNING IS ENHANCING DIGITAL MARKETING STRATEGY
Digital Clarity applies strategy to algorithmic based machine learning tools. The launch of
MACHINE LEARNING AND DIGITAL MARKETING
Because machine learning is being used to solve a huge set of diverse problems
with the help of data, channels, content, and context, as marketers, Digital
Clarity stands to benefit from this information and phenomenon as a whole. But,
as the information we gather grows, digital marketing as we know it is set to
change. Digital Clarity will be at the forefront of this change.
SEARCH ENGINE OPTIMIZATION
From an SEO point of view, keywords could become less important. Search engines
receive more revenue for ads when they provide users with higher quality
content. As a result, the algorithm they use needs to be more focused on
providing each user with content that will serve a specific purpose, rather than
be packed with the right keyword density. Therefore, the need to start thinking
about the quality of your content as a ranking factor on search engines. This is
where Digital Clarity come and help shape content 'in the right way' to help it
get found.
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PAY PER CLICK (PPC) CAMPAIGNS
With
To become more strategic and take PPC campaigns to the next level for its clients, Digital Clarity:
? Get to grips with the metrics that are most valuable to your business ? Understand obstacles that could get in the way of meeting your goals ? Know the underlying performance drivers to make more strategic decisions
SEARCH - OVERALL Search makes up half (52%) of this, increasing on par at 15% to £3.3bn, next is non-video display at £1.33bn (+9%), then video display £967m (40%). Classifieds remains at £726m and other remained at £41m.
DIGITAL CLARITY EMBRACE
Machine learning and AI have grown at a rapid pace and are an integral part of day-to-day search advertising management and planning. Though machine learning has been an integral part of the ad world, what has been more significant has been the addition of Artificial Intelligence or AI. According to a recent report in TheHarvard Business Review by Deloitte, AI in Digital Marketing is not just getting bigger, it's getting far more persuasive.MIT researchers recently unveiled a chip that can perform inference using neural network computations three to seven times faster than previous chips, and with up to 95 percent less power consumption. Dozens of companies working on new generations of AI chips-for use both in and outside of data centers-are attracting significant investment. These companies raised more than$1.5 billion in funding last year, nearly twice the amount they raised the year before.
According to Gartner, 80% of emerging technologies will have AI foundations by 2021 and beyond.
DIGITAL CLARITY PERFECTLY POSITIONED FOR THE FUTURE
According to Gartner's Digital Business Acceleration report: Where to Focus Now, Enterprises have the intention of becoming more digital due to COVID-19.
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CONTENT MARKETING Although still extremely important, the internet has become inundated with too much content. There is consensus among companies that in order to succeed, brands need to be creating content that is valuable to readers. To do this, you need to understand consumer trends, data and engagement. Machine learning tools alongside Digital Clarity's strategic approach allows its clients to reduce the amount of time spent tracking data, as well as better decipher that data to create actionable tasks that will lead to success.
THE GROWTH OF DIGITAL MARKETING & CONSULTANCY SERVICES
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The skill set historically owned by agencies offering disciplines such as UX, design, creativity, customer-centric data analytics and customer engagement is now being immersed with large consultancy businesses whose traditional bread and butter was Digital Transformation. Accenture, Deloitte, IBM,KPMG , McKinsey andPricewaterhouseCoopers rank among the most aggressive players in acquiring and partnering with agencies such as Digital Clarity. They present not only an opportunity for Digital Clarity but also a prospective exit and investment opportunity. Digital Clarity have continued to develop theirDigital Consulting and Strategy Planning offering. The forward-looking program is to be a recognized leader in this field and fulfill companies seeking Digital Transformation for their originations. DIGITAL MARKETING SERVICES There is no denying that 2020 and first quarter of 2021 has proved challenging for Digital Marketing Services. When the pandemic hit inMarch 2020 , many companies' long-term plans and strategies were thrown out the window, as everyone from the frontlines to the C-suite shifted into fire-fighting mode. Many worked around the clock by leveraging remote technology. Most businesses, except for those engaged in essentials, have been at a standstill and enterprises are cutting back on costs. The axe falls on marketing. The virus has brought most scheduled digital marketing plans to a grinding halt or slowed them down. The impact is felt in digital marketing, with predicted patterns now appearing skewed. During the main part of the lock-down., Google announced$800 million in funding and grants for businesses advertisers. It has on offer$ 340 million in credits for active advertisers. The clear opportunity is at the foundation of the Company, namely the need to expedite and continue to encourage development in the digital marketing services sector. The marketing services product is labor intensive and thus the Company must jumpstart the growth by significant capital to grow simultaneously in multiple geographies. 19
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The Company's outlook remains robust for 2021 and the foreseeable future, particularly as businesses adjust and redirect their retail business to online digital marketing in the COVID Post COVID world.
KEY MILESTONES During the fiscal year 2020 endingAugust 31,2020 and through the first quarter of 2021 endingFebruary 28, 2021 , revenues decreased due to external circumstances out of the company's control which placed enormous pressure on the operating business. Despite these circumstances, the client base is expanding in base number and the size of client serviced. At any point in time, our clients represent a variety of industries. Many of these clients choose to operate under an NDA as our clients see DBMM as a competitive advantage. Under that disclaimer, we cannot share all clients' names, but here are a few key clients representing diverse verticals, as follows: 1. Digital Clarity shortlisted for prestigiousUK Search Awards in the hotly contested 'Best Use of Search' along with client Bentley SYNCHRO, a global construction project management software company that supports the professional needs of those responsible for creating and managing the world's infrastructure. 2. Synergy SKY, a Norwegian based company that develops and markets software platforms to manage all meetings and video conferences, announce online marketing partnership with Digital Clarity. 3. Digital Clarity release SEO Guides for business during Covid-19 Pandemic. The company has a long history with Google search both paid and organic, with these guides specifically focusing on three core areas: ? The Importance of a Strong Internal Linking Strategy ? How to Get to the Top ofEurope dedicated to luxury and high-value property aimed at High-net-Worth Individuals. 5. Ad World Masters, a worldwide ranking of agencies based on state-of-the-art scoring algorithms, has named its top agencies for 2019 - worldwide. Digital Clarity has won a Silver award for theUnited Kingdom . Ad World Masters Agency of the Year highlights the best agencies around the world, based on its underlying technology and unique data.
Other examples are representative of the diversity of client base. DBMM's approach using a client's analytics and executing an individualized model to increase ROI as the prime objective, spans a wide range of industries.
Digital Clarity's services are in demand and the company is pursuing opportunities in Formula 1, Aviation and high-end marketing for Luxury Brands.
Core industry verticals for Digital Clarity include: Managed Service Providers, Unified Communication Companies and discretionary advice for professional service providers.
SEARCH REMAINS KEY, BUT GROWTH EBBS SLIGHTLY DURING PANDEMIC
Total
Conducted with PwC, the analysis shows that Display (video) and Search were the
biggest drivers of growth between January and
Search now accounts for £3.7 billion of total H1 digital ad spend, while combined Display (video and non-video) is worth £2.8 billion, a 17% annual uplift. Non-video remains the largest Display format (up 8% YoY to £1.45 billion), but video formats are growing fast (up 27% to £1.32 billion).
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THE NEED FOR PROFESSIONAL CONSULTANCY & OPPORTUNITY FOR MASSIVE GROWTH
Four consultancies lead Ad Age's ranking of the 10 largest agency companies in the world. With combined revenue of$13.2 billion , the marketing services units of Accenture, PwC, IBM and Deloitte sit just below WPP, Omnicom, Publicis Groupe, Interpublic and Dentsu. Last year, only two consultancies-Accenture Interactive and IBM iX-made the top 10. IBM iX was the first to break into the top 10. Given the experience of the team, Digital Clarity's advisory and consultancy is in demand. With the recent growth in these business areas, and the rise of consultancies, it is confirmation that Digital Clarity is headed in the right direction for growth.
THE GROWTH OF DIGITAL TRANSFORMATION WORLDWIDE
The global digital transformation market size was valued atUSD 284.38 billion in 2019 and is expected to expand at a compound annual growth rate (CAGR) of 22.5% from 2020 to 2027. During 2020 as Covid-19 emerged, Digital Clarity began to evolve their consultancy to take advantage of the increasing demand by corporations to digitally transform their organization for 2021 and beyond. Growing demand for the adoption of the Internet of Things (IoT) across industries is promoting the introduction of connected and data-rich solutions. These solutions are capable of embedding intelligence into business operations to facilitate better and more effective customer engagements. Growing usage of smartphones, mobile devices, and applications is promoting digitization. Digital transformation supports organizations in mitigating risks and handling disruption such as marketplace fluctuation, corporate restructuring, and geopolitical environment that are unanticipated, and can lead to unpredictable results.
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THE IMPORTANCE OF STRATEGIC CONSULTANCY IN 2021 AND BEYOND
Digital Clarity is dedicated to helping its clients align their business objectives and utilize digital marketing to acquire and retain customers.
The company's marketing consultancy process is centered around a brands business objective. The approach is consultative and leverage's years of expertise within the digital marketplace and across a wide range of industry sectors.
Alongside helping companies understand their 'why', the company also helps shape a robust and measured strategy to achieve business objectives.
Over the years, Digital Clarity has identified that all too often clients are unclear why, how and where to invest their budgets to get the best return. In response, the company has developed a Strategic Consultancy service helps prioritize investment and resources to achieve the given goals.
Digital Clarity has created a unique
Areas of focus include: ? Cost analysis ? Audit current channels ? Digital strategy planning ? ROI projection planning ? Digital consulting & training GLOBAL AD SPEND CONTINUES
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Competitive landscape Digital advertising is the fastest-growing segment of the global market for advertising spending. The increasing use of smartphones and the availability of cheap internet services are the two major factors propelling the growth prospects for this market. More than 30% of the companies are planning to spend around 75% of their advertising expenditures on digital marketing within the next five years. "U. S. Marketers are expected to spend$110.1 billion on digital ads this year, or 51% of the$214.6 billion totalU.S. advertising spending forecast, excluding political ads. Newspapers, radio, magazines, and local television now account for just 21% of theU.S. ad market." FromThe Wall Street Journal .
DIGITAL CLARITY HAS A COMPETITIVE ADVANTAGE
Digital Clarity operate in a highly commoditized market but have over the years build a stellar reputation that makes it different from its competitors. Some of these areas include: 1. Our DNA is Strategically Driven
We believe the path to successful customer acquisition lies in understanding a client's business - not just running a campaign. We seek to help clients understand that success has to be objective and measurable.
2. We are Business Led
Digital marketing is not a cost but an asset. Not a line in a spreadsheet but an emotive force that if done right, will bring real business change and growth.
3. We are Digital Thinkers
Marketing has to be at the heart of the business. Delivering real innovation in digital marketing requires not just knowledge but authority and bravery. We think digital. We drive results.
4. Our goal is to deliver Digital Performance
We help our clients to understand their goals and objectives, using digital marketing to drive new business opportunities and retain their current customers.
In
THE GROWTH OF SOCIAL MEDIA E-COMMERCE
Enabling consumers to finalize a purchase while remaining within social apps has been a goal for social platforms for some time now. Social commerce is seen to have the potential to be a major revenue generator and an important way to diversify revenue streams beyond advertising. AcrossAsia , networks like WeChat and Line have successfully facilitated commerce via their platforms, allowing consumers to carry out a range of commerce activities from booking taxis to paying for restaurant bills or items in-store. But social commerce has been a tough sell in many Western markets. Online consumer habits here can be difficult to change, especially when it comes to the potentially sensitive information involved in financial transactions. Social media can play a big role in the purchase journey right up to the point of purchase, but the appetite to complete a final purchase within the platform remains low. Most will move to retail sites. These benefits must be intrinsically social or deeply embedded with payment systems, and must be grounded in consumer-engagement strategies, in order for social commerce to achieve the roaring success seen in APAC. The prospect of using "buy" buttons on social media in theU.S. has not quite gained traction. The growing role of social networks as a way of researching products does, however, provide social video with a strong value-proposition in The Social Path to Purchase % who say they do the following furthering the social commerce agenda in this market. In theU.S. 23
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The expectation is that US ecommerce sales will surge 35.8% to
Source: emarketer.com
WORLDWIDE E-COMMERCE GROWTH OPPORTUNITIES
Retail e-commerce sales worldwide continue to grow exponentially year on year and projected to grow to$4.5 trillion by 2021. Online shopping is one of the most popular online activities worldwide, Goldman Sachs expects on-line shopping retail sales inChina to grow to$1.7 trillion by 2020. Usage varies by region. 24
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GLOBAL RETAIL ECOMMERCE SALES WILL REACH
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Cumulative data from Statista anticipates a 246.15% increase in worldwide
ecommerce sales, from
GLOBAL ECOMMERCE RETAIL SALES TO HIT
New studies projected that the worldwide retail eCommerce sales will reach a new high by 2021. Ecommerce businesses should anticipate a 265% growth rate, from$1.3 trillion in 2014 to$4.9 trillion in 2021. This shows a future of steady upward trend with no signs of decline. 25
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But, what's even more significant is that global eCommerce sales have been steadily eroding the worldwide retail market. In fact, by 2021, it will account for 17.5% of the total global retail sales.
OMNICHANNEL SHOPPING WILL BECOME MORE PREVALENT
As the lines blur between the physical and digital environment, multiple
channels will become more prevalent in customers' path to purchase. This is
evidenced by 73% of customers using multiple channels during their shopping
journey. What it means for eCommerce is to understand how their customers buy,
which marketing channels do they engage with, and their motivations and main
drivers to purchase. In the simplest sense, omnichannel shopping means decoding
what, where, when, why, and how people are purchasing the products you sell on a
particular channel.
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Every single touchpoint is important because it puts every single piece of the puzzle into a whole story. Knowing your customers' touch points before they purchase will better inform your brand of how to promote your products and allocate your marketing budget. More and more people are doing their shopping on social media platforms. With the improvement of social media's selling capabilities, social media platforms are more than just advertising channels. People can now conveniently and quickly purchase products on their chosen social media platform.
B2B ECOMMERCE IS A BIGGER GIANT
B2B (business-to-business) eCommerce is the online selling and marketing of products from one business to another. And when compared to the B2C (business-to-consumer) eCommerce industry, B2B eCommerce is projected to be two times higher than B2C by 2020.
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In the US alone, B2B eCommerce sales will hit
The predominance of B2B ecommerce means that B2B businesses must improve and simplify their shopping journey, channeling the B2C ordering experience. The B2B shopping experience is a lot more complicated than that of a B2C buyer. Because of the nature of the transaction, B2B buyers usually need to go through various steps, including sales representative interaction, negotiations, and approvals before they can make a successful purchase. In short, B2B eCommerce businesses must adapt to a more seamless transaction building advanced functionality quote management, price negotiation, easy ordering, order and inventory management for the B2B market.
According to
1 China:$672 billion 2 United States:$340 billion 3 United Kingdom:$99 billion 4 Japan:$79 billion 5 Germany:$73 billion 6 France:$43 billion 7 South Korea:$37 billion 8 Canada:$30 billion 9 Russia$20 billion 10 Brazil$19 billion 28
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GROWTH IN INVESTOR AWARENESS AND OUTREACH.
During 2021,Digital Brand Media & Marketing Group, Inc. will initiate a significant effort to raise positive awareness of DBMM's growth potential on a global basis. The Company had to defer its 2020 plans until certain SEC Matters regarding the delinquent filings brought current inJuly 2018 , remain open. The global pandemic made it impossible to initiate any Investor Awareness Programme. Hopefully in 2021 the strategic outreach will be directed at investors around the world who understand the digital marketplace and its expanding influence on consumer decisions. DBMM will target new investors through a global digital and traditional integrated investor outreach campaign which will be run by Digital Clarity, with third parties, as required, for distribution. In all areas, the Company will act in the interests of all stakeholders. In the full industry context of dramatic expansion of digital footprints, there has been no direct correlation between DBMM's revenues and its share price. Economic and industry analysts have opined that the industry multiple continues to grow to, in some cases, 25-30 times revenues. DBMM will expand its client and geographic scale, thus increasing revenues. There were matters outside of DBMM's control which caused growth to be in neutral, and in 2020 the pandemic threw all planning into disarray. With capital infusion, 2021 will follow the model of a growing client base and geographic reach until it achieves a TBD level of profitability. This benchmark will replicate successful industry models in digital technology and marketing. FINANCIAL OVERVIEW/OUTLOOK DBMM has been honing its commercial model since the acquisition of Digital Clarity ("DC") in 2011 which has been cash-flow positive as an operating company since its acquisition. External events outside of DBMM's control has precluded the growth expected to this point, however, its margins will continue to be strong on an annual basis, and once the business reaches appropriate scale with assumed profitability and cross-over point, DBMM trajectory suggests a resultant very successful business for all of its stakeholders. The Company growth plan was first deferred until Brexit was passed and executed with the EU, which it appears to have been done recently, but remaining challenging and frustrating is the open SEC Matter, superimposed by a global pandemic beginning inMarch 2020 . There is now a vaccine which is rolling out, and hopefully should eventually normalize theSEC which has been operating remotely. Once a Final Order has been issued, the growth plan will recommence. Clients and shareholders will benefit as the market cap grows acknowledging that digital technology and marketing continues to be one of the fastest growing industries in the world, even amidst the pandemic.
Once the growth trajectory occurs, the clients benefit immediately due to a wider range of resources; the shareholders will benefit as the market cap grows. The media market multiple far exceeds the "old" manufacturing multiples, as digital technology and marketing has become one of the fastest growing industries in the world today.
The good news is DBMM's standing in the sector is strong because Digital Clarity as a brand is positive, particularly for its size. The industry environment continues to grow exponentially and the future of digital marketing as an essential strategy for any consumer-facing business has been proven over-and-over as certain retail businesses are forced to close their doors for lack of or an ineffective digital presence. DBMM's brand, Digital Clarity, increases its valuation with client case studies and industry awards resulting in its being considered a leader in the sector for its size. DBMM's increasing client base, coupled with decreasing certain kind of debt and expenses, positions the Company to attract mezzanine financing, something sought after by many and achieved by few. Coincidently during the fiscal year 2020 and through the second quarter of 2021, revenues have slowed down temporarily due to Brexit unease in theUK and clients concern about trade issues with or without theEuropean Union . So, in the midst of the uncertainty caused by the Brexit slowdown, the COVID -19 global outbreak has caused further slowdown as clients paused and business development much different during an initial lockdown, then lifted only to be reinstated onNovember 5, 2020 . That only made the uncertainty further exacerbated, while clients need to extend or double down on their digital footprint as the industry has become essential during the pandemic. Nevertheless, Digital Clarity is revising its model to adjust to changing circumstances, when client revenues are paused or delayed. The operating unit has successfully receivedUK government relief during the last fiscal year and anticipates additional relief during 2021. The business is undergoing some real pain during Covid-19, as their clients and new client development had to undergo re-modeling to adjust to an eroding retail business, with an accelerating need to expand the online expansion and often the timing is not in sync. The elephant generally cannot dance without a lot of reorganization, especially not this fast. There has been revenue erosion while the landscape is in this uncertainty. TheUK Prime Minister locked down the country beginning inJanuary 2021 , which only exacerbates the need for clients to evolve its digital footprint with speed and unplanned risk inherent in that approach. The risk adverse gradual evolution was preferred by the vast majority of business, now has no choice. Long term that is a positive development for Digital Clarity, but short term has impacted revenues negatively. 29
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The Company received a commitment for future working capital in order to grow the Company in key markets, with the intent to move to DBMM profitability following a return to normal trading. At that point, DBMM would not require future financing until it was ready to acquire 1-2 additional companies to complement and further develop the digital marketing business. Growth capital will increase as the client base re-balanced and expands in size and scope. Going forward, there will be an emphasis on investor awareness as soon as theSEC dismissal has been affirmed by the full commission. DBMM has been current in its filings sinceJuly 2018 and is encouraged by the outlook after normal trading has recommenced. DBMM intends to make significant strides in aggressively widening its brand exposure using a variety of digital and social channels. There are investors around the globe who understand the digital marketplace and its increasing influence on consumer decisions. DBMM will be targeting these new investors in the public market through a global digital and traditional, integrated campaign which will be run by Digital Clarity, with third parties, as required for distribution.
The expectations for fiscal year 2021 remain to return to normal trading following affirmance of the dismissal by the full commission. The Company intends to move ahead thereafter to the scaled, growth plan in multiple geographies to benefit all stakeholders, being mindful of the impact of the global pandemic.
SIX-MONTH PERIOD ENDED
We had approximately
During the six-month period ended
Accounts payable, accrued expenses, accrued interest, and accrued compensation, of approximately$170,000 , resulting from a short fall in liquidity and capital resources.
Additionally, the following variations in operating assets and liabilities
during the six-month period ended
During the six-month period ended
SIX-MONTH PERIOD ENDED
We had approximately
During the six-month period ended
Change in fair value of derivative liability of
Nonrecurring gain in extinguishment of debt of
Additionally, the following variations in operating assets and liabilities impacted our cash used in operating activity:
A decrease in our accounts payable and accrued expenses of approximately
An increase in our accrued salaries of approximately
During the quarter endedFebruary 29, 2020 , we generated cash from financing activities of$158,575 , which consist of the proceeds from the issuance of loan payables. 30
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RESULTS OF OPERATIONS
UnauditedConsolidated Operating Results
For the Three Months Ended For the Six Months Ended
Increase/ Increase/ Increase/ Increase/
February 28, February 29, (Decrease) Decrease February 28, February 29, (Decrease) Decrease
2021 2020 $ % 2021 2020 $ %
SALES $ 38,117 $ 80,666 $ (42,549 ) -53 % $ 75,082 $ 240,800 $ (165,718 ) -69 %
COST OF SALES 9,416 92,055 (82,639 ) -90 % 99,739 193,337 (93,598 ) -48 %
GROSS PROFIT 28,701 (11,389 ) 40,090 37 % (24,657 ) 47,463 (72,120 ) -20 %
COSTS AND EXPENSES
Sales, general and
administrative 121,875 94,371 27,504 29 % 239,094 252,389 (13,295 ) -5 %
Gain on extinguishment of
debt - - - 0 % - (192,977 ) (192,977 ) 100 %
TOTAL OPERATING (GAIN) EXPENSES 121,875 94,371 27,504 29 % 239,094 59,412 (206,272 ) 95 % OPERATING GAIN (LOSS) (93,174 ) (105,760 ) 12,586 8 % (263,751 ) (11,949 ) 134,152 -115 % OTHER (INCOME) EXPENSE Interest expense 54,918 67,594 (47,176 ) -19 % 137,959 178,736 (75,277 ) -23 % Change in fair value of derivative liability (66,217 ) (10,485 ) (55,732 ) 532 % (72,173 ) (14,084 ) 58,089 -412 % TOTAL OTHER EXPENSE (11,299 ) 57,109 (102,908 ) 513 % 65,786 164,652 (17,188 ) -435 % NET LOSS$ (81,875 ) $ (162,869 ) $ 115,494 -50 %$ (329,537 ) $ (176,601 ) $ (118,436 ) 87 %
(NM): not meaningful
We currently generate revenue through our
For the three- and six-month period endedFebruary 28, 2021 our primary sources of revenue are thePer-Click Advertising , Web Design, and Social Media. These primary sources amounted to 43%, 49%, 6% of our revenues during the three-month period endedFebruary 28, 2021 . Revenue is recognized upon transfer of control of promised or services to customers in an amount that reflects the consideration the Company expect to receive in exchange for those services. The Company enter into contracts that can include various combinations of services, which are generally capable of being distinct and accounted for as separate performance obligations. Revenue is recognized net of any taxes collected from customers, which are subsequently remitted to governmental authorities. The decrease in our revenues during the three and six-month period endedFebruary 28, 2021 , when compared to the prior year, is due to Brexit unease in theUK and clients concern about trade issues with or without theEuropean Union , and the uncertainty associated with COVID-19 and its impact on Digital Clarity's clients.
During the three and six-month period ended
The sales, general and administrative expenses during the six-month period ended
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Gain on extinguishment of debt decreased during the three- and six-month period endedFebruary 28, 2021 , when compared to the comparable prior period. The increase is attributable to an analysis of certain liabilities based on initial assessments performed by the Company during such period which deemed them extinguished pursuant to statute of limitations. Such analysis was not performed in the comparable current period.
Interest expense, which include interest accrued on certain notes and loans,
decreased during the three and six-month period ended
The increase on derivative liabilities is primarily attributable to increase in the Company's estimated volatility used in the assumptions to compute its fair value atFebruary 28, 2021 when compared toFebruary 29, 2020 32
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