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 initially halted, and even now has slowed down, many business processes starting from manufacturing, supply chain to logistics, and marketing. Digital Clarity is no exception, and the negative impact for over two years, is measurable. During the two-year period, some businesses have permanently 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. There are opportunities emerging, and Digital Clarity is actively pursuing new clients in a new environment. This inserted a gap in the operating business plan. As 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 was a slowdown in existing business and new business development, there is a need for reinforcement of the digital values proposition to bring or maintain a company's brand front and center. As a consultancy, we are delivering the message.
Operationally, fiscal year 2022 has been important in continuing the direction of the Company post-pandemic and steering it toward a scaled growth plan which has been in neutral while the Company addressed certain external challenges beyond its control. Nevertheless, the Company continued to focus on the positive, proven operating model and used that model to maintain certain existing clients and through its digital infrastructure, is perfectly placed to expand geographic reach to new clients in 2022. Through a turbulent 2021 to date, DBMM continues to build on its strengths. Like the rest of the world, the effect of Covid-19 and the remains in turn-around. Despite the remaining challenges, the Company has strong relationships within the market and will continue to extend its business focus to a wide variety of industry verticals.
No one expected that pandemic and the
The heart of the business is its marketing consultancy.
The Company endeavors to bring theSEC case of delayed filings to a close as it has been dismissed onNovember 12, 2019 , yet compliant with all of its filings since that time.
WHY DIGITAL EXPERTS CONTINUE TO BE 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 3.7 billion people are active social media users as ofOctober 2021 . 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, Social Media,Strategic Company Transformation 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 63%
begin making purchase 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.
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
?
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
Among, its range of services, Digital Clarity help companies 'get found' on
search engines like Google . The Market Share chart from Statista, we can see
that Google has the lion's share of the search market worldwide. As a Google
Premier Partner, Digital Clarity are well placed to advise, consult and grow
companies, in 2021 and beyond.
From Google 's parent Alphabet's latest results, In the third quarter of 2020,
Google 's revenue amounted to 46.02 billion U.S. dollars , up from 37.99 billion
U.S. dollars in the preceding quarter. Google 's main revenue source is
advertising through Google sites and its network.
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.
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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 advertising spend, 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 persuasiveMIT 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.
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.
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DIGITAL MARKETING SERVICES There is no denying that 2020/21 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.
The Company's outlook remains robust for 2022 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 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. Leading project management
software and solution provider to
the construction industry Kahua
Inc, announced it was ramping up
growth using the power of digital
marketing in partnership with
digital consultancy, Digital
Clarity.
2. Digital Clarity shortlisted for
prestigious UK 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.
3. 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.
4. 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 of Google
? How Much Does SEO Cost?
5. The Luxury Property Show partners
with Digital Clarity. The Luxury
Property Show at Olympia London
and is the only event in Europe
dedicated to luxury and high-value
property aimed at High-net-Worth
Individuals.
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: FinTech, Unified Communication Companies and discretionary advice for professional service providers.
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SEARCH ENGINE OPTIMIZATION EVOLUTION
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 comes in to help shape content 'in the right way' to direct potential buyers to the client's website.
THE NEXT-GENERATION SEARCH ENGINE MARKET SET TO GROW 25.5% DURING 2021-2026
Over the last few years, the number of voice searches witnessed an exponential growth rate. Also, it is becoming less of a novelty and more like a new standard. Therefore, the next-generation search engines are more oriented toward voice-based search engines. Next-generation search engines are also increasing because of deep neural networks, machine learning, and other advancements in AI technologies. Virtual assistants, such as smart speakers, are used for various applications across several end-user industries, such as retail, BFSI, and healthcare. One major consumer-facing application is as a personal assistant. It helps consumers accomplish various tasks. For instance, Apple's Siri offers an intuitive interface for connected homes or cars. These assistants' capabilities can be personalized based on the end-user, thereby improving customer experience in various industries. Thus, although the personal segment holds a significant position, the commercial segment holds a massive opportunity to expand over the forecast period, owing to the growing industrial applications. For instance, virtual assistants can help customers find a doctor's office in the healthcare sector, fill and refill a prescription, and receive payment reminders. Moreover, the voice search mobility trend is growing at a high pace with the advancements in speech recognition technology or voice search technology.
THE GROWTH OF DIGITAL MARKETING & CONSULTANCY SERVICES
The skill set historically owned by agencies offering disciplines such as UX, design, creativity, customer-centric data analytics and customer engagement is now being immersed with large consultancy businesses whose traditional bread and butter was Digital Transformation. Accenture, Deloitte, IBM,KPMG , McKinsey 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.
THE NEED FOR PROFESSIONAL CONSULTANCY AND 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. 19
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THE GROWTH OF DIGITAL TRANSFORMATION WORLDWIDE
The Global Digital Transformation Market size is expected to reach$1,302.9 billion by 2027, rising at a market growth of 20.8% CAGR during the forecast period. Digital transformation is considered as the utilization of digital technology. Digitally transformed enterprises can be flexible to the changing technological landscape and can address abrupt shifts in the industry, particularly the one presently created by the COVID-19 pandemic; studies show that the efficiency and rate of adaptation of digitally transformed companies to a post-pandemic era are relatively larger than conventional businesses. Source Digital Clarity can help various businesses that have been considerably affected by the global outbreak of the COVID-19 pandemic. One of the significant challenges for the global economy in 2020 was to facilitate business continuity in the midst of social distancing guidelines, lockdowns norms, work-from-home culture, and other operational challenges. The lack of availability of digital strategies, infrastructure, or tools worsens the challenges for various companies that were needed to abruptly shift operations online or allow workers to work from their homes. The situation, on the other hand, resulted in a considerable surge in awareness regarding the urgent requirement for digital transformation across a majority of the industries and created some lucrative opportunities for the global market. Companies are getting more aware of the advantages of digital transformation, particularly in the work-from-home culture that needs a business to allow the employees to easily learn, collaborate and perform organizational functions across remote locations.
DIGITAL CONTINUES TO DRIVE GROWTH IN CONSULTING
Such is the dominance of US consulting, that its status as the world's largest consulting market barely bears mentioning anymore. The global consulting market grew by about 8% to$160 billion in 2020, but accounting for 44% of that, the US saw another year of meteoric growth last year according toSource Global Research . While it is still undeniably America first when it comes to consulting, however, the battle to be the second largest consulting market is much more tightly contested. Despite slowed growth in theUK , the management consulting market in theUK has remained the globe's second largest. Nearest rivalGermany accounts for 0.3% less of the global consulting market thanBritain .
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THE IMPORTANCE OF STRATEGIC CONSULTANCY IN 2022 AND BEYOND
Across industries, organizations are accelerating digital transformation processes for long-term growth and profitability. Yet: "53% of the organizations surveyed remain untested in the face of digital challenge and their digital transformation readiness therefore uncertain." This report from Gartner highlights the need embrace change.
Businesses had no choice but to respond quickly to challenging conditions. Although not formally classed as 'agile', the twists and turns of the pandemic have required executives to innovate on the fly and collaborate to get things done. This has been compounded by working from home, which has cut out distractions and created more time for 'deep thinking'. Regardless of headcount, a return to more stable trading conditions shouldn't mean running back to the standard practices and silos that previously slowed marketers down. Adobe says that Business-to-business (B2B) commerce will continue to undergo a major transformation in 2021 as companies adopt the latest technologies to find new customers, improve their supply-chain efficiencies, and provide a more personalized user experience to their clientele.
Digital Clarity has created a unique
Areas of focus include: ? Cost analysis ? Audit current channels ? Digital strategy planning ? ROI projection planning ? Digital consulting and training
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GLOBAL AD SPEND CONTINUES
? Global advertising spend is expected to grow by 10.4.% or
? Spend will rise past pre-pandemic levels, a year sooner than previously
predicted
? All regions forecast to return to growth in 2021 with
Australia expected to be fastest growing markets in 2021
? Digital continues to drive recovery, returning to double digit growth. It will
represent 50.0% share of global spend this year
Advertising investment is forecast to grow by 10.4% globally in 2021, according to the latest dentsu Ad Spend Report.
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 B2B SOCIAL MEDIA
2020 will go down as the year that marketing was pulled into the boardroom. 80% of senior executives said the role of marketing in setting strategy has expanded since the pandemic. Traditional consumers have moved online, making the digital environment even more important right now. This priority has raised the profile of marketing as companies scramble to understand the digital-first consumer. The battleground for 2021 will be about speed and agility. Now that many companies have treasure troves of data, the difference is how fast they can personalize the experience and respond to consumer behavior. Expect to see more investment and innovation in technology infrastructure alongside marketing.
? 40% of B2B content marketers increased their investment in social media and
online communities in response to COVID-19.
? 76% of B2B organizations use social media analytics to measure content
performance.
? By 2025, 80% of B2B sales interactions will occur on digital channels.
?
2021, $1.99 billion in 2022, and $2.33 billion in 2023.
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Almost all B2B content marketers (96%) use LinkedIn. They also rated it as the top-performing organic platform.
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GROWTH IN LINKEDIN ADVERTISING SET TO SOAR TILL 2023
For paid social posts, the picture is similar but not identical.
LinkedIn again comes out on top (80%).
But Facebook outranks Twitter and Instagram outranks YouTube.
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GLOBAL B2B ECOMMERCE SALES IN 2021
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.
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According to
1 China:$636 billion 2 United States:$504 billion 3 Japan:$104 billion 4 United Kingdom:$86 billion 5 Germany:$70 billion 6 France:$43 billion 7 South Korea:$37 billion 8 Canada:$30 billion 9 Russia$20 billion 10 Brazil$19 billion
US B2B DIGITAL AD MARKET SET FOR POST PANDEMIC GROWTH
According to eMarketer's
Last year, US B2B pivoted from in-person channels to digital ads to reach audiences. In 2021, the growth in digital ad spending will be even greater than was originally estimated by eMarketer, indicating the shift to digital isn't slowing down.
Digital ads will also remain a more prevalent part of the B2B media mix in the coming years.
US B2BS SPEND ON LINKEDIN DISPLAY
LinkedIn makes up the largest share of US B2B display in 2021 with 32.2% of the$5.09 billion that will be spent on B2B display this year. We estimate US B2B LinkedIn display ad revenues will be$1.64 billion in the US, growing 27.1% from 2020 when$1.29 billion was spent on LinkedIn B2B display.
US B2BS SPEND ON SEARCH TO INCREASE
In 2021, US B2Bs will spend
But search's growth rate isn't as strong: It will increase by 19.5% from 2020.
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THE NEW NORMAL WILL BE DIGITAL
In just one-year, digital adoption has happened at five to ten times the projected rate.
Lockdown periods, economic uncertainty and loss of predictability have forced customers and businesses online in previously unseen numbers. This migration has upset the power balance, with customers now more in control of the relationship and less loyal to brands and products. On top of that, 60% of companies have seen new buying behaviors such as changes to average basket size and product interests. Pandemic disruption is also causing many businesses to demand a similar level of convenience to consumers. When we return to normal, there's no question that the new normal will be digital.
GROWTH IN INVESTOR AWARENESS AND OUTREACH.
During 2022,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 continue to defer its 2020/21 plans until certain SEC Matters regarding the delinquent filings brought current inJuly 2018 , remain open into 2022. The global pandemic made it impossible to initiate any Investor Awareness Program and theSEC matter remains open, so the planning remains in neutral. Hopefully in 2022 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 2020/21 the pandemic threw all planning into disarray. With capital infusion following the closure of theSEC review with a final order of the earlier dismissal, 2022 will follow the model of a growing client base and geographic reach until it achieves a TBD level of profitability. We anticipate the benchmark will replicate successful industry models in digital technology, marketing and company transformation. 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 growth trajectory anticipated is expected during 2022, following capital infusion and return to normal trading. Once that occurs, the clients benefit immediately due to a wider range of resources; the shareholders will benefit as the market cap grows. The media market multiple far exceeds the "old" manufacturing multiples, as digital technology and marketing has become one of the fastest growing industries in the world today. DBMM's place in the sector is strong. The industry environment continues to grow exponentially and the future of digital marketing as an essential strategy for any consumer-facing business has been proven over-and-over as certain retail businesses are forced to close their doors for lack of or 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, 2020/21 results 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 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 and new clients developed. 25
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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 2022 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.
During fiscal 2021 and so far in 2022, and to a lesser extent, in fiscal 2020, we successfully reached agreements with certain lenders resulting in gain on extinguishment for loans payable which amounted to the difference between the carrying value and the revised amount of the obligations. The gain on extinguishment of principal and accrued interest amounted to$169,837 and$57,802 and during fiscal 2021 and 2020, respectively. We also successfully reached an agreement with a holder of convertible debentures aggregating$249,800 to modify its terms. Such debentures are no longer convertible, are now non-interest bearing, and have been reclassified to loans payable. It also resulted in a decrease in derivative liabilities and an increase in additional paid-in capital of approximately$260,000 during fiscal 2021.
Finally, in
We have not issued convertible debentures since 2015.
NINE-MONTH PERIOD ENDED
We had
During the nine-month period ended
Change in fair value of derivative liability of
Additionally, the following variations in operating assets and liabilities
during the nine-month period ended
Increase in accounts payable, accrued expenses, accrued interest, and accrued compensation, of$334,000 , resulting from a short fall in liquidity and capital resources.
We generated cash from financing activities of
NINE-MONTH PERIOD ENDED
We had approximately
During the nine-month period endedMay 31, 2021 , we used cash in our operating activities amounting to$321,000 . Our cash used in operating activities was comprised of our net loss from continuing operations of$530,000 adjusted for the following:
Change in fair value of derivative liability of
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Additionally, the following variations in operating assets and liabilities
during the nine-month period ended
Increase in accounts payable, accrued expenses, accrued interest, and accrued
compensation, of approximately
During the nine-month period ended
Unaudited Consolidated Operating Results
For the Three Months Ended For the Three Months Ended
Increase/ Increase/ Increase/ Increase/
May 31, May 31, (Decrease) (Decrease) May 31, May 31, (Decrease) (Decrease)
2022 2021 $ % 2022 2021 $ %
SALES $ 68,130 $ 45,456 $ 22,674 50 % $ 164,976 $ 120,538 $ 44,438 37 %
COST OF SALES 30,217 50,417 (20,200 ) -40 % 102,090 150,156 (48,066 ) -32 %
GROSS PROFIT 37,913 (4,961 ) 42,874 90 % 62,886 (29,618 ) 92,504 69 %
COSTS AND EXPENSES
Sales, general and
administrative 124,451 138,079 (13,628 ) -10 % 441,908 377,173 64,735 17 %
TOTAL OPERATING (GAIN)
EXPENSES 121,451 138,079 (13,628 ) -10 % 441,908 377,173 64,735 17 %
OPERATING GAIN (LOSS) (86,538 ) (143,040 ) 56,502 -40 % (379,022 ) (406,791 ) 27,769 -7 %
OTHER (INCOME) EXPENSE
Interest expense 95,599 54,315 41,284 76 % 307,240 192,274 114,966 60 %
Other income - - - NM (98,265 ) - 98,265 NM
Loss on extinguishment of
debt 82,485 - 82,485 NM 82,845 - 82,845 NM
Change in fair value of
derivative liability 18,273 (3,309 ) 21,582 NM (265,724 ) (68,864 ) 196,860 286 %
TOTAL OTHER EXPENSE 196,357 51,006 145,351 NM 26,096 123,410 (97,314 ) 79 %
NET LOSS $ (282,895 ) $ (194,046 ) $ (88,849 ) 46 % $ (405,118 ) $ (530,201 ) $ 125,083 -24 %
(NM): not meaningful
RESULTS OF OPERATIONS
We currently generate revenue through our
For the three-month and nine-month periods ended
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 increase in our revenues during the three-month and nine-month periods endedMay 31, 2022 , when compared to the prior year, is due to increase activity following the ease of restrictions in theUK associated with COVID-19 and its impact on Digital Clarity's clients. 27
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During the three-month and nine-month periods endedMay 31, 2022 , our cost of sales decreased due to reduction in compensation streamlining our delivery of services.
The sales, general and administrative expenses during the three-month and
nine-months periods ended
Interest expense during the three-month and nine-month periods endedMay 31, 2022 increased by additional consideration provided to a lender upon issuance of loans payable. The decrease in other expense during the nine-month period endedMay 31, 2022 is primarily attributable to the recognition of certain tax credits related to expenses incurred in theUnited Kingdom and the increase in other expenses during the three-month period endedMay 31, 2022 is primarily due to a loss on settlement of debt.
The decrease in the fair value of derivative liabilities during the three-month
and nine-month periods ended
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