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.
The fiscal year 2023 has focused on a slow return to normalcy though businesses have faced enormous challenges over the past few years, and DBMM's operating business Digital Clarity, is no exception. However, for context, it is worth reminding investors and shareholders, that Digital Clarity was acquired by DBMM as a cash-flow positive business with a great reputation and industry network, winning industry awards. As stated in the MD&As for many years, the operating business is cash flow positive, but the costs of maintaining a public company far exceed the profit in those early days. That was expected. That is the digital business model, though many digital companies do not have any operating revenues while they build the business. Though the post-pandemic era still leaves scars, there is also an opportunity for lean organizations to take advantage of the new and challenging landscape that will no doubt still impact the overall economy.
Most analysts are clear the challenges globally, though different from the pandemic, will continue to have an impact in 2023.
Businesses will have to deal with the after-effects of not only the global pandemic but new challenges. The backdrop as we enter 2023, it is clear that B2B leaders are bracing for economic upheaval. Concerns about inflation, higher interest rates, supply chain shortages, and the prospect of a looming recession are already forcing go-to-market leaders to rethink their growth strategies.
Though the general business sentiment is pessimistic, Digital Clarity has adapted its model to continually seek to focus on areas that will allow the business not only to survive during the turmoil but thrive as we come out of the challenging economic backdrop.
Digital Clarity has been pivoting during these challenging headwinds and working to build upon its experience in the B2B space and engaging with prospects in the SaaS and Tech market. The company is also looking to develop business in Web3 and Ai sectors as companies look to adapt to a changing business customer base.
WHY DIGITAL EXPERTS CONTINUE TO BE IN DEMAND
The world has changed. Digital is now within the fabric of everyday life. As consumer markets plateau and come under pressure, the move by Digital Clarity to meet the needs of the business-to-business sector, is both timely and has commercial growth potential.
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The B2B buyer journey is complex. This is why experts like Digital Clarity need to be involved from the start.
Savvy communication experts like Digital Clarity produce ideas that shape perceptions and grow markets. There has never been a better time to navigate into theB2B Marketplace as demand for an experienced, safe pair of hands is required. This sector is growing rapidly and the demand for expertise and skill to help businesses in marketing their services and products is sought after. B2B digital ad spending is projected to reach$18.47 billion by 2024, it will account for nearly 50% of total B2B ad spending that year according to Insider Intelligence. A hybrid approach to marketing in line with hybrid sales departments is expected to be the most dominant sales strategy by 2024 due to shifts in customer preferences and remote-first engagement according to McKinsey, The future of B2B sales Report 2022. Hybrid will drive up to 50 percent more revenue by enabling broader, deeper customer engagement and unlocking a more diverse talent pool than more traditional models.
Winning B2B organizations are shifting to a more hybrid sales force by implementing actions that support success.
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 client's end-users queries in the easiest and most cost-efficient way possible -- be it by developing new technology or adapting to trends.
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 digital marketing puts the DBMM brand in an excellent position for investment and growth. As the consumer-facing market becomes even more commoditized, the company's move to serving the business sector (B2B) will see it leveraging experience for growth.
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Though the pandemic is certainly not over, the business world entered into a
period of recovery in 2022. In the process, it's become apparent that even if
the ongoing shift toward digital and mobile advertising in B2B might slow down
to a degree, it's not going to stop.
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THE SHIFT TO DIGITAL IS PERMANENT
Despite slower growth, digital will continue to command a greater overall share as more B2B marketers make the permanent shift from traditional advertising to online activities. One of the most pronounced effects the pandemic had on B2B marketing was exponentially accelerating its transition into digital. As the business world begins recovering from the pandemic and returning to more traditional models, this transition has slowed down. The past year has affirmed, however, that it will not stop.
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. 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$4.3bn , next is non-video display at$1.73bn (+9%), then video display$1.2bn (40%). Classifieds remains at$949m and other remained at$53.3m .
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. 17
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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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SALES ARE GOING DIGITAL
Disruptive buyer dynamics are rewriting the rulebook for B2B sales, demanding digital-first engagement with customers. The rise in digital sales will be driven by marketing that creates demand and trust in brands.
This doesn't portend the eventual "death of the sales rep," but it does signal drastic changes needed in the seller role. Sales leaders must deliver significant value through digital and omnichannel sales models, aided by sales professionals who can steer self-learning customers toward more confident decisions. Digital delivers this.
THE GROWTH OF THE DIGITAL OMNICHANNEL
Gartner research shows a steady shift of customer preferences from in-person sales interactions to digital channels. B2B buyers spend only 17% of the total purchase journey with sales reps. Because the average deal involves multiple suppliers, a sales rep gets roughly 5% of a customer's total purchase time. And 44% of millennials prefer no sales rep interaction at all in a B2B setting. Sales leaders must deliver significant value through digital and omnichannel sales models, aided by sales professionals who can steer self-learning customers toward more confident decisions.
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OMNICHANNEL IS THE STANDARD, NOT THE EXCEPTION
Digital Clarity can help organizations adopt the B2B Omnichannel. Eight in ten B2B leaders say that omnichannel is as or more effective than traditional methods, a sentiment that has grown sharply in the last 2 years. Even as in-person engagement re-emerged as an option, buyers made clear they prefer a cross-channel mix, choosing in-person, remote, and digital self-serve interactions in equal measure. Increasing demands from customers, the proliferation of sales channels, the increase in data availability, and the need to personalize content have driven the need for sales and marketing teams to work as one. In fact, 89 percent of respondents now say that marketing and sales need to work closely together, more so than ever before. To help enable and drive increased sales, marketing teams have been busy. Fifty-two percent of respondents say their companies have conducted extensive primary research to improve customer experience. Another 51 percent have invested in new capabilities to enable personalized marketing, while 45 percent say their companies have recently re-evaluated the role of marketing in their organization overall.
McKinsey says that the equilibrium is no accident. As B2B buyers flexed to remote and digital ways of engaging, they found much to like. The use and preference for e-commerce-self-serve, for example-has continually grown year on year.
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Omnichannel is more effective than traditional sales models alone. As more companies enable face-to-face, remote, and e-commerce interactions, satisfaction with the sales model has grown exponentially. More than 90 percent of B2B companies say their go-to-market model is just as or more effective than before the pandemic began.
DIGITAL CLARITY PERFECTLY POSITIONED FOR GROWTH
Organizations will have to fight hard to retain loyalty if customer needs are not met: for example, eight in ten B2B decision makers say they will actively look for a new supplier if performance guarantees. Buyers are more willing than ever before to spend big through remote or online sales channels, with 35 percent willing to spend$500,000 or more in a single transaction. Seventy-seven percent of B2B customers are also willing to spend$50,000 or more.
B2B customers now regularly use ten or more channels to interact with suppliers.
Digital Clarity is a specialist in many of these channels and has been for a
number of years. This expertise, experience, and trust will put Digital Clarity
front of mind for organizations as they seek professional advice.
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Some of the channels of focus are:
B2B DIGITAL MARKETING SERVICES
There is no denying the last year has proved challenging for Digital Marketing Services.
That said, the need for specialist marketing advisors is in demand.
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CONTENT MARKETING Content has become a critical tool in the marketing mix for almost every B2B brand. Nine out of ten B2B marketers are using content marketing strategies to pull in new customers. This year, the most successful marketers were already spending 40% or more of their budget on their content strategy.
At its simplest, B2B content marketing is when a brand uses stories, ideas, and insights to engage and influence a business audience.
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There is a realization amongst B2B brands that rather than being faceless organizations, they need to tell their brand's story and show a more human side to their business, endear and promote demand from other businesses and customers. The best content marketing campaigns back up these stories and ideas with robust insights: interesting data points, original research, and real-world examples that help their customers understand a new trend or challenge and equip them with the tools and best practices to respond and thrive.
These data points and research is utilized by Digital Clarity to support companies in shaping their content strategy. Typically, areas that Digital Clarity help clients are:
? Blog posts - marketers who make blogging a priority are 13x more likely to see
a positive ROI for their efforts.
? White papers - favored by 22% of business leaders, these longer research-based
reports provide more in-depth information. Learn more about writing a
compelling B2B marketing white paper here.
? Short-form articles - enjoyed by 37% of execs, these have to research-based if
they are to stand out.
? Case studies - these provide buyers with reassurance further down the buying
funnel and can be made sector-specific. Nearly half of all business leaders
appreciate them.
? Infographics - these have become one of the most popular content marketing
tools in recent years.
? Podcasts - increasingly popular lead generation tools with marketers looking
to deliver thought leadership content to buyers on the move.
? Videos - companies using video, experience clickthrough rates that are 27%
higher and web conversion rates 34% greater than those that don't.
? Email - nearly eight out of 10 marketers report see g an increase in email
engagement over the past 12 months of 2022.
? LinkedIn - generates more than 50% of all social traffic to B2B websites &
blogs.
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CONTENT IS INFORMATION, AND DISCOVERABLE INFORMATION DRIVES REVENUE
Information drives purchase ease and high-quality sales
All of this looping around and bouncing from one job to another means that buyers value suppliers that make it easier for them to navigate the purchase process.
In fact, Gartner research found that customers who perceived the information they received from suppliers to be helpful in advancing across their buying jobs were 2.8 times more likely to experience a high degree of purchase ease, and three times more likely to buy a bigger deal with less regret.
Digital Clarity has a process that helps shape their client's content to become more discoverable information, and this increases revenues.
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Buyer enablement, or the provisioning of information to customers in a way that enables them to complete information online, like gathering information or making a purchase, is an area that Digital Clarity are helping organizations.
KEY MILESTONES As the market conditions in the consumer market cool slightly, the team at Digital Clarity has been busy pivoting their business model to address the need in the 2b2 business sector. This is a more strategic offering for prospective customers.
Digital Clarity has started offering a wider array of services to it fast-growing S company in the US. Services include, LinkedIn strategy, content positioning and SEO.
Digital Clarity has attended a major convergence summit with its client in the Unified Communication and Digital Transformation arena. This allowed the team to meet with the likes of SaaS CX providers, 8x8, Five9, and Mitel, amongst others. This will be an area of focus for the company into 2023. In October, Digital Clarity was part of a select group that part of a panel that discussed the impact of NFTs, Blockchain and the growth of Web 3 and the Metaverse. The event was arranged by leading law firmMemery Crystal , part of Rosenblatt.
Digital Clarity has been on a large business development push and attended
various networking events in
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.
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Core industry verticals for Digital Clarity include: B2B, SaaS, Digital Transformation, FinTech, Unified Communication Companies and discretionary advice for professional service providers and consultants.
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 THE 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 is expected to reach$1.3 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.
THE IMPORTANCE OF STRATEGIC MARKETING CONSULTANCY
The fundamentals of marketing may not have changed, but everything else has: goals, roles, expectations, talent needs, and more. B2B marketing leaders need to navigate this new terrain and build the capabilities needed to win. Digital Clarity helps these organizations win.
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.
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Adobe says that Business-to-business (B2B) commerce will continue to undergo a major transformation 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 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.
HIS Markit, a research firm, reported: "Each dollar that companies spent on
advertising 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.
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This priority has raised the profile of marketing as companies scramble to
understand the digital-first consumer. The battleground for 2023 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 behaviors. Expect to see more investment and innovation in technology
infrastructure alongside marketing.
? 76% of B2B organizations use social media analytics to measure content
performance.
? By 2025, 80% of B2B sales interactions will occur on digital channels.
?
billion in 2023.
GROWTH IN LINKEDIN ADVERTISING SET TO SOAR BEYOND 2023
Almost all B2B content marketers (96%) use LinkedIn. They also rated it as the top-performing organic platform.
For paid social posts, the picture is similar but not identical.
Digital Clarity help business organization make the most of LinkedIn. We help customers understand and build campaigns around the 95-5 rule. The 95-5 rule advises you market mostly to buyers who are not likely to buy from you today.
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THE NEW NORMAL IS DIGITAL
In just one-year, since the pandemic. 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.
We expect that, in 2023, 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.
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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, 2023 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. OnOctober 26, 2022 ,FINRA processed a Form 211 relating to the initiation of priced quotations of our shares of common stock, which means that the submitting broker-dealer has demonstrated toFINRA compliance with FINRA Rule 6432 and therefore has met the requirements under that rule to initiate a quotation for our shares of common stock within four days ofOctober 26, 2022 .FINRA's processing of a Form 211 in no way constitutesFINRA's approval of the security, the issuer, or the issuer's business and relates solely to the submitting broker-dealer's obligation to comply with FINRA Rule 6432 and SEA Rule 15c2-11 when quoting a security. (FINRA TO Glendale Securities ) After OTC Markets' review of our activities following their process, our shares of common stock returned to normal market trading without restriction or caveat emptor. The caveat emptor was removed onDecember 20, 2022 . Accordingly, plans to grow investor awareness and outreach are underway.
TheSEC matter has remained open since theNovember 12, 2019 dismissal regarding the cured late filings. This is damaging to our investors and us and impedes our progress. Our compliance continues with required timely filings and we hope the matter is closed shortly. FINANCIAL OVERVIEW/OUTLOOK DBMM has been honing its commercial model since the acquisition of Digital Clarity ("DC") in 2011, and has been cash flow-positive as an operating company since then. Unfortunately, external events outside of DBMM's control have precluded the growth expected to this point; however, its margins of 35-50% are accurate. Aspirationally, when the Company reaches appropriate scale and profitability TBD, the business will meet all stakeholder expectations. The growth trajectory anticipated during 2023 remained deferred until the Company returns to normal business and normal trading. Normal trading has resumed and the clients will benefit immediately due to a wider range of resources, and 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 fastest growing industries in the world today. The trading in our shares of common stock returned to normal onDecember 20, 2022 with no restrictions. The US retail marketplace of our shares of common stock was open finally to all investors.
DBMM's place in the industry reputationally is strong, particularly for its size. The industry environment continues to grow exponentially, and digital marketing and company transformation is an essential strategy for any commercial activity, and thus has become embedded in planning.
Since 2020, revenues have slowed down temporarily due to a number of factors: 1) client uncertainty caused by Brexit trade issues, 2) COVID-19 global slowdown with some clients pausing as lockdowns stopped and started, 3) clients needing to extend or double down lacked the resources. To address the changing environment, the business development model has evolved and, as such, Digital Clarity has earned a "seat at the table," client by client. With precision, the revenues are turning around. Several years ago, the Company received a commitment for future working capital to grow the Company in key markets. Growth capital will be directed to support a client base rebalancing and leveraging of a very dynamic, transformational, digital landscape. DC's mantra remains the same: "ROI is our DNA." Going forward, there will be an emphasis on investor awareness as soon as normal business has recommenced. DBMM intends to make significant strides in aggressively broadening its brand exposure. There are investors around the globe who understand the digital marketplace and its increasing influence on commercial decisions. DBMM will be targeting new shareholders in the public market through a global digital and traditional, integrated campaign run by DC, with third parties, as required for distribution. The expectations for fiscal year 2023 was to return to normal trading first, which now has occurred, and then move ahead to a scaled growth plan in multiple geographies once normal business recommences and theSEC matter is closed. The result will benefit all stakeholders.
The Company resolved in 2015 to eliminate any consideration of using convertible debentures as a financing vehicle. Accordingly, the Company has not issued convertible debentures since 2015.
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Additionally, we have demonstrated our adherence to such a philosophy by renegotiating its aged debt with lenders, one at a time, at fixed settlement amounts with no conversion terms. Furthermore, such renegotiations lead to the derecognition of derivative liabilities overhanging our balance sheet. The Company intends to continue its debt negotiation and modification program.
This has been a successful strategy thus far:
During fiscal year 2021 and so far in 2023, and to a lesser extent in fiscal 2020, we successfully reached agreements with certain lenders resulting in a 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 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.
Lastly, in
More recently, in
SIX MONTH PERIOD ENDED
We had approximately
During the six-month period ended
Change in fair value of derivative liability of approximately
Additionally, the following variations in operating assets and liabilities
during the six-month period ended
Increase of accounts payable, accrued expenses, accrued interest, and accrued
compensation, of approximately
We generated cash from financing activities of
SIX-MONTH PERIOD ENDED
We had approximately
During the six-month period ended
Additionally, the following variations in operating assets and liabilities
during the six-month period ended
Change in fair value of derivative liability of
Accounts payable, accrued expenses, accrued interest, and accrued compensation, of approximately$227,000 , resulting from a short fall in liquidity and capital resources.
We generated cash from financing activities of
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RESULTS OF OPERATIONS
Consolidated Operating Results
For the Three-Month Period Ended For the Six-Month Period Ended
Increase/ Increase/ Increase/ Increase/
February 28, February 28, (Decrease) Decrease February 28, February 28, (Decrease) Decrease
2023 2022 $ % 2023 2022 $ %
SALES $ 68,329 $ 39,264 $ 29,065 74 % $ 122,860 $ 96,846 $ 26,014 27 %
COST OF SALES 76,823 32,119 44,704 139 % 103,901 71,873 32,028 45 %
GROSS PROFIT (8,494 ) 7,145 (15,639 ) -219 % 18,959 24,973 (6,014 ) -24 %
COSTS AND EXPENSES
Sales, general and
administrative 115,546 151,529 (35,983 ) -24 % 264,250 317,457 (53,207 ) -17 %
TOTAL OPERATING
EXPENSES 115,546 151,529 (35,983 ) -24 % 264,250 317,457 (53,207 ) -17 %
OPERATING LOSS (124,040 ) (144,384 ) (20,344 ) -14 % (245,291 ) (292,484 ) (47,193 ) -16 %
OTHER (INCOME)
EXPENSE
Interest expense 78,827 128,169 (49,342 ) -38 % 155,926 211,641 (55,715 ) -26 %
Other income (46,255 ) - (46,255 ) NM (46,255 ) (98,265 ) 52,010 NM
Loss on settlement of
debt 88,784 - 88,784 NM 88,784 - 88,784 NM
Change in fair value of derivative liability 129,242 (296,204 ) 425,446 NM 295,562 (283,997 ) 579,559
NM
TOTAL OTHER EXPENSES (INCOME), NET 250,598 (168,035 ) 418,633 NM 494,017 (170,621 ) 664,638 NM NET LOSS$ (374,638 ) $ 23,651 $ 398,289 -1684 %$ (739,308 ) $ (121,863 ) $ 617,445 NM NM: not meaningful
We currently generate revenue through our
For the six-month period 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 and six-month period ended
During the three and six-month period ended
The sales, general and administrative expenses decreased during the three and six-month period endedFebruary 28 , 2023when compared to the prior year periods primarily as a result of decreased overhead expenses and streamlined operations in fiscal 2023.
Interest expenses during the three and six-month decreased when compared to the prior year periods primarily from the decrease of additional considerations provided to certain lenders in fiscal 2023.
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The increase in net loss for the three and six-month periods endedFebruary 28, 2023 when compared to the prior year periods is primarily attributable to non-cash charges such as change in fair value of derivative liability of$129,242 and$295 , 562, respectively as well as a loss on settlement of debt of$88,784 for both 2023 periods.
We currently generate revenue through our
For the six-month period 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 decrease in our revenues during the six-month period ended
During the six-month period ended
The sales, general and administrative expenses during the six-month period ended
Interest expense during the six-month were consistent when compared to those incurred in the prior period.
The increase decrease in other income during the three and six months ended
The increase in derivative liabilities during the three and six-month period
ended
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