DBMM Digital Brand Media and Marketing Group Inc (PK)

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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 a year and a half, is measurable.

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.

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, 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 2021 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 maintain certain existing clients and through its digital infrastructure, is perfectly placed to expand geographic reach to new clients in 2022.

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 and will continue to extend its business focus to a wide variety of industry verticals.

No one expected that the pandemic and the SEC matter, would remain open for as long as it has.

The heart of the business is its marketing consultancy. DBMM Group’s main business Digital Clarity works in the area of Digital Marketing and company transformation. Understanding each client and developing the model to individualize the outlook has been essential, 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 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. In North 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 of October 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.

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

CUSTOMERS STILL FACE SILOS ACROSS CHANNELS – THE DIGITAL LANDCAPE THROUGH THE PANDEMIC

AREAS THAT DIGITAL CLARITY EXCEL ARE AREAS THAT NEED TO BE CONSIDERED TODAY

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 Google’s new machine learning tool, RankBrain which contributes to search engine results, left many people wondering what impact machine learning would have in the realm of Search Engine Optimization (SEO).

With the tech industry going crazy for all things Artificial Intelligence (AI), Natural Language Processing (NLP), machine learning, and chatbots – companies like Digital Clarity help brands make sense of this ever-changing landscape.

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 Google launching new “smart” features such as Google Smart Bidding, Smart Display Campaigns, and In-Market Audience to help businesses maximize conversions, it is clear that the future of PPC lies in machine learning.

To become more strategic and take PPC campaigns to the next level for its clients, Digital Clarity:

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 GOOGLE’S MACHINE LEARNING MARKETING SUITE

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 The Harvard 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.

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.

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.

DIGITAL MARKETING SERVICES

There is no denying that 2020/21 has proved challenging for Digital Marketing Services. When the pandemic hit in March 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:

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.

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. Google has a 95% accuracy rate when spoken correctly in English. Moreover, Google voice search on smartphones is available in over 60 languages.

Personalized responses are one of the famous use cases of voice search, which Google has attained to a large extent, as Google can know and guess the next question the users will be most likely to ask. On the other hand, Alexa cannot understand the context to the same extent as Google. Alexa relies on custom-built skills and protocols, whereas the Google Assistant can understand specific user requests and further personalize the response.

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 and PricewaterhouseCoopers 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 their Digital 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.

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 to Source 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 the UK, the management consulting market in the UK has remained the globe’s second largest. Nearest rival Germany accounts for 0.3% less of the global consulting market than Britain.

THE IMPORTANCE OF STRATEGIC CONSULTANCY IN 2021 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 Diagnosis Workshop that helps brands identify needs as well as assess the opportunity available. The core focus is to help reduce wastage and increase results.

Areas of focus include:

GLOBAL AD SPEND CONTINUES

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 total U.S. advertising spending forecast, excluding political ads. Newspapers, radio, magazines, and local television now account for just 21% of the U.S. ad market.” From The 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:

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.

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.

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.

We help our clients to understand their goals and objectives, using digital marketing to drive new business opportunities and retain their current customers.

In April 2020, HIS Markit, research firm, reported: “Each dollar that companies spent on advertising in the United States last year, led to $9 in sales.

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.

Almost all B2B content marketers (96%) use LinkedIn. They also rated it as the top-performing organic platform.

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.

GLOBAL B2B ECOMMERCE SALES IN 2021

In the US alone, B2B eCommerce sales will hit $1.184 trillion by the end of 2021.

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 Forbes Magazine in 2021 the largest ecommerce markets are:

US B2B DIGITAL AD MARKET SET FOR POST PANDEMIC GROWTH

According to eMarketer's July 2021 forecast, 2023 will be a pivotal year for the US B2B digital ad market as spending approaches $15 billion. By then, the seismic transformation spurred by the pandemic will be permanent.

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 $5.36 billion on search ads, more than what will be allocated to display.

But search’s growth rate isn’t as strong: It will increase by 19.5% from 2020.

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 in July 2018, remain open. The global pandemic made it impossible to initiate any Investor Awareness Program.

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, 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 the UK and clients concern about trade issues with or without the European 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 on November 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 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 the SEC dismissal has been affirmed by the full commission. DBMM has been current in its filings since July 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 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 March 2022, we reached an agreement with a holder of convertible debentures to satisfy obligations aggregating $85,000 in consideration of 30,000,000 shares of the Company’s common stock.

We have not issued convertible debentures since 2015.

SIX-MONTH PERIOD ENDED FEBRUARY 28, 2022

We had $30,000 in cash and our working capital deficiency amounted to approximately $5.6 million at February 28, 2022.

During the six-month period ended February 28, 2022, we used cash in our operating activities amounting to $175,000. Our cash used in operating activities was comprised of our net loss of approximately $121,000 adjusted primarily for the following:

Change in fair value of derivative liability of $284,000;

Additionally, the following variations in operating assets and liabilities during the six-month period ended February 28, 2022 impacted our cash used in operating activity:

Increase in accounts payable, accrued expenses, accrued interest, and accrued compensation, of $215,000, resulting from a short fall in liquidity and capital resources.

We generated cash from financing activities of $196,000 which primarily consists of the proceeds from notes payable.

SIX-MONTH PERIOD ENDED FEBRUARY 28, 2021

We had approximately $58,000 in cash and our working capital deficiency amounted to $5.4 million at February 28, 2021.

During the six-month period ended February 28, 2021, we used cash in our operating activities amounting to $228,000. Our cash used in operating activities was comprised of our net loss from continuing operations of $330,000 adjusted for the following:

Change in fair value of derivative liability of $72,000

Additionally, the following variations in operating assets and liabilities during the six-month period ended February 28, 2022 impacted our cash used in operating activity:

Increase in accounts payable, accrued expenses, accrued interest, and accrued compensation, of approximately $170,000, resulting from a short fall in liquidity and capital resources.

During the six-month period ended February 28, 2021, we generated cash from financing activities of $227,000, which consist of the proceeds from the issuance of loan payables.

RESULTS OF OPERATIONS

We currently generate revenue through our Pay-Per-Click Advertising, Search Engine Marketing, Search Engine Optimization Services, Web Design, Social Media, Digital analytics and Advisory Services.

For the three-month and six-month periods ended February 28, 2022 our primary sources of revenue are the Web design and advisory services, Per-Click Advertising, and Social Media. These primary sources amounted to 62%, 38%, and 2% of our revenues, respectively during the three-month and six-month periods ended February 28, 2022.

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 six-month periods ended February 28, 2022, when compared to the prior year, is due to increase activity following the ease of restrictions in the UK associated with COVID-19 and its impact on Digital Clarity’s clients.

During the six-month period ended February 28, 2022, our cost of sales decreased due to reduction in compensation streamlining our delivery of services in the first quarter of 2022, which were increased during the three-month period ended February 28, 2022.

The sales, general and administrative expenses during the three-month and six-months periods ended February 28, 2022 were at comparable levels when compared to prior year periods.

Interest expense during the three-month and six-month periods ended February 28, 2022 increased by additional consideration provided to a lender upon issuance of loans payable.

The increase in other income during the six-month period ended February 28, 2022 is primarily attributable to the recognition of certain tax credits related to expenses incurred in the United Kingdom.

The decrease in the fair value of derivative liabilities during the three-month and six-month periods ended February 28, 2022 is primarily attributable to an decrease in the Company’s estimated volatility used in the assumptions to compute its fair value at February 28, 2022 when compared to February 28, 2021.