What changed in this filing

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Item 1. Business

2021-11-23 compared with 2020-11-18 · 198 added, 162 removed, 68 unchanged (84% of the section changed)

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OUR PRODUCTS AND SERVICES

Destiny develops and markets software as a service (SaaS) solutions that solve critical digital distribution and promotion problems for businesses in the music industry.

The core of our business is Play MPE®.

Play MPE® is a service for promoting and securely distributing broadcast quality audio, video, images, promotional information and other digital content through the internet.

The system is currently used by the recording industry for transferring pre-release broadcast quality music, radio shows, and music videos to trusted recipients such as radio stations, media reviewers, VIP's, DJ's, film and TV personnel, sports stadiums and retailers.

Music is protected by Play MPE®'s patented propietary watermarking system which provides watermarks unique to each recipient.

Destiny is currently developing additional functionality and services that are expected to increase the services to existing platform users and therefore expand Play MPE®'s addressable market, or act as catalysts to the Company's sales activities.

As well, the Company is investing into research and development on incremental product offerings expected to add addressable market opportunities.

The Company's core business is the Play MPE® platform.

Play MPE® is a two-sided B2B marketplace that enables music labels and artists to create and distribute promotional content and musical assets on the one side, and for music broadcasting professionals, music curators and music reviewers to be able to discover, download, broadcast and review the music, on the other.

Our customers range from small independent artists, to the world's largest record label;

Universal Music Group "Universal".

We have thousands of clients spread over numerous countries that also include large independent record labels ("Indies" or "Independent Record Labels"), promoters or pluggers, and the world's largest record labels (the "Major Record Labels") (who, along with Universal, include Warner Music Group "Warner" and Sony Music Entertainment "Sony").

Our Major Record Label clients have offices around the world and typically represent the world's largest recording artists.

When uploading to the Play MPE® platform, the goal of our customers is to increase demand for their music and artists by distributing that content to 'music influencers' who can, in turn, expose the music or artist to a wider consumer audience.

This exposure can have a direct increase to record label revenue through performance royalties or indirect impacts to revenue as the music and artists gain popularity.

Play MPE® is a two-sided B2B marketplace that enables music labels and artists to distribute promotional content and musical assets on the one side, and for music broadcasting professionals, music curators and music reviewers to discover, download, broadcast and review the music, on the other.

Play MPE® provides a software based tool to assist record labels and artists in marketing their music.

Record labels and artists are Play MPE®'s customers and pay for submission into the system.

Recipients are provided no charge access to review music.

When adding music to the Play MPE® system, record labels are targeting specific industry recipients who review and broadcast their music.

With this marketing effort, record labels are targeting an increase in their revenue directly through on-air broadcast royalties, streaming royalties and synchronization revenue (revenue when the reproduction of a song is coordinated with video advertisements, television, or film), and indirect increases in revenue through growing song and artists' popularity (for example concert ticket sales etc.).

Customers range from small independent artists, to the world's largest record labels;

(the "Major Record Labels") (Universal Music Group ("Universal"), Warner Music Group "Warner" and Sony Music Entertainment "Sony").

Customers choose Play MPE® for its powerful set of tools, ease of use and its effectiveness in achieving the record label's promotional objectives.

Recipients enjoy easy access to desirable music in high quality audio files.

Play MPE® CASTER (Distribution software)

Play MPE®'s Caster is a full-service distribution management system that includes a complete set of operational functions that provide all necessary software tools to enable labels to manage global marketing campaigns.

Broadly, these components include administration functions and distribution functions.

Administration functions allow management of labels and sub-labels, management of the assets (audio files, video files, and associated cover art, artist information) that are distributed, and management of client-side users and user permissions (roles with selectable capabilities).

Distribution management functions offer powerful contacts management capabilities, release creation, distribution announcements and distribution scheduling, digital rights management by release and by recipient, and release replication and its associated scheduling and digital rights management components.

This full suite of tools within Play MPE® was developed for the music industry and in close collaboration with Universal to cater the functions to its global marketing workflow.

Many clients do not use the full suite of tools.

However, this full set of tools is critical to Universal's global promotional campaign workflow and the core reason Play MPE® distributes internationally for Universal.

During fiscal 2021, the majority of the Company's investments in caster focused on moving all users within Universal to Play MPE®'s web-based platform.

This effort required significant investment in the release replication, contacts management and release scheduling functions.

With this transition, customers will have top-down management over assets and will provide numerous efficiencies in coordinating global marketing campaigns.

Release replication was released July 2021, contacts management was released August 2021, and release scheduling was released in beta immediately following year-end.

The transition of moving all users within Universal to the web-based platform is currently scheduled to be complete by March 2022.

Along with this transition of the distribution hubs in London, England and Los Angeles, USA, various territorial promotions teams will transition and new territories are expected to be added.

Use of Play MPE® by Universal provides an "anchor tenant" that drives recipient engagement and is strategically significant to Play MPE®'s expansion goals.

Caster is available in English, Spanish, German, Japanese and French.

Play MPE® is a permissions-only access system such that only recipients designated or targeted to receive content obtain access to that content.

Record labels can use Play MPE®'s contacts management system to administer recipient lists.

Contacts management offers several features that facilitate efficient updates and maintenance actions that are critically important where users maintain a large recipient database, across multiple users, and multiple recipient lists.

Absent these features, list maintenance becomes overly cumbersome, inefficient and leads to inaccuracies.

The functionality within the contacts management system is critically important to both distribution hubs at Universal and the Play MPE® operations team to efficiently maintain accurate and active recipient lists.

Within Play MPE®'s contacts management platform, the Company's operations team offers for sale carefully curated and actively maintained recipient lists with more than 14,000 music curators around the world.

These lists include complete lists in 12 countries, and lists under construction in an additional 38.

These selectable lists eliminate the need for our clients to maintain current recipient contact information.

These lists offer significant value to all customers, but are necessary for smaller independent labels and artists who do not have the resources to maintain current contacts.

Without these curators lists, many sales would not be possible.

As active lists in new territories are completed, Play MPE® will grow revenue.

In addition to the contacts management functionality, the Play MPE® product and engineering staff are developing new technical processes to facilitate list development and maintenance.

With these technical solutions, it is expected that Play MPE® will expand saleable lists and thereby increase revenue.

Play MPE® Player

Music curators enjoy free access to review and download content through an easy-to-use web-based player or mobile player apps (iOS and Android).

Web-players are currently available in 15 different languages;

English, Spanish, Swedish, Finnish, Italian, Dutch, Portuguese, French, Japanese, German, Norwegian, Latvian, Lithuanian, Estonian, and Danish.

In developing Play MPE®'s recipient interfaces, the Company's product and engineering teams focus on providing a very positive user experience.

Recipients enjoy many features that make it easy to access, collaborate, review, and search for content.

Play MPE®'s mobile apps offer off-line listening capabilities, the ability to utilize Google Chromecast and Apple Airplay streaming capabilities, creation of playlists, sorting, flagging and archiving features, and easier to access release metadata.

Recipient side satisfaction directly increases activity which directly improves the effectiveness of promotional efforts of record label customers.

Recipients on the Play MPE® platform have a wide variety of personas and include programming directors for internet streaming, satellite or terrestrial radio, retail store broadcasters, sports stadium DJs, clubs, events, music reviews in newspapers or magazines, on-air personalities, music supervisors who program TV, movies, commercials or video games, or "A&R" representatives at larger record labels.

A submission into the Play MPE® platform is targeted to appropriate recipients.

Each recipient within the Play MPE® platform has a unique library of music catered and appropriate for that recipient.

Currently the Play MPE® platform has over 47,000 active recipients around the globe in excess of 100 countries.

The majority of recipients are determined by our customers who maintain their own private contact lists and input recipient information into the Play MPE® platform.

When our customers do not have sufficient resources to maintain contacts for music influencers, or wish to supplement their own distribution channels, the Play MPE® list management team maintains recipient distribution channels.

These channels are presented for sale and are separated by numerous factors including the recipient type, genre of music, geographic location etc.

Currently, Play MPE® maintains selectable distribution lists in 12 countries across 4 continents (North America, Europe, Australasia, and Africa).

Play MPE® also provides 4 distribution lists that have a more global presence with several countries being represented.

We are unaware of any other system with such a broad offering of lists.

These lists offer significant value to all customers, but are particularly valuable in the sales process to smaller independent labels.

Currently, the Play MPE® product and engineering staff are developing new technical processes to facilitate list development and maintenance.

With these technical solutions, it is expected that existing Play MPE® list management staff will increase the capacity to develop and maintain available lists and thereby increase saleable lists.

This will be especially advantageous as Play MPE® expands into new territories.

Recipients benefit from an easy-to-use player and player apps (iOS and Android) with many features that promote use, review, search and collaboration.

Players are currently available in English, Spanish, Swedish, Finnish, Italian, Dutch, Portuguese, French, Japanese, German, Norwegian, Latvian, Lithuanian, Estonian, and Danish.

During the year, the Company added features to the player side of the platform that include advanced recipient authentication, advanced search and content sorting features.

These features improve the ease-of-use and utility of the platform to its recipients.

These features were added to the mobile player apps released just following fiscal 2020 year-end.

Also added to the mobile apps were an off-line listening capability, the ability to utilize Google Chromecast and Apple Airplay streaming capabilities for greater recipient collaboration, additional playlists, sorting, flagging and archiving features, and easier to access release metadata.

All of these features greatly enhance the recipient side of the platform.

Recipient side satisfaction directly increases activity and lead generation for record label customers.

Customers are generally either enterprise customers with full access to Caster (the distribution side of the Play MPE® platform), or full-service customers.

Full-service customers use a simplified version of Caster (the "uploader") which gives these customers limited capabilities.

Play MPE® staff then complete the release, quote the distribution and collect payment.

Caster is the world's largest and most sophisticated distribution platform and has a broad range of features essential to our customers.

Caster can be grouped into several components that include administrative modules (label, staff, asset and list management), release creator/replication/management modules, a reporting module, and security features.

Not all features are used by all customers.

For example, the security, administration and release replication features are critical to our global agreement with Universal, while the provision of distribution lists are more important to smaller "indies".

The richness of the offering within Play MPE® caters to a wide assortment of stakeholders, increases content flow, promotes activity and improves the success of the marketing investment made by our customers.

Play MPE® has direct and indirect positive impacts to record label revenue.

The release creator module of Caster underwent a major restructure and upgrade in fiscal 2020 which was launched immediately following year-end.

This new release creator is easier to use, more intuitive, has more powerful notification creation features and notification template saving.

The Company expects that this module will result in increased use by our enterprise customers.

This is also the first step to allow non-enterprise customers to fully self-serve.

The Company will build out a "checkout" feature that will not require Play MPE® staff to be involved in the release distribution and sale.

The Company expects that this will allow greater scalability of the platform as it expands globally.

During fiscal 2020, the Company added the "localization" capabilities of Caster.

This feature supports easy translation of the platform and allowed the addition of Spanish, German, Japanese and French, in addition to English, languages to Caster during the year.

The expansion of languages was undertaken to facilitate the expansion of Play MPE® in non-English speaking countries.

These features primarily improve the salability of the platform as the Company targets significant global expansion.

The Company also has a legacy business, Clipstream®, in the online video industry for which it is pursuing strategic alternatives.

The Company also developed, Clipstream®, for the online video industry for which it is pursuing strategic alternatives.

The Clipstream® Online Video Platform (OVP) is a self-service system, for encoding, hosting and reporting on video playback which can be embedded in third party websites or emails.

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BUSINESS DEVELOPMENT

The Company's immediate goal is to significantly expand its global market share of the promotion distribution of music.

While the Company believes it has the largest worldwide market share, we estimate that Play MPE® holds less than 10% of the global addressable market.

To grow Play MPE® revenue, the Company can increase distributions in well-established markets and by adding new market segments or territories.

To establish a foothold within a new market, it is necessary to build content from desirable artists, and garner recipient activity.

These are circularly reinforcing;

desirable content garners recipient activity, recipient activity generates more content and so on.

One significant advantage is Play MPE®'s global agreement and established use with Universal in numerous territories.

When sufficient activity is observed within the system, Play MPE® converts strategic users to paying customers.

The Company has a significant and well-established market share in Australia, New Zealand, Sweden, Finland, Norway, Denmark, and several genres of music in the USA.

Newer territories include Latvia, Lithuania, Estonia and South Africa, additional genres of music within the USA and a global Jazz presence.

Universal uses the Play MPE® platform in many additional countries to varying degrees.

While Universal has used Play MPE® in more than 100 countries, regular and consistently high-volume use is limited to approximately 25 countries.

These territories include areas where Play MPE® does not currently have a significant presence with other customers and thus, represents areas of significant growth potential.

Further growth is also possible by expanding Universal's use in new market segments.

The Company believes that it has multiple market advantages over competing solutions.

Play MPE®'s platform advantages will be discussed more fully under the Competition portion of this Form 10-K.

To facilitate business development efforts, the Company has made significant investments in the Play MPE® platform over the previous two years.

These improvements were primarily designed to increase the accessibility of the platform by designing processes that are more intuitive, accessible by both Macs and PCs, translating Caster into multiple languages and by adding functionality.

The primary goal of these investments is to increase sales conversions.

Entering new markets requires a strong business development group that focusses on that market, builds relationships, introduces the platform and builds usage with strategic clients providing desirable content.

These strategic clients typically represent larger, well established artists with known and desirable music.

Play MPE® list management staff assists the business development group's efforts by focusing on accurate recipient lists and recipient activity.

Typically, the Company provides trial use at no charge or nominal fees while a "network" of use is created.

To strengthen our team, the Company conducted a major restructuring of its business development group mid-year.

In April, we appointed Glenn Mattern as Director of Business Development.

Mattern brings over 25 years of business development experience to this newly created position.

Following Mr.

Mattern's appointment, the Company began recruiting to further expand and improve the business development team.

When a base of activity is established within a market with larger strategic clients, revenue from smaller independent record label revenue can be targeted.

This revenue involves a more programmatic selling effort involving marketing, lead generation and sales conversion.

In the United States, Play MPE® established a network of use in several genres of music more than decade ago.

Play MPE® then commenced collecting revenue from independent record labels in the fourth quarter of 2007.

Since that time, independent revenue has grown in all but five of the intervening fifty-three quarters.

Average growth in the US independent record label group over the last decade has been 10.4%.

A recent example of acquiring a new territory is our success in South Africa.

Starting in fiscal 2020, Play MPE® added Warner Music South Africa's trial use to existing use with Universal Music South Africa.

By the end of the fiscal year we announced a reseller agreement in South Africa with Stamp Communications ("Stamp").

In August, we commenced our first independent record label sales in South Africa.

We expect to see a long analogous revenue growth with South Africa independent record labels and to expand in the sub-Saharan African market.

In addition to the efforts in South Africa, we have also initiated on expansion into Canada, new genres of music within the United States, and the Latin music market.

Near the latter half of the fiscal year, we began targeting major independent record labels with a global presence that will provide strategic content in multiple territories.

Play MPE® has several features that add significant value to these multi-national customers that are not available with competing services.

The Latin music segment does not have an entrenched competitor.

In 2020 we began updating, restructuring and expanding our US Latin lists and began creating recipient lists in Mexico.

Concurrently, Play MPE® commenced seeding the US and Mexican markets with content from Universal Music Latin Entertainment and several major independent record labels.

We also translated Caster into Spanish to complement our Spanish player.

Through 2021 we will continue to build the network of use and expand geographic areas.

The Latin market is very large and we expect this market to add significant revenue.

We also saw an opportunity to expand into Canada due to our relative strengths over a competing system.

Canada has been serviced by a local system that has been the primary service in English speaking Canada for a number of years.

While the competing system has established use on both the recipient and sender side, it suffers from user frustration due to product limitations and a lack of investment into the platform.

Play MPE® recently began marketing in Canada with the goal to displace this competing system.

Whether Play MPE® will be successful in the Canadian market will depend on whether the superior user experience of the Play MPE® platform and our preferred customer support will outweigh the inertia of established customer and recipient behavior.

In this regard, Play MPE® has made very significant progress during the year.

In late January 2020, Universal Music Canada commenced distribution of all releases within Canada with some exclusive to the Play MPE® platform.

Universal Music Canada can now use a much stronger, easier to use distribution tool with a number of efficiencies and strengths over the competing system.

Where Universal Music Canada distributes international content, that content is already imbedded within the system with already uploaded audio and associated metadata.

In March, we expanded this use to include a second major record label and throughout the balance of the fiscal year we continued to grow recipient engagement and add major independent record labels.

To assist in this effort, Play MPE®'s list management team completed a review of the Canadian recipient lists to update and include all relevant radio personnel including major conglomerates Bell Media, Corus, Pattison, Stingray and others.

"Major independent record labels" differ from Major Record Labels in their size, and from independent record labels due the breadth of their international presence.

Our major independent record label initiative is in its early stages as we establish relationships and introduce Play MPE®.

We have several major independent record label clients that use Play MPE® in established territories.

Our approach here will be to obtain introductions through satisfied customers, leverage Play MPE®'s unique global label features, and grow strategic use in new market segments.

We have seen very positive results, getting numerous introductions, training sessions and some trial use.

A "Send" within the Play MPE® platform is a song or group of songs (bundle or albums) sent to an individual recipient.

With the improving business development group and platform accessibility, the Company has seen a significant growth in sends.

This increase in sends comes from an increase in commercial use and an increase in "seeding use" which should have a positive impact in revenue over time.

Growth in Sends over the prior year

Growth in number of Sends over prior year

As we grow strategic client use in new market segments, we expect small independent record label demand to grow significantly.

To scale more efficiently, Play MPE® product staff are building a fully self-serve checkout capability.

To that end, the Company released the new release creator just following year-end.

While this new release creator will assist in sales conversion to enterprise clients, it is the first step to ensuring smaller clients can self-serve and self-checkout.

To increase the revenue growth in these areas, we are expanding our marketing efforts to increase lead generation, process and conversion.

The Covid-19 pandemic has altered the way we interact with many of our customers, with our attendance at various industry events, conferences and seminars being limited due to travel restrictions and cancellations.

We have shifted to a virtual customer engagement strategy, to establish, and strengthen, relationships with industry promoters, record labels, and other key industry contacts.

Potential new customers may be set up on an initial trial of our system, providing for increased engagement and feedback from these industry professionals.

Other business development efforts are also focused on moving existing customers to monthly subscription or custom pricing that encourages more usage of the system.

Our customer engagement strategies include collaborative thought leadership programs with initiation of the Play MPE® panel, webinar and Instagram Live series.

These panels, and live interviews, showcase success stories, share opinions and impressions, and convey industry insights.

These programs are designed to grow collaborative customer interactions, align Play MPE® and record label activities and expand Play MPE® platform interactions.

Our focus going forward will be to leverage the expanded business development team to grow usage in new markets, add product features, and improve product design to facilitate the expanded development team's success with enterprise accounts as well as provide easy access to self-serve customers.

Over the last quarter of fiscal 2019 and continuing into fiscal 2020, the Company made significant improvements to its product management team and processes.

In the intermediate term, the Company will pursue an expanded product base that will likely leverage the customers, content and recipient engagement inherent in the Play MPE® platform.

The Company sees tremendous opportunities in ancillary and complimentary services.

In fiscal 2018, after completing a detailed review of the resources required to progress Clipstream further, the Company transitioned the Clipstream® product to maintenance only, stopping development of new major features.

The Company's immediate term objective is to expand its global market share of the promotion distribution of music by expanding the use of the Play MPE® platform in new market segments and well established markets.

Management believes that its current competitive advantages and market dynamics will lead to an increased market share for Play MPE® worldwide.

The Company's global agreement with Universal, market leading distribution channels and the inherent advantages of the Play MPE® platform all increase business development opportunities.

This core business supports and complements the Company's investments in additional product developments that will increase the Company's addressable markets.

Management has identified opportunities to provide additional products and revenue streams and has commenced investments these business opportunities.

T he core value proposition, and key to Play MPE®'s success, is its positive impact on marketing campaigns.

This impact arises from activity on both sides of the platform within a market segment.

Play MPE® has long standing and well-established use in several genres of music in the United States, and all music genres in Australia, New Zealand, Sweden, Finland, Norway, and Denmark.

Developing markets include Latin American countries, Canada, Latvia, Lithuania, Estonia, South Africa, additional genres of music within the USA, and a global Jazz presence.

Play MPE® also has a presence in numerous additional market segments with Universal's global distribution.

In core markets, Play MPE® revenue increases as the number of songs made available to recipients receiving this content increases.

Sending a song to one recipient is referred to as a "Distribution" in the Company's tracked metrics and is a key performance indicator.

Total distributions in both existing and developing markets grew by more than 37% in 2021.

Management has developed strategies for Play MPE® in existing markets is to increase and improve marketing efforts to attract and educate new customers, expand distribution opportunities to new types of recipients and to expand distributions from those within those markets to Play MPE®'s growing global distribution channels.

Play MPE® provides recipient lists in several territories around the world.

As Play MPE® enters new territories, distributions commence both in that specific territory and international distributions expand.

Thus as Play MPE®'s core market grows this type of distribution should grow exponentially.

During 2021, Play MPE®'s marketing team commenced a series of initiatives that include partnerships with music related associations and awards, social media posts, blog posts, and advertising.

Our marketing team began creating benchmarks to measure various campaigns.

Lead generation during the year grew by 28.6%.

Management's strategy in new developing markets starts with providing access to the system without commercial arrangements at the initial stage to "seed" the platform with desirable content.

This content is required to directly engage recipient activity.

Typically, this content comes from key record labels that provide currently popular or catalogue content from the world's most popular musicians.

Content that normally drives recipient activity comes from the Major Record Labels or larger multi-national independent record labels ("Major Independent Labels").

To establish initial use in a new market, our business development and marketing staff collaborate to expand brand awareness, educate customers and establish trial use.

As recipient activity builds, our operations team adds saleable distribution lists in these new territories.

During fiscal 2021, the Play MPE® operations team commenced the construction of numerous lists in developing markets which became available for trial use.

These recipient lists are critical for sales to smaller labels and artists who do not have the capacity to maintain current and complete contact information.

When recipient lists are complete and active, they provide significant value to our customers and become available for sale.

With a global agreement with Universal, Play MPE® typically benefits from an implied endorsement and introduction into new territories.

As Universal completes its transition to the web-based version of Play MPE® during fiscal 2022, we expect to see increased opportunities to enter new markets.

During fiscal 2021, to facilitate and accelerate our new market acquisition, we began adding to and restructuring our business development team.

During the year we added six (6) business development account representatives and support staff in the United States and Canada for a net growth of four (4).

The Company's Latin initiative refers to music curators of Latin music and all territories where Spanish is predominant and includes;

the United States, Spain, the Caribbean, Central America and South America.

This segment is currently highly fragmented and does not benefit from any one well established system for distribution and review.

As a result, the Company believes its focussed business development effort, and market leading advantages will result in considerable growth in this segment.

In fiscal 2021, Warner Music Latina, and several Major Independent record labels;

J&N Records, Morena Records, Criteria Entertainment, 300 Entertainment, Empire Distribution, Azteca Music Group and Del Records all commenced seeding content throughout our Latin markets distributing more than 400 releases to all territories.

These territories now include active Play MPE® users in the United States (and Puerto Rico), Mexico, Colombia, Dominican Republic, Cuba, Guatemala, Honduras, Nicaragua, Costa Rica, Panama, Ecuador, Peru, Brazil, Bolivia, Chile, Uruguay, Argentina, and Spain.

This new usage builds on longer standing use by Universal in Spain, Argentina and Chile.

To tal active users in these territories grew by 130% during fiscal 2021.

Concurrent to Play MPE®'s efforts to grow available content, the Company's operations group began constructing distribution lists throughout the territory.

Preliminary experience suggests that well maintained and acc urate recipient lists are critical not only to independent record labels but also to larger Major Independent and Major Record Labels.

The Company's product website, explanatory videos, Caster software and player software are all available in Spanish.

In 2019, the Company saw an opportunity to expand into Canada due to the relative strengths of Play MPE® over an established system which operates within Canada.

While the competing system in Canada has numerous competitive weaknesses, it benefits from brand awareness and process inertia.

In order to attract users to the Play MPE® platform, the Company focused its business development efforts on garnering Major Label and Major Independent content.

In late January 2020, Universal Music Canada co mmenced distribution of all releases within Canada.

By Q3 2020, Sony Music Canada had commenced sending all content through Play MPE® and in Q4 of 2021, War ner Music Canada commenced releasing content through Play MPE®.

All three Major Labels are now regularly using Play MPE® in Canada to varying extents.

In fiscal 2021, Canadian releases (unique pieces of content like singles or albums) were up 198%, Sends (a Releases to a recipient) were up 300% and Distributions (songs to recipients) were up 508% to over 7,500,000 distributions in Canada in 2021.

By the end of fiscal 2021 active recipient users in Canada had grown by 52% to over 1,100.

As the market becomes more aware of Play MPE®, recipient reaction has been overwhelmingly positive.

One sub-segment of the Canadian market where there is no dominant system was in French Canadian content.

Following a brief but successful trial period, Play MPE® signed one of the largest distributors of French language content in Canada.

Distributions within Canada by Canadian record labels are primarily part of the non-commercial "seeding" stage as Play MPE® continues to advance brand awareness and user activity.

However, as Canadian record labels become aware of Play MPE® international presence, these labels have commenced distributing to Play MPE®'s international recipient lists.

These distribution opportunities to an international audience with an active recipient base are not available in the local platform and represent a significant value add to Canadian independent record labels.

Play MPE® expects to add recipient lists in French speaking territories due to the demand from French Canadian artists.

Revenue from Canadian labels grew by 170% from fiscal 2020 to fiscal 2021.

Play MPE® has been in active use by Universal Music South Africa within South Africa since 2016.

Warner Music South Africa commenced trials with Play MPE® in mid fiscal 2020.

Play MPE® has now developed an established user base and brand recognition.

Near the end of fiscal 2020 Stamp Communications ("Stamp") began representing Play MPE® to local independent labels and artists resulting in Play MPE®'s first independent record label sales.

Sales to independent record labels within South Africa were relatively small in fiscal 2021.

However, the Company expects this revenue is the start of a long and persistent growth pattern analogous to independent record labels sales in the United States where revenue has consistently grown by more than 9% per annum over the trailing twelve years.

The charting success of distributions made through the Play MPE® platform by our independent record labels serves as an impressive marketing tool.

Our trial with Warner Music South Africa proved very successful and resulted in a new two-year renewable exclusive commercial agreement effective immediately following fiscal 2021.

Perhaps most importantly, the Company believes that the South African market will act as an influential strategic stepping stone to the African market generally and the Company has commenced small distributions and training beyond South African borders.

United States

Play MPE® has a very long history and strong user base within the Christian, Country, Non - Commercial/NPR, College, Adult Contemporary and Alternative music genres within the United States.

Play MPE® has stronger competition in various Rock genres, Urban, Rhythmic and Pop/Top 40 formats.

It is within these underserved genres where Play MPE® can grow substantially within the United States.

The Company is focused on capitalizing on recent investments in the platform, commercial arrangements with the Major Labels within the United States and platform functionality.

As part of the additions to the business development group during the year, the Company added team members with broad promotions and radio experience in Rhythmic, Urban and Top 40 formats.

With our focus on this segment, The Company has since had new or increased usage in these formats from major labels such as Sony sub labels:

Arista, Columbia, Epic and RCA.

Warner sub labels:

Warner Records and Atlantic Records, Universal sub label:

Republic as well as independent labels such as Empire Distribution and 300 Entertainment.

The improved flow of content which is distributed through the Play MPE® platform, has improved engagement with recipients in the various formats.

Compared to fiscal 2020, the number of active recipients in the Top 40 genre increased by 13%;

Rhythmic by 24.8%, and Urban by 23.5%.

The Company will continue to focus on these genres and establish independent record label sales.

Concurrent with broad efforts to grow the core of our existing Play MPE®, our product, engineering and business development staff evaluate and explore possible complementary business opportunities.

As the music industry is evolving, these opportunities are plentiful.

We evaluate these opportunities based on risk reward where reward is direct new business revenue and complementary impact on the Play MPE® business.

In fiscal 2018, after completing a detailed review of the resources required to progress Clipstream further, the Company stopped development.

Business development efforts are focused on identifying strategic alternatives for this product, business, and intellectual property outside the Company.

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We lease approximately 6,600 square feet of office space, with the lease expiring in June of 2022, and we currently have 34 total employees.

Our employees include our President and Chief Executive Officer, our Chief Financial Officer, two finance and administrative personnel, five operational and technical support staff, seven sales and marketing staff, two product development staff, and nine software developers.

Our employees include our President and Chief Executive Officer, our Chief Financial Officer, one finance and administrative personnel, nine operational and technical support staff, eight sales and marketing staff, five product development staff, and nine software developers.

We also employ contractors as needed.

The Play MPE® system is a platform designed for the music promotion industry.

Play MPE® was first to market and has significant technical and customer relationship advantages over competing services.

Not only is Play MPE® the most user-friendly system in the industry, it is the most feature-rich.

No competing service has the depth of product offering and many of Play MPE®'s features do not exist at all in competing services.

Play MPE® has numerous smaller competitors that are generally described in three main categories;

digital archives, digital delivery services or physical deliveries.

Play MPE® is a digital archive where recipients can review content from a variety of sources and can return, review, organize and download at later dates.

Digital delivery services do not provide organization of content and generally have a one-time delivery from one source.

Play MPE® began as a first-to market digital promotional distribution platform as a replacement to physical delivery of CDs.

As a result, Play MPE® has competitive barriers to entry in its core market segments.

These barriers come from an established network of use and from platform design.

Play MPE® provides a superior user experience on both sides of the platform and has functions, not offered in competing archival systems, that are critically important to certain commercial arrangem ents.

The many advantages that Play MPE® possesses over competitors serves to increase activity on both sides of the platform.

With increased activity, a marketing campaign's effectiveness increases and this is the key value proposition with Play MPE®.

Play MPE® has numerous regional competitors that are typically isolated to a specific segment.

Competitive alternatives include;

physical delivery, one-time digital deliveries providers or digital archives.

Digital archives are libraries of browsable music content that keep music in an organized database that can be accessed over a period of time.

Play MPE® is a digital archive.

As digital delivery services do not provide organized content, if that first send is not successful, the effectiveness falls precipitously.

Play MPE® offers significant advantages over these services.

On the recipient side, Play MPE® includes significant content organization tools, downloads and reviews at later dates, players and mobile apps etc.

In many cases, these options are not designed for the industry and are difficult to use and ineffective.

Play MPE® has significant advantages over other digital archive services.

Perhaps most significantly are Play MPE®'s content security features, enhanced, efficient and easier to use distribution and administrative modules which greatly enhance global distributions.

Play MPE® rarely encounters a competitor, whether digital delivery or digital archive, that provides recipient lists, mobile apps, or language translations.

Play MPE® is vastly more efficient, cost effective, fast, secure, and provides feedback reporting of use as compared to physical delivery.

Play MPE® has regional competitors with limited global presence and limited functionality while Play MPE® has Major Record Label and Major Independent Label use in several countries.

A network effect entrenches the system in territories with well-established use, as it is difficult for any single user to switch to an alternative without the entire industry switching.

Play MPE® has a dominant network position in several markets including in numerous genres of music in the United States (Country, Christian, AAA and Alternative), Australia and New Zealand, Sweden, Norway, Denmark and Finland, with various levels of market penetration in numerous additional markets around the globe.

While competing services claim to have agreements with the major record labels, these agreements are normally isolated to a single geographic market.

The system was built to facilitate sharing of assets and content with regional subsidiaries and affiliates of our Major Record Label customers.

This allows local representatives to localize the release resulting in costs savings and efficiencies not available in competing solutions.

For larger, multi-national customers, Play MPE® system provides modules that cater to efficient global distribution and several content protection features.

All clients enjoy a very easy to use and catered recipient lists that are typically not available in other systems.

The Play MPE® system provides our clients with a content management tool that includes privilege control, release sharing amongst global territories (saving our clients time and money when conducting global distributions), enhanced email notification and promotions tools, social media announcements, recipient player apps (iPhone, iPad, Android, Mac, Windows, and Web Browser), with a fully redundant high speed infrastructure that is more sophisticated and has higher functionality than quickly developed lower cost alternatives.

The Company expects that competition will be strongest where audio quality, security, recipient network, and reporting are not as important as cost.

For smaller customers, the Play MPE® offers several selectable recipient lists and offers a network of use in several geographic territories.

In many cases, these options are not designed for the industry, do not provide integrations, do not provide reporting, and artist information and metadata are unavailable or less accessible.

While these options are typically less expensive, they also provide significantly lower value.

Play MPE®'s advantages over competing archival platforms can be grouped into functionality that is either necessary to efficiently manage global marketing processes, or functionality that is isolated to local promotions campaigns or a more intuitive, improved user experience.

Functionality that assists in global marketing campaigns include administrative functions, and release replication.

Administration functions (label management, permissions management and asset management) are not typically necessary where only one staff member releases content for one label to one territory.

In all other cases, these functions provide the flexibility to manage all functions under one platform.

The Company is unaware of any competitive platform that provides these capabilities and these functions are critical for Universal.

Release replication allows local offices of a global label to reuse a particular release but modify and cater that release for the local consumption.

These local modifications can include language translations, recipient selection, and information specific to the market (eg.

concert dates).

With this feature, local offices save time in uploading files and entering metadata.

Eliminating the need to re-enter data reduces errors.

Metadata includes International Standard Recording Codes "ISRC".

These codes determine royalty remittances and errors in these codes directly impact royalty remittance.

In addition to saving time and reducing error, release replication facilitates timely promotional campaigns where content can be scheduled, released and accessed with dependent permissions as the record label determines.

In addition, content access can be changed or revoked easily.

Competitive platforms do not provide these functions.

Release replication is critical for Universal's global workflow and is also used regularly by Warner in Europe.

Release replication has periodically been used to facilitate new use in new markets and the Company believes this will facilitate new multinational use.

Release scheduling provides full flexibility in determining when music becomes available to stream or download, or ceases to be available or when notifications are distributed.

Within Play MPE®, content owners can easily schedule these capabilities by recipient or recipient lists, all in one easily accessible interface.

These schedules can easily be modified if necessary.

The Company is unaware of any competitive system that provides these functions and these functions are critical to Universal's workflow.

For other customers, the flexibility of release scheduling is beneficial in release management but less critical.

Contacts management provides numerous functions that facilitate list management within a record label or group of record labels.

Within contacts management, recipients can be updated across lists at the same time, lists can easily be created with existing recipients etc.

While the Company is aware of competing systems that permit the upload of contact lists, the Company is unaware of any competing system with these capabilities to manage, and update recipients, contacts lists, list creation or list and recipient edits across lists.

These capabilities are critical for Universal and the Company's operations department to maintain recipient information and recipient lists across labels and territories.

The Company is unaware of any competitor that offers active recipient lists in as many territories and this capability is critical where labels wish to expand marketing efforts internationally.

Play MPE® is used commercially by all three Major Record Labels in five territories, by two Major Labels in ten territories and in numerous additional territories at the seeding stage of network development.

This network of use provides desirable content which drives activity and is a significant barrier to entry by competitors in these territories.

The Company expects that the combination of this activity and the functionality of the platform (release replication features, contacts management, security and administrative functions, language translations, list management services and content security) will ultimately lead to market domination in several new market segments.

Play MPE®'s features that facilitate global marketing campaigns are critical to the Company's global agreement with Universal and a significant barrier to entry for a competitive offering.

This agreement facilitates use by Universal in numerous territories globally but does not guarantee it.

These functions are currently less important when business development staff are targeting regional offices of Major Labels or independent record labels in a specific territory.

However, as the Company completes the migration of these functions to the web-based platform in early fiscal 2022, business development staff will reignite efforts to leverage these capabilities to establish global agreements with other international users.

When targeting a specific and incremental territory, the Company either has a dominant competitor or the market is fragmented.

In both cases, it is critical that Play MPE® establish a network of activity on both sides of the platform by gathering content and obtaining recipient activity.

Where Play MPE® has an established competitive platform, Play MPE®'s success will depend on whether its ease of use and added functionality will outweigh the brand awareness and process inertia associated with the competing platform.

In these cases, Play MPE® advantages include more powerful notification creation, notification templates and savable templates, greater flexibility in release scheduling and its associated digital rights management, managed recipient lists or more accurate recipient lists, greater international recipient usage, more intuitive user interface, timely notifications, more robust server infrastructure and a more positive recipient user experience.

Even with all these advantages, to displace an existing network of use takes time, persistence and a strong business development team.

GOVERNMENT REGULATION

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We have a developed a watermarking technology which can uniquely identify the individual who originally accessed a particular song.

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Item 1. Business