Shareholders, stakeholders and partners,
On behalf of the board, and executive, I am pleased to provide the Q1 FY2023 CEO Update.
The following update provides a summary of successful corporate, business and capital markets developments over the past two quarters, including highlights achievements and a roadmap for ongoing development. Each section provides hyperlinks (IN BOLD) to recent news releases, presentations, collateral, filings, research and articles, for your reference, and review. Please review the following update below and send any questions and/or inquiries to [email protected] and please visit our Investor Centre for an updated Corporate Presentation.
Thank you kindly for your interest and support.
Best regards,
John Belfontaine
CEO and Chairman
DGTL Holdings Inc.
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Executive Summary
The following update provides management highlights from Q1 FY 2023 operations. As reported, the Company evolved its leadership team in Q4 2022 to include a new CEO and Chairman, Chief Financial Officer, and Chief Commercial Officer. The Company also recently added a new Independent Director and Chairman of the Audit Committee (Nov 2022 AGM).
The newly evolved DGTL Holdings Inc. management team has selected key mandates to focus efforts and resources on; (1) fiscal responsibility, (2) corporate governance and (3) leadership / accountability. Mandates were selected to maximize the efficiency of the Company’s corporate structure and operating business lines. The near-term goal for the Company is a swift and sustainable improvement of fundamentals, market sentiment, and client diversification, for scalable growth, and new M&A in fiscal 2023.
In the last 90 days, management has navigated challenging economic and market conditions and implemented strategies to support its mandates. In doing so, management has begun executing restructuring initiatives designed to develop enterprise value by improving gross margins and profitability via divesting liabilities and operating expenses. In the past quarter, management has also filed Q4 FYE 2022 and Q1 2023 (on deadline), held an inaugural AGM, expanded product suite and reported numerous major sales, marketing, and media milestones.
Post restructuring, Engagement Labs is now the Company’s flagship operating subsidiary offering a diverse set of products from their patented and award-winning data and analytics platform (i.e., data-analytics, and content creation and influencer marketing) to Fortune 500 clients. The TotalSocial® brand and expanding suite of products allows for multiple revenue streams and continues to develop and impressive client list of serve current, past, and new international leaders in technology, media, entertainment and CPG.
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Sales & Marketing
Since the July 2022 CEO Update, the Company has published eleven (11) new Market Trends and ten (10) Sector Insights research articles, posted on dgtlinc.com, and corporate social channels. Wholly owned subsidiary Engagement Labs recently received earned media coverage in a Marketing Charts article for their analytics report on the 2022 FIFA World Cup, and continues to receive free press on their award-winning TotalSocial Platform-as-a-Service (PaaS).
In the last quarter, the Company has reported eleven (11) new major service contracts with Fortune 500 level customers. See the highlights below or a library of press releases for details on these recent announcements.
July 20th, 2022, the Company reported that three high-profile brands in the media and technology sector signed inaugural contracts with flagship PaaS, TotalSocial®, including:
- A cutting-edge film and television production company founded, and led, by an NBA superstar (with four championships, four MVP awards, four finals MVP awards, etc.)
- One of the largest commercial broadcast television networks in the USA
- One of the fastest growing multi-media platforms in the world
August 3rd , 2022, the Company reported four new TotalSocial® contracts (valued at $180,000):
- A NYSE listed CPG conglomerate with a market capital of $360 billion
- Three best-selling RTE snack brands in the USA leveraging TotalSocial® for sponsorship evaluation brand and measurement
September 20th, 2022, the Company reported that a major multinational media conglomerate’s sports division renewed their annual subscription to TotalSocial®(valued at $110,000). This contract represents the third consecutive year of renewal for this account.
October 5th, 2022, the Company reported an annual TotalSocial®subscription renewal
(valued at $115,000) and a long-term relationship with one of the largest USA sports leagues.
October 11th, 2022, the Company reported that a Nasdaq listed technology giant (with a market capital of over $1 trillion) signed a pilot TotalSocial® project to measure video-streaming based advertisements during the most watched sporting event in North America.
November 2nd, 2022, the Company reported that a successful trial with Nasdaq listed technology giant (listed above) resulted a new annual TotalSocial®licensing subscription.
November 17th, 2022, the Company reported that one of the highest selling video gaming console brands in the world (and subsidiary of a Nasdaq listed technology giant with a market capital of over US $1 trillion) signed a new pilot with TotalSocial® (valued at $95,000).
The Company is in the process of expanding TotalSocial® product and service offerings to include strategy, execution and measurement solutions that offer a diverse suite of products for marketers and brand managers. In doing so, new brand marketing materials, sales tools and processes are being developed to position TotalSocial® to its Fortune 500 clients.
Under the supervision of the new Chief Commercial Officer, with a new and improved platform and a growing portfolio of Fortune 500 level clients, the prospect for up-sell and cross-sales has increased as complimentary services are included in proposals to new and active clients.
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Annual General Meeting (AGM)
The Company conducted its inaugural Annual General Meeting (AGM) of the Shareholders on November 18th, 2022, at 1:00 pm EST (via teleconference). Notice of this meeting was sent to all shareholders of record as of the close of business on October 14, 2022, and included an Information Circular, a copy of the Company’s Q4 FY 2022 audited financial statements, and a form of proxy for shareholders to vote on management proposals. A copy of the results of this inaugural AGM can be found the on the Company website via an After Meeting Report.
In summary, the AGM included a majority vote in favour to set the number of board of directors to three, and to re-appoint directors Mr. John Belfontaine and Mr. David Beck to the board. Results also included the appointment of new Independent Director, and Audit Committee Chairman Mr. George Kovalyov to the board. On behalf of the management team, we welcome Mr. Kovalyov, and we thank former director Mr. Brendan Purdy for his extensive contributions to the Company.
Other AGM resolutions include the majority vote in favour to formally re-appoint Zeifmans LLP as the Company’s official auditor and the majority votes in favour to renew the Company’s incentive stock option plan and a proposal to ratify the Company’s omnibus long-term incentive plan.
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Recent Financials
The Company filed its audited Q4 FYE 2022 financial statements and management discussion and analysis (MD&A) on September 30th, 2022, as well as its interim Q1 FY 2023 financial statements and MD&A on October 311st, 2022 (the first full quarter of operations under the new executive management mandates listed above). The Company’s interim and annual financial statement filings can be found on SEDAR, or at dgtlinc.com (i.e., Recent Financials).
Highlights
The Q1 FY 2023 filings reflected quarterly and year-over-year (YoY) improvements. Highlights for the three months ended August 31, 2022, vs. three months ending August 31, 2021, include:
- Gross Profits = $499,770 vs. $178,370 YoY increase of 65%
- Cost of Revenues = +$9,537, vs. ($387,994) for a YoY reduction of 109.5%
- Operating Loss = ($180,408) vs. ($524,317) for a YoY reduction of 66.6%
- Net Loss = ($32,679), vs. ($510,737)[i] for a YoY reduction of 94%
- Total Liabilities = $3,687,786 vs. $4,705,836 for a YoY reduction of 22.7%.
Management endeavours to continue material improvements to gross margins, and overall profitability, as restructuring initiatives are actualized in fiscal 2023. Operational executive teams are now re-focusing efforts from restructuring to new business development and revenue growth. DGTL Holdings Inc. (TSX.DGTL) has 45,242,266 common shares issued and outstanding and a market capital of $3.17M, with restructuring initiatives designed to divest up to a potential $5,000,000 in liabilities and operating expenses within fiscal 2023.
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Economy & Market
In the spring/summer of 2022, global economists and market analysts debated whether or not the U.S. economy was entering a full recession. It was clear that negative quarterly GDP growth, rising consumer prices and federal interest rate hikes indicated potential for an economic downturn. However, despite slowing global demand, high inflation rates, and labour gaps in the first three quarters of 2022, many leading economists are now forecasting that the US economy may experience a soft landing in 2023 (see Goldman Sachs report) and avoid a full recession, providing new potential for the Interactive Communications Technology sector (i.e. B2B enterprise marketing and advertising software-as-a-service, and the Fortune 500 brands in which they serve).
As equities markets speculate, and price, based on prevailing opinions of future economic cycles, many Canadian junior technology sector issuers experienced a declined in valuation in 2022. Technically, the TSXV Composite Index has entered a bear market falling over (-41%) YTD. Technology issuers on the TSX experienced a disproportionate decline within this bear market as the S&P/TSX Technology Index fell over (-57%) within the same period. With the advertising technology sub-sector, major market comparables saw steeper declines in valuations (e.g. TSX.AT, T.MDF, and Nasdaq.IZEA), despite reporting historical quarterly revenue levels. TSXV.DGTL has traded alongside major market trends, now near the seed level share price, providing a value opportunity for investors and shareholders.
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Mergers & Acquisitions
Ongoing financial improvement initiatives have been implemented to attract higher quality prospects for future M&A. Despite challenging macro-economic and equity market conditions, the Company remains committed to its vision of building a full-service digital media house serving Fortune 500 clients. The Company is re-positioning for new M&A in calendar 2023, in order to grow a diversified holdings of disruptive SaaS businesses in key high growth categories.
The board is now shifting focus from restructuring to building the portfolio while diligently scaling operating business lines. The revised strategy is to leverage depressed enterprise valuations within the public company markets, across North America, as a viable new pipeline for future prospective M&A. The Company continues to evaluate new and accretive opportunities focusing on fully commercialized enterprise level SaaS/PaaS solutions in the high growth areas of the digital media sector, i.e. mobile, gaming, streaming (A/V) and OTT (Over-The-Top).
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Closing Remarks
In the last 90 days, management has successfully implemented significant (and ongoing) improvements to its financial position, corporate governance, executive administration, and business development. Management is fully engaged, active and dedicated to scalable portfolio growth alongside responsible business and corporate governance practices, to support the acceleration of operating business lines and to ready the Company for future M&A.
Current projects in the fiscal Q2 2023 are the ongoing implementation of restructuring initiatives for continued improvement in the financial position, the timely filing of the Q2 FY 2023 financials, expansion of products and services under the TotalSocial® brand, assertive business development and marketing efforts, and active prospecting for new M&A opportunities.
In closing, Management will continue to provide regular updates, on a quarterly basis, moving forward. We look forward to providing more positive updates on these concurrent projects. In the interim, please visit the Investor Centre for news releases, recent filings for a newly updated Corporate Presentation, or visit Learning Hub for past updates, and recent research and news.
Thank you again, for your interest and support.
[i] Net loss and comprehensive loss for the year for Three Months Ended August 31, 2022, versus Three Months Ended August 31, 2021
