UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-Q

(Mark One)



[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended February 28,November 30, 2021

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934



For the transition period from _____ to _____



Commission File Number0-28259        0-28259

DESTINY MEDIA TECHNOLOGIES INC.

(Exact name of registrant as specified in its charter)

NEVADANevada

84-1516745

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

1110 - 885 West Georgia Street,

Vancouver, British Columbia, Canada

V6C 3E8

(Address of principal executive offices)

(Zip Code)


604-609-7736

(Registrant's telephone number, including area code)

__________________________________________________________________
_______________________________________________________________________
(Former name, former address and former fiscal year, if changes since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.


[X]Yes [   ] No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).


[X]Yes [   ] No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer            [   ]

Accelerated filer                       [   ]      

Non-accelerated filer              [   ]

Smaller reporting company      [X]

Emerging growth company    [   ]



If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act

[   ] Yes]Yes [   ] No


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)

[   ] Yes]Yes [X] No

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer's class of common stock, as of the latest practicable date:

The number of shares outstanding of the registrant's common stock, par value $0.001, as of April 12, 2021January 7, 2022 was 10,385,571.10,147,771.


PART I - FINANCIAL INFORMATION

Item 1.Financial Statements.

 

 

Condensed Consolidated Interim Financial Statements

Destiny Media Technologies Inc.

(Unaudited)

February 28,November 30, 2021

(Expressed in United States dollars)

 

 

Destiny Media Technologies Inc.

CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS

(Expressed in United States Dollars)

Unaudited

As at, November 30,  August 31, 
  2021  2021 
  $  $ 
ASSETS      
Current      
Cash and cash equivalents 2,536,426  2,752,662 
Short-term investments [note 3] 0  0 
Accounts receivable, net of allowance for doubtful accounts of $23,718, [August 31, 2021 - $19,743] 564,677  400,233 
Other receivables 60,168  53,172 
Prepaid expenses 107,253  103,463 
Total current assets 3,268,524  3,309,530 
Deposits 35,077  35,556 
Property and equipment, net [note 4] 130,863  143,487 
Intangible assets, net [note 4] 247,448  187,622 
Right of use asset [note 5] 131,384  190,253 
Total assets 3,813,296  3,866,448 
       
LIABILITIES AND STOCKHOLDERS' EQUITY      
Current      
Accounts payable 101,749  202,722 
Accrued liabilities 322,331  309,839 
Deferred revenue 3,944  8,511 
Current portion of operating lease liability [note 5] 158,301  226,978 
Total current liabilities 586,325  748,050 
Operating lease liability, net of current portion [note 5] 0  0 
Total liabilities 586,325  748,050 
       
Commitments and contingencies [note 7]      
       
Stockholders' equity      
Common stock, par value $0.001 [note 6]      
   Authorized: 20,000,000 shares      
   Issued and outstanding: 10,235,061 shares      
      [August 31, 2021 - issued and outstanding 10,265,361 shares] 10,235  10,266 
Additional paid-in capital [note 6] 9,139,575  9,157,804 
Accumulated deficit (5,622,938) (5,788,539)
Accumulated other comprehensive loss (299,901) (261,133)
Total stockholders' equity 3,226,971  3,118,398 
Total liabilities and stockholders' equity 3,813,296  3,866,448 

As at, February 28,  August 31, 
  2021  2020 
  $  $ 
       
ASSETS      
Current      
Cash and cash equivalents 3,011,715  1,841,340 
Short-term investments [note 3] —  781,490 
Accounts receivable, net of allowance for
     doubtful accounts of $19,537, [August 31, 2020 – $23,412]		 328,131  426,832 
Other receivables 41,844  26,083 
Prepaid expenses 96,764  78,562 
Total current assets 3,478,454  3,154,307 
Deposits 35,185  34,316 
Property and equipment, net [note 4] 169,809  194,277 
Intangible assets, net [note 4] 15,736  22,952 
Right of use asset [note 5] 301,228  403,961 
Total assets 4,000,412  3,809,813 
       
LIABILITIES AND STOCKHOLDERS’ EQUITY      
Current      
Accounts payable 138,062  119,399 
Accrued liabilities 369,697  353,235 
Deferred revenue 18,269  19,638 
Current portion of operating lease liability [note 5] 235,659  238,261 
Total current liabilities 761,687  730,533 
Operating lease liability, net of current portion [note 5] 114,170  219,063 
Total liabilities 875,857  949,596 
       
Contingencies [note 7]      
       
Stockholders’ equity      
Common stock, par value $0.001 [note 6]      
   Authorized: 20,000,000 shares      
   Issued and outstanding: 10,409,361 shares      
    [August 31, 2020 – issued and outstanding 10,450,646 shares] 10,409  10,451 
Additional paid-in capital [note 6] 9,347,311  9,366,290 
Accumulated deficit (5,949,832) (6,171,068)
Accumulated other comprehensive loss (283,333) (345,456)
Total stockholders’ equity 3,124,555  2,860,217 
Total liabilities and stockholders’ equity 4,000,412  3,809,813 

See accompanying notes

Destiny Media Technologies Inc.

CONDENSED CONSOLIDATED INTERIM STATEMENTS  OF COMPREHENSIVE
INCOME (LOSS)

(Expressed in United States dollars)
Unaudited
Three months ended November 30,
  2021  2020 
  $  $ 
       
Service revenue [note 9] 1,134,151  1,123,977 
       
Cost of revenue      
Hosting costs 42,184  30,042 
Internal engineering support 8,400  6,327 
Customer support 47,603  35,852 
Third party and transaction costs 19,376  18,092 
  117,563  90,313 
       
Gross Margin 1,016,588  1,033,664 
       
Operating expenses      
General and administrative 150,624  159,549 
Sales and marketing 415,810  302,474 
Product development 258,424  298,088 
Depreciation and amortization 27,172  24,315 
  852,030  784,426 
Income from operations 164,558  249,238 
Other income      
Interest income 1,043  1,464 
       
Net income 165,601  250,702 
       
Net income per common share, basic and diluted 0.02  0.02 
       
Weighted average common shares outstanding:      
Basic 10,257,964  10,450,656 
Diluted 10,337,338  10,450,656 

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF
COMPREHENSIVE INCOME (LOSS)

(Expressed in United States dollars)

Unaudited

  Three Months  Three Months  Six Months  Six Months 
  Ended  Ended  Ended  Ended 
  February 28,  February 29,  February 28,  February 29, 
  2021  2020  2021  2020 
  $  $  $  $ 
             
Service revenue [note 10] 930,699  806,729  2,054,676  1,852,585 
             
Cost of revenue            
Hosting costs 29,667  15,839  59,709  42,456 
Internal engineering support 7,296  6,516  13,623  13,363 
Customer support 41,343  36,351  77,195  75,722 
Third Party and transactions costs 13,593  10,414  31,685  22,861 
  91,899  69,120  182,212  154,402 
             
Gross Margin 838,800  737,609  1,872,464  1,698,183 
             
Operating expenses            
General and administrative 164,395  216,094  323,943  435,597 
Sales and marketing 340,954  362,400  643,428  646,156 
Product development 337,392  287,752  635,480  607,726 
Depreciation and amortization 26,400  35,478  50,715  67,550 
  869,141  901,724  1,653,566  1,757,029 
             
Income (loss) from operations (30,341) (164,115) 218,898  (58,846)
             
Other income            
Interest income 875  8,110  2,338  14,477 
Other income -  674  -  696 
Net income (loss) (29,466) (155,331) 221,236  (43,673)
             
Other comprehensive income (loss)            
Foreign currency translation adjustments 34,081  (15,108) 62,123  (13,556)
             
Total comprehensive income (loss) 4,615  (170,439) 283,359  (57,229)
             
Net income (loss) per common share,
   basic and diluted		 (0.00) (0.01) 0.02  (0.00)
             
Weighted average common shares outstanding:            
             
   Basic and diluted 10,442,752  10,629,438  10,446,726  10,665,834 

Three months ended November 30,

  2021  2020 
  $  $ 
       
Net income 165,601  250,702 
       
Foreign currency translation adjustments (38,768) 28,042 
       
Total comprehensive income 126,833  278,744 

See accompanying notes

Destiny Media Technologies Inc.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(Expressed in United States dollars)

Unaudited

Three months ended February 28,November 30, 2021 and February 29, 2020

              Accumulated  Total 
        Additional     other  stockholders' 
  Common stock  paid-in  Accumulated  comprehensive  equity 
  Shares #  Amount  Capital  Deficit  Loss    
     $  $  $  $  $ 
Balance, November 30, 2020 10,450,646  10,451  9,379,139  (5,920,366) (317,414) 3,151,810 
Total comprehensive income (loss) -  -  -  (29,466) 34,081  4,615 
Stock based compensation [note 6] -     13,134  -  -  13,134 
Common shares retired (41,285) (42) (44,962) -  -  (45,004)
Balance, February 28, 2021 10,409,361  10,409  9,347,311  (5,949,832) (283,333) 3,124,555 
                   
Balance, November 30, 2019 10,702,041  10,702  9,576,694  (6,228,825) (390,307) 2,968,264 
Total comprehensive loss -  -  -  (155,331) (15,108) (170,439)
Stock based compensation [note 6] -     2,697  -  -  2,697 
Common shares retired (251,385) (251) (241,083) -  -  (241,334)
Balance, February 29, 2020 10,450,656  10,451  9,338,308  (6,384,156) (405,415) 2,559,188 
              Accumulated  Total 
        Additional     other  stockholders' 
  Common stock  paid-in  Accumulated  comprehensive  equity 
  Shares  Amount  capital  Deficit  loss    
  #  $  $  $  $  $ 
Balance, August 31, 2021 10,265,361  10,266  9,157,804  (5,788,539) (261,133) 3,118,398 
Total comprehensive income -  -  -  165,601  (38,768) 126,833 
Shares repurchased for cancellation (30,300) (31) (44,135)       (44,166)
Stock based compensation [note 6] -  -  25,906  -  -  25,906 
Balance, November 30, 2021 10,235,061  10,235  9,139,575  (5,622,938) (299,901) 3,226,971 
                   
Balance, August 31, 2020 10,450,646  10,451  9,366,290  (6,171,068) (345,456) 2,860,217 
Total comprehensive income -  -  -  250,702  28,042  278,744 
Stock based compensation [note 6] -  -  12,849  -  -  12,849 
Balance, November 30, 2020 10,450,646  10,451  9,379,139  (5,920,366) (317,414) 3,151,810 

See accompanying notes

Destiny Media Technologies Inc.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(Expressed in United States dollars)

Unaudited

Six months ended February 28, 2021 and February 29, 2020

              Accumulated  Total 
        Additional     other  stockholders' 
  Common stock  paid-in  Accumulated  comprehensive  equity 
  Shares  Amount  capital  Deficit  loss    
  #  $  $  $  $  $ 
Balance, August 31, 2020 10,450,646  10,451  9,366,290  (6,171,068) (345,456) 2,860,217 
Total comprehensive income -  -  -  221,236  62,123  283,359 
Stock based compensation [note 6] -  -  25,983  -  -  25,983 
Common shares retired (41,285) (42) (44,962) -  -  (45,004)
Balance, February 28, 2021 10,409,361  10,409  9,347,311  (5,949,832) (283,333) 3,124,555 
                   
Balance, August 31, 2019 11,000,796  11,001  9,850,348  (6,340,483) (391,859) 3,129,007 
Total comprehensive loss -  -  -  (43,673) (13,556) (57,229)
Stock based compensation [note 6] -  -  20,633  -  -  20,633 
Common shares retired (550,140) (550) (532,673) -  -  (533,223)
Balance, February 29, 2020 10,450,656  10,451  9,338,308  (6,384,156) (405,415) 2,559,188 

See accompanying notes       

Destiny Media Technologies Inc.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS

Six months ended February 28, 2021 and February 29, 2020 (Expressed in United States dollars) 
       
  2021  2020 
  $  $ 
       
OPERATING ACTIVITIES      
Net income (loss) 221,236  (43,673)
Items not involving cash:      
   Depreciation and amortization [note 4] 50,715  67,550 
   Stock-based compensation 25,983  20,633 
   Allowance for doubtful accounts (4,465) — 
   Unrealized foreign exchange (gain) loss 315  (7,927)
Changes in non-cash working capital:      
   Accounts receivable 113,910  (240,907)
   Other receivables (15,222) 4,386 
   Prepaid expenses and deposits (16,966) 6,646 
   Accounts payable 24,925  57,321 
   Accrued liabilities (618) 13,350 
   Deferred revenue (1,863) (16,399)
   Operating lease liability (6,110) 5,447 
Net cash provided by (used in) operating activities 391,840  (133,573)
       
INVESTING ACTIVITIES      
Sale (Purchase) of short-term investments, net 800,624  (753,185)
Purchase of property, equipment and intangibles (13,557) (43,666)
Net cash provided by (used in) investing activities 787,067  (796,851)
       
FINANCING ACTIVITY      
Repurchase of common stock for retirement (45,004) (533,223)
Net cash used in financing activity (45,004) (533,223)
       
Effect of foreign exchange rate changes on cash 36,472  1,686 
       
Net increase (decrease) in cash and cash equivalents 1,170,375  (1,461,961)
Cash and cash equivalents, beginning of period 1,841,340  2,512,138 
Cash and cash equivalents, end of period 3,011,715  1,050,177 
       
Supplementary disclosure      
Interest paid —  — 
Income taxes paid —  — 

Three months ended November 30, (Expressed in United States dollars) 
       
  2021  2020 
  $  $ 
OPERATING ACTIVITIES      
Net income 165,601  250,702 
Items not involving cash:      
   Depreciation and amortization [note 4] 27,172  24,315 
   Stock-based compensation 25,906  12,849 
   Deferred leasehold inducement 0  0 
   Unrealized foreign exchange (gain) loss 3,436  11,372 
Changes in non-cash working capital:      
   Accounts receivable (177,303) 98,548 
   Other receivables (6,212) (4,763)
   Prepaid expenses and deposits (4,971) 16,497 
   Accounts payable (94,434) 102,318 
   Accrued liabilities 12,709  (66,893)
   Deferred revenue (4,530) (909)
   Operating lease liability 0  (2,382)
Net cash (used in) provided by operating activities (52,626) 441,654 
       
INVESTING ACTIVITIES      
Redemption (purchase) of short-term investments, net 0  763,749 
Development of software (72,290) 0 
Purchase of property, equipment and intangibles (7,997) (5,188)
Net cash provided by (used in) investing activities (80,287) 758,561 
       
FINANCING ACTIVITY      
Repurchase of common stock for retirement (44,166) 0 
Net cash used in financing activity (44,166) 0 
       
Effect of foreign exchange rate changes on cash (39,157) 35,307 
       
Net increase (decrease) in cash and cash equivalents (216,236) 1,235,522 
Cash and cash equivalents, beginning of period 2,752,662  1,841,340 
Cash and cash equivalents, end of period 2,536,426  3,076,862 
       
Supplementary disclosure      
Interest paid 0  0 
Income taxes paid 0  0 
       
Non-cash investing and financing activities      
Right of use asset 0  0 
Operating lease liability 0  0 

See accompanying notes

Destiny Media Technologies Inc.

NOTES TO CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS

November 30, 2021

Destiny Media Technologies Inc.

NOTES TO CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS

February 28, 2021

1. ORGANIZATION

Destiny Media Technologies Inc. (the "Company") was incorporated in August 1998 under the laws of the State of Colorado and the corporate jurisdiction was changed to Nevada effective October 8, 2014. The Company develops technologies that allow for the distribution over the internet of digital media files in either a streaming or digital download format. The technologies are proprietary. The Company operates out of Vancouver, BC, Canada and serves customers predominantly located in the United States, Europe and Australia.

The Company's stock is listed for trading under the symbol "DSNY" on the OTCQB U.S. in the United States, under the symbol "DSY" on the TSX Venture Exchange and under the symbol "DME" on the Berlin, Frankfurt, Xetra and Stuttgart exchanges in Germany.

2. BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated interim financial statements have been prepared by management in accordance with accounting principles generally accepted in the United States for interim financial information pursuant to the rules and regulations of the United States Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by United States generally accepted accounting principles for annual financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the sixthree months ended February 28,November 30, 2021 are not necessarily indicative of the results that may be expected for the year ended August 31, 2021.2022.

The balance sheet at August 31, 20202021 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by United States generally accepted accounting principles for annual financial statements.

For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended August 31, 2020.2021.

COVID-19 Pandemic

In March 2020 the World Health Organization declared coronavirus COVID-19 a global pandemic. This contagious disease outbreak, which has continued to spread, and any related adverse public health developments, has adversely affected workforces, economies, and financial markets globally, potentially leading to an economic downturn. It has also disrupted the normal operations of many businesses, including the Company's. This outbreak could decrease spending, adversely affect demand for the Company's product and harm the Company's business and results of operations. It is not possible for the Company to predict the duration or magnitude of the adverse results of the outbreak and its effects on the Company's business or results of operations at this time.

1

Destiny Media Technologies Inc.

Destiny Media Technologies Inc.

NOTES TO CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS

November 30, 2021

NOTES TO CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS

February 28, 2021

3. SHORT TERM INVESTMENTS

The Company's short-term investments consistsconsisted of one-year Guaranteed Investment Certificates with a major Canadian financial institution that earn interest at variable interest rates ranging from 0.10% - 2.36%. As at February 28,November 30, 2021, the Company's short-term investments had reached maturity, and are included in cash and cash equivalents.

4. PROPERTY AND EQUIPMENT AND INTANGIBLES

     Accumulated  Net book 
  Cost  amortization  value 
  $  $  $ 
February 28, 2021         
Property and equipment         
Furniture and fixtures 135,298  114,914  20,384 
Computer hardware 279,677  224,268  55,409 
Computer software 384,626  319,746  64,880 
Leasehold improvement 161,048  131,912  29,136 
  960,649  790,840  169,809 
          
Intangibles         
Patents, trademarks and lists 437,607  421,871  15,736 

  Cost  

Accumulated
amortization

  

Net book
value

 
November 30, 2021 $  $  $ 
Property and equipment         
Furniture and fixtures 132,814  115,655  17,159 
Computer hardware 297,888  235,062  62,826 
Computer software 377,245  339,074  38,171 
Leasehold improvement 157,449  144,742  12,707 
  965,396  834,533  130,863 
          
Intangibles         
Software under development 236,724  6,189  230,535 
Patents, trademarks and lists 443,333  426,420  16,913 
  680,057  432,609  247,448 
          
     Accumulated  Net book 
  Cost  amortization  value 
August 31, 2021 $  $  $ 
Property and equipment         
Furniture and fixtures 133,049  114,740  18,309 
Computer hardware 293,930  231,180  62,750 
Computer software 377,777  333,751  44,026 
Leasehold improvements 157,934  139,532  18,402 
  962,690  819,203  143,487 
          
Intangibles         
Software under development 167,069  0  167,069 
Patents, trademarks and lists 441,178  420,625  20,553 
  608,247  420,625  187,622 

 

     Accumulated  Net book 
  Cost  amortization  value 
August 31, 2020 $  $  $ 
Property and equipment         
Furniture and fixtures 134,629  112,540  22,089 
Computer hardware 264,701  215,916  48,785 
Computer software 382,852  298,523  84,329 
Leasehold improvements 160,295  121,221  39,074 
  942,477  748,200  194,277 
          
Intangibles         
Patents, trademarks and lists 436,780  413,828  22,952 

2

Destiny Media Technologies Inc.

NOTES TO CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS

November 30, 2021

Depreciation and amortization for the six monthsthree-month period ended February 28,November 30, 2021 was $50,715$27,172 (2020: $67,550)$24,315)

23

Destiny Media Technologies Inc.

Destiny Media Technologies Inc.

NOTES TO CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS

November 30, 2021

NOTES TO CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS

February 28, 2021

5. RIGHT OF USE ASSET

The Company entered into a lease agreement commencing July 1, 2017 and expiring June 30, 2022 consisting of approximately 6,600 square feet offeet. Subsequent to November 30, 2021, the Company entered into an agreement to terminate the office space.lease effective January 31, 2022.

On adoption of ASC 842, Lease Accounting, the Company recognized right-of-use assets and a corresponding increase in lease liabilities, in the amount of $671,911 which represented the present value of future lease payments using a discount rate of 8% per year. Property tax and insurance payments paid to the lessor are included in the calculation of future lease payments.

Right of Use Asset Continuity February 28, 2021 August 31, 2020  November 30, 2021 August 31, 2021 
 $ $  $ $ 
Balance, September 1 403,961  671,911  190,253  403,961 
Lease Inducement -  (47,607)
 403,961  624,304 
Depreciation (111,091) (213,935) (57,284) (224,154)
Foreign Currency Translation Adjustment 8,358  (6,408) (1,585) 10,446 
Balance, End of Period 301,228  403,961  131,384  190,253 

The Company has operating lease payments committed as follows:

  $ 
    
2021 276,915 
2022 93,171 
Total lease payments payable 370,086 
Less amounts representing interest (20,257)
Total Operating Lease Liability 349,829 
Less current portion of operating lease liability (235,659)
Long term portion of operating lease liability 114,170 
  $ 
2022 162,414 
Total lease payments payable 162,414 
Less amounts representing interest (4,113)
Total Operating Lease Liability 158,301 
Less current portion of operating lease liability (158,301)
Long term portion of operating lease liability 0 

 

Operating Lease Liability Continuity		 November 30, 2021  August 31, 2021 
  $  $ 
Balance, September 1 226,978  457,324 
Less Lease Payments (70,873) (270,898)
Interest 4,113  28,714 
Foreign Currency Translation Adjustment (1,917) 11,838 
Balance, End of Period 158,301  226,978 

Operating Lease Liability Continuity February 28, 2021  August 31, 2020 
  $  $ 
Balance, September 1 457,324  671,911 
Less Lease Payments (133,612) (253,040)
Interest 16,780  44,692 
Foreign Currency Translation Adjustment 9,337  (6,239)
Balance, End of Period 349,829  457,324 

During the three and six month periodsthree-month period ended February 28,November 30, 2021 the Company recorded depreciation expense of $56,455 and $111,091 respectively (February 29, 2020: $52,821 and $107,457 respectively)$57,284 (2020: $54,636) which has been allocated between general and administrative expenses, research and development and sales and marketing on the consolidated statement of comprehensive income (loss).income. The total rent commitment, net of the leasehold improvement allowance, is being amortized to rent expense on a straight-line basis over the term of the lease.

On December 17, 2021, the Company entered into an agreement to terminate the property lease effective January 31, 2022.

34

Destiny Media Technologies Inc.

NOTES TO CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS

February 28, 2021

Destiny Media Technologies Inc.

NOTES TO CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS

November 30, 2021

6. STOCKHOLDERS' EQUITY

[a] Common stock issued and authorized

The Company is authorized to issue up to 20,000,000 shares of common stock, par value $0.001 per share.

Effective January 15, 2021, the Company commenced a Normal Course Issuer Bid (NCIB)("NCIB"), pursuant to which the Company may purchase up to a maximum of 522,532 common shares, through the TSX Venture Exchange (the "TSX") at the market price at the time of purchase, subject to daily limits and compliance with the applicable rules of the TSX and Canadian securities laws. During the three and six month periodsthree-month period ended February 28,November 30, 2021, the Company repurchased and cancelled 41,28530,300 common shares for $45,004 (February 29, 2020: 550,140 common$44,166. As at November 30, 2021 a total of  215,585 shares had been repurchased for $533,223$304,570 under a NCIB Effective September 16, 2019).the NCIB.

[b] Stock option plansplan

The Company has a stock option plan, namely the 2015 Stock Option Plan (the "Plan"), under which up to 530,000 shares of common stock, has been reserved for issuance. A total of 180,000Nil common shares remain eligible for issuance under the Plan. Subsequent to November 30, 2021, the Company approved, subject to shareholder approval, a 2022 Stock Option plan, whereby 1,000,000 common shares would be reserved for issuance.

The options generally vest over a range of periods from the date of grant, some are immediate, and others are 12 or 24 months. Any options that do not vest as the result of a grantee leaving the Company are forfeited and the common shares underlying them are returned to the reserve. The options generally have a contractual term of five years.

5

Destiny Media Technologies Inc.

NOTES TO CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS

November 30, 2021

6. STOCKHOLDERS' EQUITY (cont'd.)

[b]Stock option plan (cont'd.)

Stock-Based Payment Award Activity

A summary of stock option activity under the PlansPlan as of February 28,November 30, 2021, and changes during the period then ended is presented below:

        Weighted    
     Weighted  Average  Aggregate 
     Average  Remaining  Intrinsic 
     Exercise Price  Contractual  Value 
Options Shares  $  Term  $ 
Outstanding at August 31, 2020 400,000  1.35  3.24  — 
Granted 10,000  1.00  5.00  500 
Outstanding at February 28, 2021 410,000  1.34  2.77  16,000 
Exercisable at February 28, 2021 285,000  1.40  2.28  9,750 
        Weighted    
     Weighted  Average  Aggregate 
     Average  Remaining  Intrinsic 
     Exercise Price  Contractual  Value 
Options Shares  $  Term  $ 
Outstanding at August 31, 2021 410,000  1.34  2.26  0 
Granted 521,000  1.50  5.00  0 
Forfeited (10,000) 1.00  3.41  0 
Outstanding at November 30, 2021 921,000  1.43  2.76  28,700 
Exercisable at November 30, 2021 380,000  1.37  1.80  15,200 

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted price of the Company's common stock for the options that were in-the-money at February 28,November 30, 2021.

4

Destiny Media Technologies Inc.

NOTES TO CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS

February 28, 2021

6. STOCKHOLDERS' EQUITY (cont'd.)

[b]Stock option plans (cont'd.)

The following table summarizes information regarding the non-vested options outstanding as of February 28,November 30, 2021 and changes during the period then ended:

  Weighted  Weighted 
  Average  Average 
  Grant Date  Grant Date 
 Number of Options Fair Value  Number of Options Fair Value 
  $  $ 
Non-vested options at August 31, 2020 203,750  0.48 
Non-vested options at August 31, 2021 98,750  0.48 
Granted 10,000  0.34  521,000  1.11 
Vested (88,750) 0.48  (73,750) 0.49 
Non-vested options at February 28, 2021 125,000  0.47 
Forfeited (5,000) 0.49 
Non-vested options at November 30, 2021 541,000  1.08 

As of February 28,November 30, 2021, there was $43,192$534,838 of total unrecognized compensation cost related to non-vested stock-based compensation awards. The unrecognized compensation cost is expected to be recognized over a weighted average period of 0.742.21 years.

6

Destiny Media Technologies Inc.

During the six months ended February 28,NOTES TO CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS

November 30, 2021 the total

6. STOCKHOLDERS' EQUITY (cont'd.)

[b]Stock option plan (cont'd.)

Stock-Based Payment Award Activity (cont'd.)

Total stock-based compensation expense of $25,983 (February 29, 2020: $20,633)$25,906 was recognized during the three month period ended November 30, 2021, (2020: $12,849) is reported in the statement of comprehensive income (loss) as follows:

 2021 2020  2021 2020 
 $ $  $ $ 
Stock-based compensation  
General and administrative 9,063  6,336  2,424  4,531 
Sales and marketing 9,573  8,045  13,950  4,644 
Product development 7,347  6,252  9,532  3,674 
Total stock-based compensation 25,983  20,633  25,906  12,849 

Valuation Assumptions

The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model based on the following assumptions:

 2021 2020 
    2021 2020 
Expected term of stock options (years) 3.25  3.25  3.25  3.25 
Expected volatility 105.4%  116.2%  122.7%  105.4% 
Risk-free interest rate 0.35%  1.3%  0.35%  0.35% 
Dividend yields —  —  0  0 
Weighted average grant date fair value$0.34 $0.49 $0.40 $0.34 

5

Destiny Media Technologies Inc.

NOTES TO CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS

February 28, 2021

6. STOCKHOLDERS' EQUITY (cont'd.)

[b]Stock option plans (cont'd.)

Expected volatilities are based on historical volatility of the Company's stock. The Company uses historical data to estimate option exercise and employee termination within the valuation model. The expected term of options granted represents the period of time that options granted are expected to be outstanding. The risk-free rate for periods within the contractual life of the options is based on US Treasury bill rates in effect at the time of grant.

7

Destiny Media Technologies Inc.

NOTES TO CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS

November 30, 2021

6. STOCKHOLDERS' EQUITY (cont'd.)

[c] Employee Stock Purchase Plan

The Company's 2011 Employee Stock Purchase Plan (the "Plan") became effective on February 22, 2011. Under the Plan, employees of the Company are able to contribute up to 5% of their annual salary into a pool which is matched equally by the Company in order to purchase Company shares under certain terms. Directors are able to contribute a maximum of $12,500 each for a combined maximum annual purchase of $25,000. The maximum annual combined contributions will be $400,000. All purchases are made through the Toronto Stock Exchange by a third-party plan agent. The third-party plan agent is also responsible for the administration of the Plan on behalf of the Company and the participants.

During the six monthsthree month period ended February 28,November 30, 2021, the Company recognized compensation expense of $52,857 (February 29, 2020 - $32,422)$17,227 (2020: $15,186) in salaries and wages on the consolidated statement of comprehensive income in respect of the Plan, representing the Company's employee matching of cash contributions to the Plan. TheDuring the three month period ended November 30, 2021, the shares were purchased on the open market at an average price of $0.81 (February 29, 2020: $1.00)$1.48 (2020 : $0.67). The shares are held in trust by the Company for a period of one year from the date of purchase.

[d] Earnings Per Share

Net income per common share (basic) is calculated by dividing net income by the weighted average number of common shares outstanding during the period. Net income per common share (diluted) is calculated by dividing net income for the period by the weighted average number of common shares outstanding during the period, plus the dilutive effect of outstanding common share equivalents. This method requires that the dilutive effect of outstanding options and warrants issued be calculated using the treasury stock method. Under the treasury stock method, all common share equivalents have been exercised at the beginning of the period (or at the time of issuance, if later), and that the funds obtained thereby were used to purchase common shares of the Company at the average trading price of common shares during the period, but only if dilutive.

  2021  2020 
  $  $ 
Net Income 165,601  250,702 
Weighted average shares outstanding 10,257,964  10,450,656 
Dilutive impact of outstanding stock options 79,374  0 
Diluted weighted average common shares outstanding 10,337,338  10,450,656 

At November 30, 2021, the Company had an aggregate of 921,000 (August 31, 2021: 410,000) stock options outstanding.

8

Destiny Media Technologies Inc.

NOTES TO CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS

November 30, 2021

7. CONTINGENCIES

The Company is subject to claims and legal proceedings that arise in the ordinary course of business. Such matters are inherently uncertain, and there can be no guarantee that the outcome of any such matter will be decided favorably to the Company or that the resolution of any such matter will not have a material adverse effect upon the Company's financial statements. The Company does not believe that any of such pending claims and legal proceedings will have a material adverse effect on its consolidated financial statements.

On September 5, 2017, the Company's former President and Chief Executive Officer filed a Notice of Civil Claim in the Supreme Court of British Columbia against the Company, its subsidiaries, independent directors and current Chief Executive Officer, claiming damages for conspiracy, breach of contract, wrongful dismissal, defamation and aggravated and punitive damages. The Company believes the claims are without merit and is defending itself against the claims. The quantum of loss, if any, is not determinable at this time and management believes it is unlikely that the outcome of this matter will have an adverse impact on its results of operations, cash flows and financial condition.

6

Destiny Media Technologies Inc.

NOTES TO CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS

February 28, 2021

8. NEW ACCOUNTING PRONOUNCEMENTS

Recently Adopted Accounting Standards

In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" ("ASU 2016-13").  Financial Instruments-Credit Losses (Topic 326) amends guidance on reporting credit losses for assets held on an amortized cost basis and available-for-sale debt securities.  For assets held on an amortized cost basis, Topic 326 eliminates the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses.  The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected.  For available-for-sale debt securities, credit losses should be measured in a manner similar to current GAAP, however Topic 326 will require that credit losses be presented as an allowance rather than as a write-down.  ASU 2016-13 affects entities holding financial assets and net investment in leases that are not accounted for at fair value through net income.  The amendments affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash.  The amendments in this ASU will be effective for the Company on September 1, 2020.  The adoption of this standard did not have a material impact on the Company's consolidated financial statements.None

9

Destiny Media Technologies Inc.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement - Disclosure Framework (Topic 820). The updated guidance improves the disclosure requirements on fair value measurements. The amendments in this ASU was effective for the Company on September 1, 2020. The adoption of this guidance did not have a material impact on the Company's consolidated financial statements.NOTES TO CONDENSED CONSOLIDATED INTERIM

10.FINANCIAL STATEMENTS

November 30, 2021

9. CONCENTRATIONS AND ECONOMIC DEPENDENCE

The Company operates solely in the digital media software segment and all revenue from its products and services are made in this segment.

Revenue from external customers, by product and location of customer, is as follows:

  2021  2020 
  $  $ 
       
Play MPE®      
United States 577,149  533,460 
Europe 484,336  508,317 
Australia 64,032  75,779 
Africa 6,954  3,528 
Total Play MPE® Revenue 1,132,471  1,121,084 
       
Clipstream ®      
United States 1,680  2,893 
Total Clipstream ® Revenue 1,680  2,893 
       
Total Revenue 1,134,151  1,123,977 

7

Destiny Media Technologies Inc.

NOTES TO CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS

February 28, 2021

  Three Months Ended  Six Months Ended 
  February 28  February 29  February 28  February 29 
  2021  2020  2021  2020 
     $  $  $  $ 
Play MPE®            
North America 379,034  305,697  912,494  790,929 
Europe 484,159  447,967  992,476  910,397 
Australasia 62,999  48,259  138,778  130,837 
Africa 938  —  4,466  — 
Total Play MPE® 927,130  801,923  2,048,214  1,832,163 
             
Clipstream ®            
North America 3,569  4,806  6,462  20,422 
Total revenue 930,699  806,729  2,054,676  1,852,585 

Revenue in the above table is based on location of the customer's billing address. Some of these customers have distribution centerscentres located around the globe and distribute around the world. During the six monthsthree month period ended February 28,November 30, 2021, the Company generated 42%37% of total revenue from one customer (February 29, 2020 - 44%respectively (2020 : 38%).

It is in management's opinion that the Company is not exposed to significant credit risk.

As at February 28,November 30, 2021, one customer represented $145,541$272,449 (or 44%48%) of the trade receivables balance (August 31, 2020, two customers2021, one customer represented $275,620$142,758 (or 65%)36%).

The Company has substantially all its assets in Canada and its current and planned future operations are, and will be, located in Canada.

11.10. COMPARATIVE FIGURES

Certain comparative figures have been reclassified to conform to the current period's presentation. These reclassifications did not affect prior periods' net earnings.

10

Destiny Media Technologies Inc.

12.NOTES TO CONDENSED CONSOLIDATED INTERIM

FINANCIAL STATEMENTS

November 30, 2021

11. SUBSEQUENT EVENTS

On MarchDecember 17, 2021 the Company entered into an agreement to terminate the office lease effective January 31, 2020, a further 23,800 shares of common stock were repurchased under the NCIB and cancelled.2022. The Company's lease was previously expected to terminate June 30, 2022.


811

Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations.

FORWARD LOOKING STATEMENTS

The following discussion should be read in conjunction with the accompanying financial statements and notes thereto included within this Quarterly Report on Form 10-Q. In addition to historical information, the information in this discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These forward-looking statements involve risks and uncertainties, including statements regarding the Company's capital needs, business strategy and expectations. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements.

In some cases, you can identify forward-looking statements by terminology such as "may", "will", "should", "expect", "plan", "intend", "anticipate", "believe", estimate", "predict", "potential" or "continue", the negative of such terms or other comparable terminology. Actual events or results may differ materially. In evaluating these statements, you should consider various factors described in this Quarterly Report, including the risk factors under "Item 1A. Risk Factors." of part II, and, from time to time, in other reports the Company files with the Securities and Exchange Commission. These factors may cause the Company's actual results to differ materially from any forward-looking statement. The Company disclaims any obligation to publicly update these statements or disclose any difference between its actual results and those reflected in these statements. Such information constitutes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

OVERVIEW AND CORPORATE BACKGROUND

Destiny Media Technologies Inc. was incorporated in August 1998 under the laws of the State of Colorado and the corporate jurisdiction was changed to Nevada effective October 8, 2014. We carry out our business operations through our wholly owned subsidiary, Destiny Software Productions Inc., a British Columbia company that was incorporated in 1992, MPE Distribution, Inc. a Nevada company that was incorporated in 2007 and Sonox Digital Inc. incorporated under the Canada Business Corporations Act in 2012. The "Company", "Destiny Media", "Destiny", "we" or "us" refers to the consolidated activities of all four companies.

Our principal executive office is located at Suite 1110, 885 West Georgia Street, Vancouver, British Columbia V6C 3E8. Our telephone number is (604) 609-7736 and our facsimile number is (604) 609-0611.

Our common stock trades on TSX Venture Exchange in Canada under the symbol "DSY", on the OTCQB U.S. ("OTCQB") under the symbol "DSNY", and on various German exchanges (Frankfurt, Berlin, Stuttgart and Xetra) under the symbol DME, WKN 935 410.

Our corporate website is located at http://www.dsny.com.

OUR PRODUCTS AND SERVICES

Destiny develops and markets software as a service (SaaS) solutions that solve critical problems in digital distribution and promotion problems for businesses in the music industry. The core of our business is Play MPE®, a promotional music marketing and digital distribution service.. 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 proprietary 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.

Play MPE®

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. 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.).

Our customersCustomers 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 labelslabels; (the "Major Record Labels") (who, along with Universal, include(Universal Music Group ("Universal"), Warner Music Group "Warner" and Sony Music Entertainment "Sony"). Our MajorCustomers 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.

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 Label clients have offices aroundlabels 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 worldcontacts management system is critically important to both distribution hubs at Universal and typically represent the world's largest recording artists. 

When uploading to the Play MPE® operations team to efficiently maintain accurate and active recipient lists.

Within Play MPE®'s contacts management platform, the goal ofCompany'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, is to increase demandbut are necessary for their musicsmaller independent labels and artists by distributingwho 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 'music influencers' who can, in turn, exposeaccess, collaborate, review, and search for content. Play MPE®'s mobile apps offer off-line listening capabilities, the music or artistability to a wider consumer audience. This exposure can have a direct increaseutilize 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 revenue through performance royalties or indirect impacts to revenue as the music and artists gain popularity. 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.Clipstream®

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 launched in Q1 of 2021.  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. 

During Q2 2021, Caster's release creator tool was updated to provide additional template management functionality which provides flexibility in creating and sharing email templates. This streamlines release creation for our enterprise customers.

During the quarter the Company's software engineering group continued to focus on enhancements to global release management features which are designed to expand global use by international labels.  The engineering group is also investigating various technologies to expand the Company's addressable market.

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

The Company's new market development initiatives include the Canadian, Latin, South African, and USA markets. Activity levels within the platform increased over the same quarter in the prior year. Releases (a unique piece of music content with accompanying metadata uploaded into the platform) increased by 10.59%, and sends (the number of destinations selected) grew by 34.9%.  Further, the number of tracks within each release grew by 46.3%.  Our Latin initiative continued to make progress with the commencement of distributions by Warner Music Latina immediately following the quarter.

The Company sees tremendous potential to grow market share with investments in product development and business development staff.  The Company is targeting growth in its core Play MPE® business by expanding the use of Play MPE® into new market segments and by expanding our addressable market through the addition of new saleable products and services by adding technologies within the Play MPE® platform.

During the quarter the Company added to our marketing, software engineering, operations and product design teams. Recruitment efforts in business development resulted in additions to staff following the end of our second quarter.  The Company continues to recruit primarily for software engineering capacity. 

Clipstream®

The Company also has a legacy business,developed Clipstream®, in 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. Playback is currently through the Company's proprietary JavaScript codec engine, which is only available on the internet through the Company. The unique software-based approach to rendering video, has patents claiming initial priority to 2011. This product has incidental revenues and is not supported or marketed.

RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTH PERIODS ENDED FEBRUARY 28,NOVEMBER 30, 2021 AND FEBRUARY 29, 2020

Revenue

Total revenue for the six monthsthree-month period ending February 28,November 30, 2021 increased by approximately 11%1% ($2,054,6761,134,151 in 2021 - $1,852,585$1,123,977 in 2020). Play MPE® represents virtually all the Company's revenue.  Play MPE®'s year to date revenue grew by 11.8%1% (or 9.9%1.7% after adjusting for favorable foreign exchange).  Play MPE® continued to experience high growth in the independent labels in the United States, Europe, and Australia with an average revenue growth of 35%3% in this segment. 

Total revenue for the three-month period ended February 28, 2021 increased by 15.4% over the comparable quarter in fiscal 2020, to $930,699 (2020 - $806,729) (11.0% after adjustment for favorable foreign exchange).  Play MPE® had high growth in the independent labels in the United States, Europe, and Australia with an average revenue growth of 28.1% in the quarter.

Operating Expenses

Overview

As our technologies and products are developed and maintained in-house, the majority of our expenditures are on salaries and wages and associated expenses such as office space, supplies and benefits. Our operations are primarily conducted in Canada and therefore, our costs are primarily incurred in Canadian dollars while our revenues are primarily denominated in Euros and US dollars. Thus, operating expenses and the results of operations are impacted, to the extent they are not hedged, by the rise and fall of the relative values of the Canadian dollar to these currencies. The Company maintains a large portion of its financial reserves in Canadian dollars to mitigate the downside risk of adverse exchange rates on its operating expenditures.

OperatingTotal operating costs during the six-monththree-month period ended February 28,November 30, 2021 decreasedincreased by 5.9%8.6% to $1,653,566$852,029 (2020 - $1,757,029)$784,426). The decreaseOperating Costs in costs was the result of a reduction non-recurring (one-time)comparative period, include one-time, non-recuring costs associated with staff restructuring incurred in the six-month period ended February 29, 2020 and a reduction in travel and related expenditures associated with client meetings associated with business development efforts. These reductions were the result of COVID-19 pandemic travel restrictions.

Total overall costs, adjustedrestructuring. Adjusting for thethese one-time costs associated with staff restructuring, overall costs increased by 3.3%11.8%. ThisThe increase in costs is caused by increased investments inprimarily the result of expanded business development marketing, and product design and development staffing costs designed to accelerateexpand Play MPE®‘s global market share. The Company also increased staffing costs to more quickly expand the company's product developmentoffering. A portion of these costs were capitalized. Also increasing overall costs are impacts a weakening  of the US Dollar. Foreign exchange impacts are generally temporarily in nature and revenue growth.  This increase has been partially offset by the abovementioned reduction in business development related travel costs caused by COVID-19 pandemic travel restrictions.generally reverse over time.

  28-Feb  29-Feb       
   2021  2020       
    (6 months)   (6 months)   Change  Change 
   $  $   $  % 
 Total operating expenditures 1,653,566  1,757,029  (103,463) (5.9%) 
              
 Non-recurring (one-time) costs 62,561  216,573  (154,012) (71.1%) 
 Adjusted total expenditures 1,591,005  1,540,456  50,549  3.3% 

 

General and administrative 28-Feb  29-Feb       
   2021  2020       
   (6 months)  (6 months)  Change  Change 
   $  $  $  % 
 Bad debt (4,465) -  (4,465) (100.0%) 
 Office and miscellaneous 76,161  89,180  (13,019) (14.6%) 
 Foreign exchange (gain)/loss (16,133) 12,089  (28,222) (233.5%) 
 Professional fees 112,988  125,360  (12,372) (9.9%) 
 Rent 13,750  11,733  2,017  17.2% 
 Telecommunications 1,609  1,058  551  52.1% 
 Travel 2,488  4,137  (1,649) 39.9% 
 Wages and benefits 137,545  192,040  (54,495) (28.4%) 
   323,943  435,597  (111,654) (25.6%) 
General and administrative November 30  November 30       
  2021  2020       
  (3 months)  (3 months)  Change  Change 
  $  $  $  % 
Bad debt 4,316  -  4,316  0.0% 
Office and miscellaneous 50,478  40,241  10,237  25.4% 
Professional fees 18,295  46,825  (28,530) (60.9%) 
Rent 5,744  6,715  (971) (14.5%) 
Telecommunications 821  776  45  5.8% 
Travel 1,395  1,112  283  25.4% 
Wages and benefits 69,575  63,880  5,695  8.9% 
  150,624  159,549  (8,925) (5.6%) 

Our general and administrative expenses consist of salaries and related personnel costs including overhead, office rent, and general office supplies. General and administrative costs also include professional fees and general travel expenditures. The decrease in professional fees is the resultdue to a reduction of reduced non-recurringcorporate administration costs and a reduction of litigation costs.

Sales and marketing 28-Feb  29-Feb       
   2021  2020       
   (6 months)  (6 months)  Change  Change 
   $  $  $  % 
 Advertising and marketing 14,641  74,562  (59,921) (80.4%) 
 Rent 64,581  67,582  (3,001) (4.4%) 
 Telecommunications 8,980  6,906  2,074  30.0% 
 Wages and benefits 555,226  497,106  58,120  11.7% 
   643,428  646,156  (2,728) (0.4%) 
Sales and marketing November 30  November 30       
  2021  2020       
  (3 months)  (3 months)  Change  Change 
  $  $  $  % 
Advertising and marketing 33,011  9,020  23,991  266.0% 
Rent 33,062  31,536  1,526  4.8% 
Telecommunications 5,322  4,053  1,269  31.3% 
Wages and benefits 344,415  257,865  86,550  33.6% 
  415,810  302,474  113,336  37.5% 

Sales and marketing expenses consist of salaries and related personnel costs including overhead, office rent, and telecommunications costs.  Sales and marketing expenses also include advertising and marketing expenditures, which consist of promotional materials, online or print advertising, business development tools, and marketing or business development related travel costs including attendance at conference or trade shows, and record label and client visits. The increase in staffing costs primarily relates to one time charges associated with staff restructuring.  Wages also increased over the prior year throughemployment of additional staff designed to grow and enhance business development activities.Play MPE®‘s market share. The decreaseincrease in advertising and marketing expenses is related to decreased travel expenditures for our staff to attend label visitsincreased advertising, sponsorship, and attendance at industry events due to COVID-19.in the first quarter.


Product Development 29-Feb  29-Feb       
   2020  2020       
   (6 months)  (6 months)  Change  Change 
   $  $  $  % 
 Rent 51,360  54,615  (3,255) (6.0%) 
 Software services 35,925  32,334  3,591  11.1% 
 Telecommunications 34,390  32,289  2,101  6.5% 
 Wages and benefits 513,805  488,488  25,317  5.2% 
   635,480  607,726  27,754  4.6% 
Product Development November 30  November 30       
  2021  2020       
  (3 months)  (3 months)  Change  Change 
  $  $  $  % 
Rent 22,591  25,079  (2,488) (9.9%) 
Software services 18,177  17,576  601  3.4% 
Telecommunications 16,318  16,805  (487) (2.9%) 
Wages and benefits 201,338  238,628  (37,290) (15.6%) 
  258,424  298,088  39,664  (13.3%) 

Product development costs consist primarily of salaries and related personnel costs including overhead and consulting fees with respect to product development and deployment. The increase in wages and benefits is related to an increase in staffing in product development, duringoffset by $72,290 capitalized as internal use software in the quarter. The Company has also restructured the use of external hosting services resulting in a permanent decline in costs with no reduction in system reliability or capabilities.quarter (November 30, 2020: $Nil). 

 

Depreciation and Amortization

Depreciation and amortization expense decreasedincreased to $50,715$27,172 for the six-monththree-month period ended February 28,November 30, 2021 from $67,550$24,315 for the period ended February 29,November 30, 2020, a decreasean increase of 24.9%11.7% due to a decrease in computeramortization of software development costs associated with externally developed Play MPE® recipient player applications.

Other earnings and expenses

Interest income was $2,338$1,043 for the six-monththree-month period ended February 28,November 30, 2021 (2020: $14,477)$1,464) and is derived from one-year Guaranteed Investment Certificates.

Net income

During the six-monththree-month period ended February 28,November 30, 2021 we had net income of $221,236$165,601 (2020 - $43,673 net loss)$250,702). Overall, an increase in revenue was accompanied by budgeted spending on staffing and marketing and advertising costs, as discussed above

For the three-month period ended February 28,November 30, 2021, adjusted EBITDA was $9,192$217,635 (2020 - EBITDA ($126,134))$286,402).  Adjusted EBITDA is not defined under generally accepted accounting principles ("GAAP") and it may not be comparable to similarly titled measures reported by other companies. We used Adjusted EBITDA, along with other GAAP measures, as a measure of profitability because Adjusted EBITDA helps us to compare our performance on a consistent basis by removing from our operating results the impact of our capital structure, the effect of operating in different tax jurisdictions, the impact of our asset base, which can differ depending on the book value of assets, the accounting methods used to compute depreciation and amortization, the existence or timing of asset impairments and the effect of non-cash stock-based compensation expense. We believe Adjusted EBITDA is useful to investors as it is a widely used measure of performance and the adjustments we make to Adjusted EBITDA provide further clarity on our profitability. We remove the effect of non-cash stock-based compensation from our earnings which can vary based on share price, share price volatility and expected life of the equity instruments we grant. In addition, this stock-based compensation expense does not result in cash payments by us. Adjusted EBITDA has limitations as a profitability measure in that it does not include the interest expense on our debts, our provisions for income taxes, the effect of our expenditures for capital assets, the effect of non-cash stock-based compensation expense and the effect of asset impairments. The following is a reconciliation of net income (loss) from operations to Adjusted EBITDA over the eight most recently completed fiscal quarters:



 2021 Q2 2021 Q1 2020 Q4 2020 Q3 2020 Q2 2020 Q1 2019 Q4 2019 Q3  2022 Q1 2021 Q4 2021 Q3 2021 Q2 2021 Q1 2020 Q4 2020 Q3 2020 Q2 
 $ $ $ $ $ $ $ $      $ $ $ $ $ $ 
Net Income (loss) (29,466) 250,702  158,187  54,899  (155,331) 111,658  114,157  195,712  165,601  91,699  69,594  (29,466) 250,702  158,187  54,899  (155,331)
Amortization, stock-based compensation and deferred leasehold inducements 39,533  37,164  49,085  48,470  37,307  49,140  34,983  36,404  53,077  40,589  39,806  39,533  37,164  49,085  48,470  37,307 
Interest income (875) (1,464) (4,672) (5,266) (8,110) (6,367) (5,999) (8,233) (1,043) (869) (823) (875) (1,464) (4,672) (5,266) (8,110)
Adjusted EBITDA 9,192  286,402  202,600  98,103  (126,134) 154,431  143,141  223,883  217,635  131,419  108,577  9,192  286,402  202,600  98,103  (126,134)

LIQUIDITY AND FINANCIAL CONDITION

As at February 28,November 30, 2021, we held $3,011,715$2,536,426 (August 31, 20202021 - $2,622,830)$2,752,662) in cash and cash equivalents and short-term investments.  Our short-term investments consistingconsisted of one-year Guaranteed Investment Certificates (GICs) held through a major Canadian financial institution, and had reached maturity prior to February 28, 2021 (August 31, 2020: $781,490).November 30, 2021.

At February 28,November 30, 2021, we had working capital of $2,716,767$2,682,199 compared to $2,423,774$2,561,480 as at August 31, 2020.2021.  During the three-month period ended February 28,November 30, 2021, the Company completed NCIB purchases totaling $45,004$44,166. 

Net cash used in operating activities for the three-month period ended November 30, 2021 was $52,626 (2020: $241,334).

Netnet cash provided by operating activities for the six-month period ended February 28, 2021 was $391,840, compared to net cash used in operating activities of $133,573 for the six months ended February 29, 2020.$441,654).  The primary reason for the increasedecrease in cash flows from operating activities is duerelated to an increasechanges in operating revenues, as described above, as well as a decrease in accounts receivable during the quarter.working capital which are expected to reverse over time.

Net cash provided by investing activities for the six-month period ended February 28, 2021 was $787,067, compared to cash used in investing activities of $796,851 for the six-monththree-month period ended February 29, 2021.November 30, 2021 was $80,287 (2020: cash provided from investing activities of $758,561). During the six-monththree-month period ended February 28,November 30, 2021, $800,624$72,290 was received on the maturity of our GICs.used in software under development.

Net cash used in financing activities during the six-monththree-month period ended February 28,November 30, 2021 was $45,004 (February 29, 2020 was $533,223)$44,166 (2020: $nil), related to cash used to repurchase and retire 41,28530,300 shares of common stock (550,140 shares of common stock)(2020: Nil) of the Company under the NCIB.

CRITICAL ACCOUNTING POLICIES

We prepare our interim condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, and make estimates and assumptions that affect our reported amounts of assets, liabilities, revenue and expenses, and the related disclosures of contingent liabilities. We base our estimates on historical experience and other assumptions that we believe are reasonable in the circumstances. Actual results may differ from these estimates.

There have been no significant changes in the critical accounting policies and estimates described in our Annual Report on Form 10-K for the year ended August 31, 20202021 as filed with the SEC on November 18, 202023, 2021 except for those described in Note 8, "New Accounting Pronouncements" in the notes to our Interim Condensed Consolidated Financial Statements included in this Form 10-Q.

NEW ACCOUNTING PRONOUNCEMENTS

Please refer to Note 8 "New Accounting Pronouncements" in the notes to our Interim Condensed Consolidated Financial Statements included in this Form 10-Q.

Item 3.Quantitative and Qualitative Disclosures About Market Risk.

Foreign Exchange Risk

Our revenues are primarily in United States dollars and Euros while our operating expenses are primarily in Canadian dollars. Thus, operating expenses and the results of operations are impacted to the extent they are not hedged by the rise and fall of the relative values of Canadian dollar to these currencies. During the three and six month periods ended February 29,November 30, 2021, as a result of fluctuations in the Euro, and the Australian, Canadian, and US dollars, the Company recognized a positive impact on reported revenues and a negative impact on reported operating expenditures, for an overall marginal positive impact on reported net income.

Item 4.Controls and Procedures.

Disclosure Controls and Procedures

Disclosure controls and procedures and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time period specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934 is accumulated and communicated to management including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

In connection with this quarterly report, as required by Rule 13a-15 under the Securities Exchange Act of 1934, we have carried out an evaluation of the effectiveness of the design and operation of our company's disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of our Company's management, including our company's Chief Executive Officer and Chief Financial Officer. Based upon that evaluation, our company's Chief Executive Officer and Chief Financial Officer concluded that as of February 28,November 30, 2021, our disclosure controls and procedures were effective as at the end of the period covered by this report.

Changes in Internal Control over Financial Reporting

There were no changes that would impact our internal controls for the period from September 1, 20202021 to February 28,November 30, 2021. 

PART II - OTHER INFORMATION

Item 1.Legal Proceedings.

On September 5, 2017, the Company's former President and Chief Executive Officer Mr. Steve Vestergaard, filed a Notice of Civil Claim in the Supreme Court of British Columbia against the Company, its subsidiaries, independent directors and current Chief Executive Officer, claiming damages for conspiracy, breach of contract, wrongful dismissal, defamation and aggravated and punitive damages. The Company believes the claims are without merit and will defend itself against the claims.

Item 1A.Risk Factors.

In addition to the other information set forth in this Form 10-Q, you should carefully consider the factors discussed in "Item 1 - Risk Factors" in our Form 10-K for the fiscal year ended August 31, 20202021 filed with the SEC. These risks could materially and adversely affect our business, financial condition and results of operations. The risks described in our Form 10-K have not changed materially, however, they are not the only risks we face. Our operations could also be affected by additional factors that are not presently known to us or by factors that we currently consider immaterial to our business.

COVID-19 Pandemic

In March 2020 the World Health Organization declared coronavirus COVID-19 a global pandemic. This contagious disease outbreak, which has continued to spread, and any related adverse public health developments, has adversely affected workforces, economies, and financial markets globally, potentially leading to an economic downturn. It has also disrupted the normal operations of many businesses, including the Company's. This outbreak could decrease spending, adversely affect demand for the Company's product and harm the Company's business and results of operations. It is not possible for the Company to predict the duration or magnitude of the adverse results of the outbreak and its effects on the Company's business or results of operations at this time.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds.

None.

None.

Item 3.Defaults Upon Senior Securities.

None.

None.

Item 4.Mine Safety Disclosures.

Not Applicable.

Item 5.Other Information.

None.

None.

Item 6.Exhibits.

31.1*Section 302 Certification of Chief Executive Officer
  
31.2*Section 302 Certification of Chief Financial Officer

32.1*Section 906 Certification of Chief Executive Officer and Chief Financial Officer
  
101*101.INS*XBRL Instance Document–the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document
  
101.INS101.SCH*XBRL InstanceTaxonomy Extension Schema Document
  
101.SCH101.CAL*XBRL Taxonomy Extension Schema Document
101.CALXBRL Taxonomy Extension Calculation Linkbase Document
  
101.DEF101.DEF*XBRL Taxonomy Extension Definition Linkbase Document
  
101.LAB101.LAB*XBRL Taxonomy Extension Label Linkbase Document
  
101.PRE101.PRE*XBRL Taxonomy Extension Presentation Linkbase Document
104*Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

*    Filed herewith


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

DESTINY MEDIA TECHNOLOGIES, INC.

By:/s/Frederick Vandenberg________________

______________________

Frederick Vandenberg

              Chief Executive Officer, President

 (Principal

(Principal Executive Officer)

Date:January 13, 2022

 Date: April 14, 2021

By:/s/Samuel Ritchie______________________

Samuel Ritchie

              Chief Financial Officer, Treasurer

 (Principal

(Principal Financing and Accounting Officer)

Date: April 14, 2021

January 13, 2022