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 November 30, 20212022

[ ] 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 

DESTINY MEDIA TECHNOLOGIES INC.

(Exact name of registrant as specified in its charter)

NevadaNEVADA84-1516745
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
  
1110428 - 8851575 West Georgia Street 
Vancouver, British Columbia, CanadaV6C 3E8V6G 2V3
(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]  [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]              [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 ActAct.

[  ]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 January 7, 202211, 2023 was 10,147,771.10,122,261.


DESTINY MEDIA TECHNOLOGIES, INC.

FORM 10-Q
TABLE OF CONTENTS

Page
PART I - FINANCIAL INFORMATION
ITEM 1.Condensed Consolidated Financial Statements1
Condensed Consolidated Balance Sheets1
Condensed Consolidated Statements of Comprehensive Income2
Condensed Consolidated Statements of Stockholders' Equity3
Condensed ConsolidatedStatements of Cash Flows4
Notes to Condensed Consolidated Financial Statements5
ITEM 2.Management's Discussion and Analysis of Financial Condition and Results of Operations10
ITEM 3.Quantitative and Qualitative Disclosures About Market Risk18
ITEM 4.Controls and Procedures18
PART II - OTHER INFORMATION
ITEM 1.Legal Proceedings19
ITEM 1A.Risk Factors19
ITEM 2.Unregistered Sales of Equity Securities and Use of Proceeds19
ITEM 3.Defaults Upon Senior Securities19
ITEM 4.Mine Safety Disclosures19
ITEM 5.Other Information19
ITEM 6.Exhibits19
Signatures20
PART I - FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Item 1.Financial Statements.

Condensed Consolidated Interim Financial StatementsDESTINY MEDIA TECHNOLOGIES, INC.

Destiny Media Technologies Inc.Condensed Consolidated Balance Sheets
(Unaudited)

  Notes  November 30,
2022		  August 31,
2022		 
ASSETS         
Cash and cash equivalents 3 $2,246,205 $2,095,928 
Accounts receivable, net of allowance for doubtful accounts of $36,924 (August 31, 2022- $39,518) 7  380,092  483,774 
Other receivables    36,735  29,600 
Prepaid expenses    51,829  83,242 
Deposits    32,270  33,305 
Total current assets    2,747,131  2,725,849 
          
Property and equipment, net 4  268,314  311,792 
Intangible assets, net 5  758,313  529,717 
Total assets   $3,773,758 $3,567,358 
          
LIABILITIES AND STOCKHOLDERS' EQUITY         
Current         
Accounts payable   $105,069 $116,290 
Accrued liabilities    338,570  319,738 
Deferred revenue    16,893  21,043 
Total current liabilities    460,532  457,071 
Total liabilities    460,532  457,071 
          
Commitments and contingencies 7  -  - 
          
Stockholders' equity         
Common stock, par value $0.001, authorized 20,000,000 shares.
Issued and outstanding - 10,122,261 shares (August 31, 2022 - issued and outstanding 10,122,261 shares)		 6  10,122  10,122 
Additional paid-in capital 6  9,153,005  9,115,848 
Accumulated deficit    (5,381,199) (5,639,465)
Accumulated other comprehensive loss    (468,702) (376,218)
Total stockholders' equity    3,313,226  3,110,287 
Total liabilities and stockholders' equity   $3,732,603 $3,567,358 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

1

DESTINY MEDIA TECHNOLOGIES, INC.

(Unaudited)Condensed Consolidated Statements of Comprehensive Income

November 30, 2021(Unaudited)

     Three Months Ended
November 30,		 
  Notes  2022  2021 
Service revenue 8 $1,020,737 $1,134,151 
          
Cost of revenue         
Hosting costs    27,959  42,184 
Internal engineering support    12,570  8,400 
Customer support    71,228  47,603 
Third-party and transactions costs    17,690  19,376 
     129,447  117,563 
Gross margin    891,290  1,016,588 
     87%  90% 
Operating expenses         
General and administrative    163,061  150,624 
Sales and marketing    174,226  415,810 
Product development    263,426  258,424 
Depreciation and amortization 4,5  36,379  27,172 
     637,092  852,030 
Income from operations    254,198  164,558 
          
Other income         
Interest and other income    7,668  1,043 
Income before income tax   $261,866 $165,601 
Current income tax expense    (3,600) - 
          
Net income   $258,266 $165,601 
Foreign currency translation adjustments    (92,484) (38,768)
Total comprehensive income   $165,782 $126,833 
          
Net income per common share         
Basic   $0.03 $0.02 
Diluted   $0.03 $0.02 
          
Weighted average common shares outstanding:         
Basic    10,122,261  10,257,964 
Diluted    10,122,261  10,337,338 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

2

DESTINY MEDIA TECHNOLOGIES, INC.

(Expressed in United States dollars)Condensed Consolidated Statements of Stockholders' Equity

For the Three Months Ended November 30, 2022 and 2021

Destiny Media Technologies Inc.(Unaudited)

     Common stock             
  Notes  Shares  Amount  Additional
Paid-in
Capital		  Accumulated
Deficit		  Accumulated
Other
Comprehensive
Income (Loss)		  Total
Stockholders'
Equity
(Deficiency)		 
Balance, August 31, 2022    10,122,261 $10,122 $9,115,848 $(5,639,465)$(376,218)$3,110,287 
Total comprehensive income    -  -  -  258,266  (92,484) 165,782 
Stock-based compensation 6(b)  -  -  37,157  -  -  37,157 
Balance, November 30, 2022    10,122,261 $10,122 $9,153,005 $(5,381,199)$(468,702)$3,313,226 
                      
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 
Common shares retired 6(a)  (30,300) (31) (44,135) -  -  (44,166)
Stock-based compensation    -  -  25,906  -  -  25,906 

Balance, November 30, 2021

    

10,235,061

 

$

10,235

 

$

9,139,575

 

$

(5,622,938

)

$

(299,901

)

$

3,226,971

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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 

See accompanying notes

Destiny Media Technologies Inc.3

CONDENSED CONSOLIDATED INTERIM STATEMENTS  OF
INCOME
(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 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 November 30, 2021 and 2020

              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 CASH FLOWS

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 

DESTINY MEDIA TECHNOLOGIES, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

      Three Months Ended
November 30,		 
   Notes  2022  2021 
           
Operating Activities         
Net income   $258,266 $165,601 
Adjustments to reconcile net income to net cash provided (used) in operations:         
 Depreciation and amortization 4,5  36,379  27,172 
 Stock-based compensation 6(b)  37,157  25,906 
 Allowance for doubtful accounts    1,370  - 
 Unrealized foreign exchange loss    (12,869) 3,436 
Changes in non-cash working capital:         
 Accounts receivable    99,817  (177,303)
 Other receivables    (6,951) (6,212)
 Prepaid expenses and deposits    30,234  (4,971)
 Accounts payable    442  (94,434)
 Accrued liabilities    19,200  12,709 
 Deferred revenue    (3,508) (4,530)
Net cash provided by (used in) operating activities    459,537  (52,626)
           
Investing Activities         
Development of software    (248,309) (72,290)
Purchase of property, equipment, and intangibles 4,5  -  (7,997)
Net cash used in investing activities    (248,309) (80,287)
           
Financing Activities         
Common stock repurchased for cancellation 6(a)  -  (44,166)
Net cash used in financing activities    -  (44,166)
           
Effect of foreign exchange rate changes on cash    (60,951) (39,157)
           
Net increase (decrease) in cash and cash equivalents    150,277  (216,236)
Cash and cash equivalents, beginning of period    2,095,928  2,752,662 
Cash and cash equivalents, end of period   $2,246,205 $2,536,426 
           
Supplementary disclosure:         
Interest paid   $- $- 
Income taxes paid   $3,600 $- 

SeeThe accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Destiny Media Technologies Inc.4

DESTINY MEDIA TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS

November 30, 2021

NOTE 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 (the "TSX") and under the symbol "DME" on the Berlin, Frankfurt, Xetra and Stuttgart exchanges in Germany.

2. BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements include the consolidated accounts of the Company and its wholly owned subsidiaries: Destiny Software Productions, Inc. ("DSNY"), MPE Distributions, Inc. ("MPE"), Tonality, Inc. ("Tonality"), and Sonox Digital Inc. ("Sonox"). All intercompany transactions have been eliminated on consolidation.

The accompanying unaudited condensed consolidated interim financial statements included in this Quarterly Report on Form 10-Q have been prepared by management in accordanceconformity 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 in the U.S. ("U.S. GAAP"). The unaudited condensed consolidated financial statements presented in this Quarterly Report should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company's Annual Report on Form 10-K filed with the SEC on November 14, 2022 (the "2022 Form 10-K"). The balance sheet as of August 31, 2022 was derived from audited consolidated financial statements included in the 2022 Form 10-K but does not include all disclosures required by U.S. GAAP for annualcomplete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. OperatingThe Company's significant accounting policies are described in Note 2 to those consolidated financial statements.

Interim results for the three months ended November 30, 2021 aremay not necessarilybe indicative of the results that may be expected for the year ended August 31, 2022.full year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted from these interim financial statements. The unaudited condensed consolidated financial statements reflect all adjustments which in the opinion of management are necessary for a fair statement of results of operations, financial condition, cash flows and stockholders' equity for the periods presented. Except as otherwise disclosed, all such adjustments are of a normal recurring nature.

Use of Estimates

The balance sheet at August 31, 2021 has been derived frompreparation of the audited consolidated financial statements atin accordance with U.S. GAAP requires management to make use of certain estimates and assumptions that date but does not include allaffect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the information and footnotes required by United States generally accepted accounting principles for annual financial statements.

For further information, refer todate of the consolidated financial statements and footnotes thereto included in the Company's annual reportreported amounts of revenue and expenses during the reported periods. The Company bases its estimates on Form 10-K forhistorical experience and on various other assumptions that management believes are reasonable under the year ended August 31, 2021.

COVID-19 Pandemic

In March 2020circumstances, 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 iswhich form the basis for making judgments about carrying values of assets and liabilities that are not possible forreadily apparent from other sources. Actual results could differ from those estimates. Significant estimates are related to the Company to predict the duration or magnituderecoverability of the adverse resultslong-term assets including property and equipment, intangible assets, amortization expense, and valuation of the outbreak and its effects on the Company's business or results of operations at this time.

1

Destiny Media Technologies Inc.

NOTES TO CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS

November 30, 2021stock-based compensation.

5

3. SHORT TERM INVESTMENTSCASH AND CASH EQUIVALENTS

The Company's short-term investments consistedcash includes cash in readily available checking accounts. The Company's cash equivalents consist of one-year Guaranteed Investment Certificates ("GIC") with a major Canadian financial institution that earn interest at variable interest rates ranging from 0.10% - 2.36%. As at November 30, 2021, the Company's short-term investments and had reached maturity, and are included in cash and cash equivalents.their maturity.

4. PROPERTY AND EQUIPMENT AND INTANGIBLES

  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 
                 November 30, 2022 
Property and Equipment Cost  Accumulated
Amortization		  Net Book Value 
Furniture and fixtures$132,130 $(119,161)$12,969 
Computer hardware 310,306  (255,705) 54,601 
Computer software 652,753  (452,009) 200,744 
Leasehold improvements -  -  - 
Total property and equipment$1,095,189 $(826,875)$268,314 
    
    
  August 31, 2022 
Property and Equipment Cost  Accumulated
Amortization		  Net Book Value 
Furniture and fixtures$136,369 $(122,279)$14,090 
Computer hardware 320,260  (259,339) 60,921 
Computer software 673,691  (436,910) 236,781 
Leasehold improvements -  -  - 
Total property and equipment$1,130,320 $(818,528)$311,792 
          
     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 

2

Destiny Media Technologies Inc.

NOTES TO CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS

November 30, 2021

Depreciation and amortization for the three-month periodthree months ended November 30, 2022 was $33,902 (November 30, 2021 was $27,172 (2020: $24,315)- $16,905).

35. INTANGIBLE ASSETS, NET

                November 30, 2022 
Intangible Assets Cost  Accumulated
Amortization		  Net Book Value 
Software under development$747,815 $- $747,815 
Patents, trademarks, and lists 449,916  (439,418) 10,499 
Total intangible assets$1,195,765 $(439,418)$758,313 
    
    
  August 31, 2022 
Intangible Assets Cost  Accumulated
Amortization		  Net Book Value 
Software under development$516,397 $- $516,397 
Patents, trademarks, and lists 464,285  (450,965) 13,320 
Total intangible assets$980,682 $(450,965)$529,717 

Destiny Media Technologies Inc.

NOTES TO CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS

Depreciation and amortization for the three months ended November 30, 2022 was $2,477 (November 30, 2021 - $10,267).

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. Subsequent to November 30, 2021, the Company entered into an agreement to terminate the office 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 November 30, 2021  August 31, 2021 
  $  $ 
Balance, September 1 190,253  403,961 
Depreciation (57,284) (224,154)
Foreign Currency Translation Adjustment (1,585) 10,446 
Balance, End of Period 131,384  190,253 

The Company has operating lease payments committed as follows:

  $ 
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 

During the three-month period ended November 30, 2021 the Company recorded depreciation expense of $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. 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.

4

Destiny Media Technologies Inc.6. STOCKHOLDERS' EQUITY

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. During the three months ended November 30, 2022 the Company did not issue any common stock .

6

6. STOCKHOLDERS' EQUITY (cont'd)

[b]Stock option plans

Effective January 15, 2021,Pursuant to the Company commenced a Normal Course Issuer Bid ("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-month period ended November 30, 2021, the Company repurchased and cancelled 30,300 common shares for $44,166. As at November 30, 2021 a total of  215,585 shares had been repurchased for $304,570 under the NCIB.

[b]Stock option plan

The Company has a stock option plan, namely theCompany's 2015 Stock Option Plan (the "Plan""2015 Plan"), under which up to 530,000 shares of common stock hashave been reserved for issuance. A total of Nil420,000 common shares remain eligible for issuance under the 2015 Plan. Subsequent to November 30, 2021,On February 18, 2022, the Company approved, subject toreceived shareholder approval afor the 2022 Stock Option plan,Plan (the "2022 Plan") (together with the 2015 Plan, the "Plans"), whereby 1,000,000 common shares would beare reserved for issuance. As of November 30, 2022, 524,000 common shares remain eligible for issuance under the 2022 Plan.

The options generally vest over a range of periods from the date of grant, some are immediate, and others arevest over 12 or 24 months. Any options that do not vest as the result of a grantee leaving the Company are forfeited and the underlying 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 PlanPlans as of November 30, 2021,2022, and changes during the period then ended is presented below:were the following:

 Weighted   

Number of
Options

 

Weighted Average
Exercise Price

 Weighted
Average
Contractual
Term		 

Aggregate Intrinsic
Value

 
 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  410,000 $1.34  2.26 $- 
Granted 521,000  1.50  5.00  0  561,000 $1.50  5.00 $- 
Forfeited (10,000) 1.00  3.41  0  (91,583)$1.38  3.85 $- 
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 
Repurchased (82,500)$1.00  2.25 $- 
Expired (203,917)$1.46  0.50 $- 
Outstanding at August 31, 2022 593,000 $1.49  3.79 $- 
Forfeited (4,250)$1.50  3.92 $- 
Expired (2,750)$1.50  3.92 $- 
Outstanding at November 30, 2022 586,000 $1.49  3.54 $- 
Exercisable at November 30, 2022 330,083 $1.48  3.24 $- 

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 atas of November 30, 2021.2022.

The following table summarizes information regarding the non-vested options outstanding as of November 30, 20212022, and changes during the period then ended:period:

 Weighted 
 Average 
 Grant Date 
 Number of Options Fair Value 
 $   

Number of Options

 

Weighted
Average
Exercise
Price

 
Non-vested options at August 31, 2021 98,750  0.48  98,750 $0.48 
Granted 521,000  1.11  561,000 $1.50 
Forfeited (91,583)$1.38 
Vested (239,958)$1.44 
Expired (7,667)$1.50 
Non-vested options at August 31, 2022 320,542 $1.50 
Vested (73,750) 0.49  (60,375)$1.50 
Forfeited (5,000) 0.49  (4,250)$1.50 
Non-vested options at November 30, 2021 541,000  1.08 
Non-vested options at November 30, 2022 255,917 $1.50 

As of November 30, 2021,2022, there was $534,838$141,020 (November 30, 2021 - $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 1 year (November 30, 2021 - 2.21 years.years).

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6

Destiny Media Technologies Inc.6. STOCKHOLDERS' EQUITY (cont'd)

NOTES TO CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS[b]Stock option plans (cont'd)

During the three months ended November 30, 2021

6. STOCKHOLDERS' EQUITY (cont'd.)

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

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

Total2022, the total stock-based compensation expense of $25,906 was recognized during the three month period ended November 30, 2021, (2020: $12,849) is reported in the statement of comprehensive income as follows:

 2021 2020 
 $ $  Three Months Ended
November 30,		 
Stock-based compensation  2022 2021 
General and administrative 2,424  4,531 $19,149 $2,424 
Sales and marketing 13,950  4,644  6,686  13,950 
Product development 9,532  3,674  11,322  9,532 
Total stock-based compensation 25,906  12,849 $37,157 $25,906 

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

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.

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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""ESPP") became effective on February 22, 2011. Under the Plan,ESPP, employees of the Company are able tocan contribute up to 5% of their annual salary into a pool which is matched equally by the Company in order to purchase Companythe Company's common shares under certain terms. Directors are able tocan 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 PlanESPP on behalf of the Company and the participants.

During the three monththree-month period ended November 30, 2021,2022, the Company recognized compensation expense of $17,227 (2020: $15,186)$18,672 (November 30, 2021 - $17,227) in salaries and wages on the consolidated statement of comprehensive income in respect of the Plan,ESPP, representing the Company's employee matching of cash contributions to the Plan. During the three month period ended November 30, 2021, theESPP. The shares were purchased on the open market at an average price of $1.48 (2020 : $0.67)$0.53 (November 30, 2021 - $1.48). 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 (loss) per common share (basic) is calculated by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Net income (loss) per common share (diluted) is calculated by dividing net income (loss) 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 For the three ended November 30, 2021,2022 the Company had an aggregateoutstanding options, in the amount 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, 2021586,000, were anti-dilutive and have been excluded from the calculation of diluted income (loss) per share.

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.

8

8. NEW ACCOUNTING PRONOUNCEMENTS7. CONTINGENCIES (cont'd)

Recently Adopted Accounting StandardsRisk and Uncertainties

None

9

Destiny Media Technologies Inc.Starting in late 2019, a novel strain of the coronavirus, or COVID-19, began to rapidly spread around the world. At this time, there continues to be significant volatility and uncertainty relating to the full extent to which the COVID-19 pandemic and the various responses to it will impact our business, operations, and financial results.

NOTES TO CONDENSED CONSOLIDATED INTERIMMost countries have at various times instituted quarantines, restrictions on travel, "stay at home" rules, social distancing measures and restrictions on the types of businesses that could continue to operate, as well as guidance in response to the pandemic and the need to contain it. The spread of COVID-19 has adversely impacted global economic activity and has contributed to significant volatility and negative pressure in financial markets. The pandemic has resulted, and may continue to result, in a significant disruption of global financial markets, which may reduce our ability to access capital in the future, which could negatively affect our liquidity.

FINANCIAL STATEMENTSIf the COVID-19 pandemic does not continue to slow and the spread of COVID-19 is not contained, our business operations, including those of our customers, could be interrupted. The duration of any business disruption cannot be reasonably estimated at this time but may materially affect our ability to operate our business and result in additional costs. It is not possible to reliably measure or quantify the impact COVID-19 has had on the financial results of the Company. If the COVID-19 pandemic continues for an extended period, it may materially adversely impact business operations and, consequently, future financial results.

November 30, 2021

9.8. 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 earned during the three months ended November 30, 2022 and 2021, by product and location of customer, iswas 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 
  Three Months Ended
November 30,		 
  2022  2021 
Play MPE®      
North America$534,844 $577,149 
Europe 438,681  484,336 
Australasia 40,024  64,032 
Africa 7,188  6,954 
Total Play MPE® 1,020,737  1,132,471 
       
Clipstream®      
North America -  1,680 
Total$1,020,737 $1,134,151 

Revenue in the above table is based on location of the customer's billing address. Some of these customers have distribution centrescenters located around the globe and distribute around the world. During the three month periodmonths ended November 30, 2021,2022, the Company generated 37%39% of total revenue from one customer respectively (2020 : 38%(November 30, 2021 - 37%).

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

As at November 30, 2021,2022, one customer represented $272,449$137,858 (or 48%35.7%) of the trade receivables balance (August 31,(November 30, 2021 - one customer represented $142,758 (or 36%$272,449 or 48%).

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

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.

NOTES TO CONDENSED CONSOLIDATED INTERIM

FINANCIAL STATEMENTS

November 30, 2021

11. SUBSEQUENT EVENTS9

On December 17, 2021 the Company entered into an agreement to terminate the office lease effective January 31, 2022. The Company's lease was previously expected to terminate June 30, 2022.

11

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

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

FORWARD LOOKING STATEMENTS

The following discussion should be read in conjunction with the accompanying financial statements and notes thereto included within this Quarterly ReportThis report on Form 10-Q. In addition to historical information, the information in this discussion10-Q contains forward-looking statements withinmade pursuant to the meaningsafe harbor provisions of the Private Securities Litigation Reform Act of 1995 under Section 27A of the Securities Act of 1933, as amended, (the "Securities Act"),or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, (the "Exchange Act"). Theseor the Exchange Act. Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions, and future performance, and involve known and unknown risks, uncertainties, and other factors, which may be beyond our control, and which may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. All statements involve risks and uncertainties, including statements regarding the Company's capital needs, business strategy and expectations. Any statements contained herein that are notother than statements of historical facts may be deemed tofact are statements that could be forward-looking statements. You can identify these forward-looking statements through our use of words such as "may," "can," "anticipate," "assume," "should," "indicate," "would," "believe," "contemplate," "expect," "seek," "estimate," "continue," "plan," "point to," "project," "predict," "could," "intend," "target," "potential" and other similar words and expressions of the future.

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 negativeThere are a number of such terms or other comparable terminology. Actual events or results may differ materially. In evaluating these statements, you should consider variousimportant 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 maythat could cause the Company's actual results to differ materially from those expressed in any forward-looking statement. The Company disclaimsstatement made by us. These factors include, but are not limited to:

  • our goals and strategies;
  • our future business development, financial condition and results of operations;
  • expected changes in our revenue, costs or expenditures;
  • growth of and competition trends in our industry;
  • our expectations regarding demand for, and market acceptance of, our products;
  • our expectations regarding our relationships with investors, institutional funding partners and other parties with whom we collaborate;
  • fluctuations in general economic and business conditions in the markets in which we operate; and
  • relevant government policies and regulations relating to our industry.

These forward-looking statements reflect our management's beliefs and views with respect to future events and are based on estimates and assumptions as of the date of this Annual Report on Form 10-K and are subject to risks and uncertainties. We discuss many of these risks in greater detail under "Risk Factors." Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. Given these uncertainties, you should not place undue reliance on these forward-looking statements.

You should read this Annual Report on Form 10-K and the documents that we reference and have filed as exhibits to the Annual Report on Form 10-K completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of the forward-looking statements in this Annual Report on Form 10-K by these cautionary statements. Except as required by law, we undertake no 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 meaningwhether as a result of the Private Securities Litigation Reform Act of 1995.new information, future events or otherwise.

In this report, "we," "us," "our," "our company", "Destiny" and similar references refer to Destiny Media Technologies, Inc., a Nevada corporation, and its wholly-owned subsidiaries: Destiny Software Productions, Inc. ("DSNY"), MPE Distributions, Inc. ("MPE"), Tonality, Inc. ("Tonality"), and Sonox Digital Inc. ("Sonox"), and (ii) the term "common stock" refers to the common stock, par value $0.001 per share, of Destiny Media Technologies, Inc., a Nevada corporation. The financial information included herein is presented in United States dollars unless otherwise indicated.

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,subsidiaries: Destiny Software Productions Inc., a British Columbia company that was incorporated in 1992, MPE Distribution, Inc., a Nevada company that was incorporated in 2007, Tonality Inc., a Nevada company that was incorporated in 2021, 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, 885428, 1575 West Georgia Street, Vancouver, British Columbia V6C 3E8.V6G 2V3. Our telephone number is (604) 609-7736 and our facsimile number is (604) 609-0611.

10

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 digital distribution and promotion problems for businesses in the music industry. The

Play MPE®

Currently, the Company's core of our business is Play MPE®.the Play MPE® is a service for promoting and securely distributing broadcastonline platform. Play MPE® distributes promotional content (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 enablescontent) from music labels and artists to distribute promotional content and musical assets on the one side, and for music broadcasting professionals, music curators and music reviewers to discover, download, broadcast and review the music, oncontent. Curators include radio programmers, digital streaming broadcasters, media reviewers, VIP's, DJ's, film and TV personnel, sports stadiums, retailers etc. In providing the other.distribution, Play MPE® provides a software-based toolseveral capabilities developed and designed to assist record labelsaddress the unique needs of music promoters. Play MPE® was first to market, and artistsis the largest provider of this service and provides the most feature rich platform in marketing their music. the world.

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.customers. When adding music to the Play MPE® system, record labelsclients are targeting specific industry recipients who review and broadcast their music. WithPlay MPE®'s primary value proposition in this marketing effort is a direct increase to record labels are targeting an increase in theirlabel and artist 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.).popularity.

Also, Play MPE® provides numerous capabilities that dramatically reduce record label costs and provide controls necessary for certain strategic marketing plans and controls to secure record label content. In doing so, Play MPE® satisfies a broad range of stakeholders representing diverse interests at record labels. Music is protected by Play MPE®'s patented proprietary watermarking system which provides watermarks unique to each recipient.

Described more fully below, features within Play MPE® are grouped into four main categories: local distribution software, global distribution architecture, targeted recipient list curation and recipient players.

Customers range from small independent artists to the world's largest record labels;labels (the "Major Record Labels") (Universal. The Major Record Labels are Universal Music Group ("Universal"), Warner Music Group "Warner"("Warner") and Sony Music Entertainment "Sony"("Sony"). These record labels directly own numerous sub-labels that include Capitol Music Group, Def Jam Recordings, Interscope Records, Island Records, Republic Records, Polydor, Deutsche Grammophon, Motown, Verve Label Group, Virgin Music Label and Artists Services, EMI, RCA Records, Epic Records, Columbia Records, Arista Records, Legacy Recordings, Provident Entertainment, Warner Records, Warner Bros, Atlantic Records Group, 300 Elektra Entertainment, to name only a few. Play MPE® welcomes all of these labels into its customer base.

Customers choose Play MPE® for its powerful set of tools, ease of use and its effectiveness in achieving the record label's promotional objectives. Recipients enjoy easy access to desirable music in high quality audio files.

Play MPE® CASTER (Distribution(local distribution software)

Play MPE®'s Caster is a full-servicesoftware includes local distribution management system that includes a complete set of operational functions that provide all necessary software toolscapabilities for a client to enablecreate and schedule release announcements and select its targeted audience. Play MPE® is designed uniquely to suit music marketing plans and significant components include:

  • Release Creator includes drag and drop functionality to quickly embed images, social media links, add promotional files etc. to quickly create effective announcements.
  • Release Scheduling allows numerous scheduling functions for initial announcements, repeated announcements, changes in DRM (a recipient's ability to download or only stream the content) etc. These schedules can be uniquely edited by recipient or recipient list. Several features here are also available to facilitate release scheduling at scale.
  • Templates facilitate consistent label branding and presentation while reducing release preparation time. Each release announcement can be saved as a template and reused or edited for future announcements. Clients can design and save unlimited templates to provide unique design and branding for artists or record labels.

11

  • Contacts Management provides features that allow record labels to upload and manage global marketing campaigns. Broadly, these components include administration functions and distribution functions. Administration functions allowtheir own targeted audience. There are many features within this platform that provide efficiencies in destination management for all customers of labels and sub-labels, managementPlay MPE®. However, this section of the assets (audio files, video files, and associated cover art, artist information)platform provides numerous functions that are distributed, and management of client-side users and user permissions (roles with selectable capabilities). Distribution management functions offer powerfulcritical for efficient contacts management capabilities, release creation,at scale and is described in Caster's global distribution announcements and distribution scheduling, digital rights managementfunctionality. Within Contacts Management, users can easily select curated lists of engaged recipients provided 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(see description below) or by selecting their managed recipient lists.

  • Reporting of release results shows recipient interactions including downloads, streams, clicks and opens.

Intuitive designs and functionality across all areas of this portion of the music industryplatform simplify the distribution process, reduce customer time required to distribute, and in close collaboration with Universalfacilitate the inclusion of information 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 workflowimprove engagement which ultimately increases record label and the core reason Play MPE® distributes internationally for Universal.artist revenue.

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

Play MPE®When competing with an established service within a local market, it is a permissions-only access system suchthese features balanced against changing consumer behaviors that only recipients designated or targeted to receive content obtain access to that content. Record labels can usedetermine Play MPE®'s ability to increase and acquire market share. Competing services offer the basic distribution requirements inherent in the service but do so while missing many features that provide efficient delivery, engaged recipients and accurate and complete distribution lists.

Caster consistently receives high reviews on the platform's ease of use and capabilities and on its ultimate effectiveness. Public reviews can be found at https://www.plaympe.com/testimonials/

Play MPE® CASTER (global architecture)

Play MPE®'s global distribution architecture was developed in close collaboration with Universal to address the needs of its global approach to release distribution. This architecture provides functionality required for Universal to conduct their unique approach to music distribution and provides numerous significant competitive advantages for Universal. These features improve marketing coordination and revenue generation while reducing overall label costs.

Significant components include:

  • Staff role management: Customers can grant varying capabilities or permissions for different staff positions. For example, one staff member can create a release while another can approve the release of this content. In a larger organization, this control ensures accurate and professional distributions are conducted, but allows for segregation of duties to maximize efficiency.
  • Label management: With label management, administrative staff can determine which users have access to which labels and which content. Each label has a unique account environment allowing for its own unique setup, list curation, favorites, staff roles, templates etc.
  • Global release sharing (replication): With global release sharing, distribution centers can share a release to a territory. That territory then can reuse the release while localizing it to suit the particular needs of that jurisdiction (editing language, artist information, local concert dates, local contacts etc.). This eliminates duplication of upload and data entry while reducing errors. In the context of global distribution, across multiple territories, multiple labels, and thousands of unique releases, savings of staff time is significant. Metadata completeness and accuracy are also increased. When complete metadata is conveyed, recipient engagement is higher. Higher recipient engagement increases record label revenue. Within the included metadata are ISRC codes which are unique codes used to remit track royalties. When ISRC codes are communicated, royalty remittances are complete and timely. These aspects provide significant competitive advantages to Universal.
  • Release embargos: When marketing and promotion departments create global campaigns for highly anticipated music releases, staff restrict access to this content until the public release time. Here, record labels can permit early access to the relevant content so local offices can edit, localize and schedule releases but controls are added to restrict certain permissions and prevent premature release. Universal enjoys competitive advantages with these capabilities derived through cost savings and improved marketing campaigns. Absent these functions, global release coordination is more costly and less coordinated.
  • Archive integration: With archive integration, Play MPE® automatically captures music, art, and associated metadata vastly reducing errors in release creation and data entry. This further expands the competitive advantages enjoyed in global release sharing.
  • Release management: There are numerous capabilities within release management that are necessary for efficient global release management. Content owners can change DRM and quickly remove content globally if necessary etc.
  • Asset management: Assets include music tracks, album art, metadata etc. Within the assets management portion, several features allow assets to be used, recomposed, combined, recombined etc. Features here allow efficient and quick delivery of new releases.
  • Release scheduling: While release scheduling is available for local distribution, many additional features are designed to facilitate actions that reduce staff time in a global environment.

12

  • Contacts management: Critically important to all promotions is the distribution of content to an interested and engaged audience. As introduced in the local distribution discussion, Caster provides a contacts management system to administer recipient lists. Contacts management offers severalwith numerous 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 contactsultimately inaccurate.

Collectively, functions in global release management system is critically important to bothprovide numerous competitive advantages that reduce overall costs, and improve marketing collaboration while increasing record label revenue and cash flow. We are unaware of any other service that provides these global distribution hubs at Universal and the Play MPE® operations team to efficiently maintain accurate and active recipient lists.functions.

Within Play MPE®'s contacts CASTER (targeted list management platform, the Company's operations team offers for sale carefully curatedservices)

Recipient lists are bundles of active and actively maintainedengaged recipients with an interest in specific music types. Lists are sold as a fixed price per list (or list bundle). As recipient lists with more than 14,000 music curators around the world. These lists include complete listsare adjusted in 12 countries, and lists under constructionreal time, changes in an additional 38. These selectable lists eliminate the need for our clients to maintain currentgross recipient contact information. These lists offer significant value to all customers, but are necessary for smaller independent labels and artists who donumbers or active recipients does 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 increasedirectly or immediately impact revenue.

Fundamental to our customers' success in music marketing is reaching music curators capable of, and actively engaged in, remarketing the promoted content to a wider consumer audience. To limit unwanted access to new music and to increase recipient engagement, targeted and limited distribution is a vital component in music promotion. Thus, Play MPE® is a permissions-only access system and only recipients designated or targeted to receive content obtain access to that content. Current and correct identification of engaged recipients is therefore critical to our customers' success. While targeted distribution limits access to new content, this aspect also improves recipient side engagement by eliminating unwanted content.

Play MPE® actively manages curated and targeted distribution lists. List creation and list maintenance involve several proprietary processes that are designed to create complete, active, accurate, and targeted lists to facilitate efficient marketing campaigns. Play MPE® provides more than 300 unique targeted lists comprising of more than 17,000 unique and active recipients over 30 countries. To facilitate targeted music marketing campaigns, these lists are grouped by territory (typically by country), by genre of music, and by recipient type (see recipient player discussion). Relying on proprietary technical innovations and processes, these recipient lists are updated in real time. With an annual churn averaging between 27-34%, these recipient lists would quickly become inaccurate absent Play MPE®'s active curation. Play MPE® regularly monitors activity levels and recipients through proprietary analytics. Play MPE® provides the widest and most accurate distribution channels available in the industry.

For smaller record labels and independent artists, the provision of a list of destinations is a requirement for sale as these customers do not know who to contact. For larger record labels, promotions staff can upload their own contact lists. However, proprietary processes ensure Play MPE® lists are more accurate, complete and engaged. The majority of releases distributed through Play MPE®, include a targeted distribution list, curated by Play MPE®.

Play MPE® Player

Music curators enjoy free access to review and download content through an easy-to-usea web-based player orand mobile player apps (iOS and Android). Web-playersWeb players are currently available in 15 different languages;languages: English, Spanish, Swedish, Finnish, Italian, Dutch, Portuguese, French, Japanese, German, Norwegian, Latvian, Lithuanian, Estonian, and Danish.

In developingRecipients on the Play MPE®'s platform have a wide variety of personas and include programming directors for internet streaming, satellite or terrestrial radio, retail store curators, 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. Each recipient interfaces,within the Company's productPlay MPE® platform has a unique library of music catered to, and engineering teams focus on providing a very positive user experience. appropriate for, that recipient.

Recipients enjoy many features that make it easy to access, collaborate, review, and search for content. Play MPE®'s mobile apps offer off-line listening capabilities, the ability to utilize Google Chromecast and Apple Airplay streaming capabilities, creation of playlists, sorting, flagging and archiving features, and easier access to access release metadata. Recipient side satisfaction directly increases activity which directly improves the effectiveness of promotional efforts of record label customers.

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

Clipstream®

The Company also developed Clipstream® for the online video industry for which it is pursuing strategic alternatives. The Clipstream® Online Video Platform (OVP) is a self-service system, for encoding, hosting and reporting on video playback which can be embedded in third party websites or emails. 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.13

RESULTS OF OPERATIONS FOR THE THREE MONTH PERIODSMONTHS ENDED NOVEMBER 30, 20212022 AND 20202021

Revenue

Total revenue for the three-month period endingthree months ended November 30, 2021 increased2022 decreased by approximately 1% ($1,134,151 in 2021 - $1,123,977 in 2020).10% to $1,020,737 compared to the revenue of $1,134,151 for the three months ended November 30, 2021. Adjusted for impacts of foreign currency translation Play MPE® represents virtually allrevenue declined by 4.1%. While unfavorable foreign exchange is the single largest source of the Company's revenue.  Play MPE®'s yearrevenue decline, adverse economic impacts affecting our independent customers led to datea 13% reduction in revenue from our smaller independent record labels. These declines are expected to be temporary and to reverse as artist touring revenue rebounds following the lockdowns associated with the global pandemic.

On the positive side, with efforts on product and business development, and adjusting for foreign exchange, global revenue from Universal Music Group grew by 1% (or 1.7% after adjusting for favorable foreign exchange)8.7%, and global revenue from Warner Music Group by 10.5%. Play MPE® continuedThe Company has emphasized stronger commercial relationships with the Major Labels to experienceprovide a corner stone to stronger long term revenue growth.

Product investments over the last several years have been focused on providing global distribution functionality in a browser-based platform that provides significant competitive advantages. These advantages are seen most prominently in a global distribution context and broadly consist of a significant reduction of global distribution costs, increased control over content, and various aspects that enhance the effectiveness of our client's marketing efforts which has a direct improvement to our customers' revenue. These investments delayed development efforts to expand services and add items that will assist in growing our customer base and has delayed revenue growth from smaller independent record labels. The Company is now moving resources to expand our addressable market and increase customer acquisition.

The Company's revenues are denominated predominantly in US Dollars, Euros and Australian Dollars. Major Label revenue is predominantly (90%) denominated in Euro and, as a result of the decline in the independent labels invalue of the Euro relative to the United States Europe, and Australia with an averagedollar, global Major Label revenue was adversely impacted in spite of growth of 3% in thiswithin the European segment.

Operating ExpensesGross Margin

OverviewGross margin for the three months ended November 30, 2022 was 87.3% of revenue, which represents a decrease of 2.8% from the three months ended November 30, 2021. The Company's cost of revenue consists of data hosting and processing charges, third party transaction related costs, and engineering, technical and customer support costs. These costs are driven by the size and volume of customer transactions processed, as well as the relative proportion of "full-service" versus "self-service" revenue. Our self-service sales are derived from customers who have been provided with a customer account to access our encoder to independently upload and publish releases. Our full-service revenue is derived from customers who are fully serviced by our internal staff, who prepare and publish releases on their behalf. During the three months ended November 30, 2022, our gross margin decreased over the comparative period predominately due to increase in staffing costs associated with the technical and customer support departments.

14

Operating Expenses

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.

Total operatingOperating costs during the three-month periodthree months ended November 30, 2022 decreased by 25.2% to $637,092 (November 30, 2021 increased by 8.6% to $852,029 (2020 - $784,426). Operating Costs in the comparative period, include one-time, non-recuring costs associated with staff restructuring. Adjusting for these one-time costs associated with staff restructuring, overall costs increased by 11.8%$852,029). The increasedecrease in costs iswas primarily the result of expanded business development staffingthe following two main factors:

  • A decrease of approximately 5.2% due to favorable foreign exchange rates as the US dollar strengthened relative to the Canadian dollar where the majority of the Company's costs designed to expand Play MPE®‘s global market share. The Company also increased staffing costs to more quickly expand the company's product offering. A portionreside.
  • An increase of these costsapproximately $175,000 in salaries and wages that were capitalized. Also increasing overallThis increase in capitalized software development costs represents approximately 20.5% reduction in current operating costs. Costs capitalized represent investments in new products and enhancements to the Play MPE® platform that are impacts a weakeningcapitalized based on an assessment of their positive incremental value to the US Dollar. Foreign exchange impacts are generally temporarily in nature and generally reverse over time.Company.

 

General and administrative November 30 November 30    
 2021 2020     Three Months Ended
November 30,		    
 (3 months) (3 months) Change Change 
 $ $ $ % 
General and administrative expenses 2022 2021 $ Change % Change 
Wages and benefits$116,968 $69,575  47,393  68.1% 
Professional fees 54,383  18,295  36,088  197.3% 
Office and miscellaneous 20,924  27,404  (6,480) -23.6% 
Shareholder relations 4,226  3,629  597  16.5% 
Rent 11,751  5,744  6,007  104.6% 
Foreign exchange (73,442) (3,080) (70,362) 2,284.5% 
Telecommunications 2,281  821  1,460  177.8% 
Bad debt 4,316  -  4,316  0.0%  (1,370) 4,316  (5,686) -131.7% 
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%) 
Other 

27,340

  23,920  

3,420

  14.3% 
Total general and administrative expenses$

163,061

 $150,624  

12,437

  8.3% 

Our general and administrative expenses consist of salaries and related personnel costs including overhead, office rent, professional fees, shareholder relations, and general office supplies. Generalexpenses. The increase in salaries and administrative costs also include professional fees and general travel expenditures.wages can be explained by increased non-cash stock-based compensation due to the number of share-based awards. The decreaseincrease in professional fees iswas due to a reductionthe timing of various corporate administration costs and a reduction of litigation costs.activities.

Sales and marketing November 30 November 30    
 2021 2020     Three Months Ended
November 30,		    
 (3 months) (3 months) Change Change 
 $ $ $ % 
Sales and marketing expenses 2022 2021 $ Change % Change 
Wages and benefits$135,394 $344,415  (209,021) -60.7% 
Advertising and marketing 33,011  9,020  23,991  266.0%  24,227  33,011  (8,784) -26.6% 
Rent 33,062  31,536  1,526  4.8%  13,190  33,062  (19,872) -60.1% 
Telecommunications 5,322  4,053  1,269  31.3%  1,415  5,322  (3,907) -73.4% 
Wages and benefits 344,415  257,865  86,550  33.6% 
 415,810  302,474  113,336  37.5% 
Total sales and marketing expenses$174,226 $415,810  (241,584) -58.1% 

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 the employment of additional staff designed to grow Play MPE®‘s market share. The increase in advertising and marketing expenses is related to increased advertising, sponsorship, and attendance at industry events in the first quarter.

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 increasedecrease in wages and benefits is related to an increasethe result of lower overall staffing numbers in staffingbusiness development as well as a shift in focus of staff towards product development, offset by $72,290 capitalized as internal use software in the quarter (November 30, 2020: $Nil). development.

  Three Months Ended
November 30,		       
Product development expenses 2022  2021  $ Change  % Change 
Wages and benefits$189,469 $201,338  (11,869) -5.9% 
Software services 20,455  18,177  2,278  12.5% 
Rent 24,169  22,591  1,578  7.0% 
Telecommunications 29,333  16,318  13,015  79.8% 
Product development expenses$263,426 $258,424  5,002  1.9% 

 

15

Throughout the second half of the prior year, the Company increased product development staffing in order to build upon earlier research and development of a new product complementary to Play MPE®. Overall staffing costs for product development, including those capitalized in the current and prior periods, increased by approximately 55%. The decline in current operating costs represents a large increase in the amount of costs capitalized. During the period ended November 30, 2022, $248,309 in wages and benefits paid to engineering and product development staff were capitalized to software under development intangible assets (November 30, 2021 - $72,290).

Depreciation and Amortization

Depreciation and amortization expense increased to $27,172 for the three-month period ended November 30, 2021 from $24,315$36,379 for the period ended November 30, 2020, an2022 (November 30, 2021 - $27,172). The increase of 11.7%33.9% was due to a amortizationdepreciation of additionally capitalized software development costs associated with Play MPE® recipient player applications.applications during the year.

Other earnings and expensesIncome

Interest income earned on the Company's Guaranteed Investment Certificates was $1,043$7,668 for the three-month period ended November 30, 2022 (November 30, 2021 (2020: $1,464) and is derived from one-year Guaranteed Investment Certificates.- $1,043). The interest income more than doubled year over year due to increased interest rates in Canada.

Net incomeIncome (Loss)

During the three-month periodthree months ended November 30, 20212022 we had net income of $165,601 (2020$258,266 (November 30, 2021 - $250,702).$165,601)

For the three-month periodthree months ended November 30, 2021,2022, adjusted EBITDA was $217,635 (2020$324,134 (November 2021 - EBITDA $286,402)$217,635). Adjusted EBITDA is not defined under generally accepted accounting principles ("GAAP")U.S. 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 our 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.the Company. 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 foron 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:

 2022 Q1 2021 Q4 2021 Q3 2021 Q2 2021 Q1 2020 Q4 2020 Q3 2020 Q2  Q1 2023 Q4 2022 Q3 2022 Q2 2022 Q1 2022 Q4 2021 Q3 2021 Q2 2021 
     $ $ $ $ $ $ 
Net Income (loss) 165,601  91,699  69,594  (29,466) 250,702  158,187  54,899  (155,331)
Amortization, stock-based compensation and deferred leasehold inducements 53,077  40,589  39,806  39,533  37,164  49,085  48,470  37,307 
Net Income (Loss)$258,266  193,673 $(3,242)$(202,610)$165,601 $91,699 $69,594 $(29,466)
Stock-based compensation 37,157  (21,281) 75,163  68,789  25,905  12,620  13,133  26,400 
Depreciation, amortization, and deferred leasehold inducements 36,379  52,603  36,313  26,574  27,172  27,969  26,673  13,133 
Interest income (1,043) (869) (823) (875) (1,464) (4,672) (5,266) (8,110) (7,668) (4,460) (1,686) (1,964) (1,043) (869) (823) (875)
Adjusted EBITDA 217,635  131,419  108,577  9,192  286,402  202,600  98,103  (126,134)$324,134  220,535 $106,548 $(109,211)$217,635 $131,419 $108,577 $9,192 

LIQUIDITY AND FINANCIAL CONDITION

As at November 30, 2021, we2022, the Company held $2,536,426 (August$2,246,205 (August 31, 20212022 - $2,752,662)$2,095,928) in cash and cash equivalents and short-term investments.equivalents. Our short-term investmentscash equivalents consisted of one-year Guaranteed Investment Certificates (GICs) held through a major Canadian financial institution and had reached maturity prior to November 30, 2021.their maturity.

AtAs at November 30, 2021,2022, we had working capital of $2,682,199$2,286,599 compared to $2,561,480$2,268,778 as at August 31, 2021.  During2022.

16

Cash Flows


The following table sets forth a summary of the three-month period ended November 30, 2021,net cash flow activity for each of the Company completed NCIB purchases totaling $44,166. periods indicated:

  Three Months Ended
November 30,		       
Net cash and cash equivalents provided by (used in) 2022  2021  $ Change  % Change 
Operating activities$459,537 $(52,626) 512,163  -973.2% 
Investing activities (248,309) (80,287) (168,022) -209.3% 
Financing activities -  (44,166) 44,166  -100.0% 
Effect of foreign exchange rate changes on cash (60,951) (39,157) (21,794) -55.7% 
Net increase (decrease) in cash and cash equivalents$150,277 $(216,236) 366,513  -169.5% 

Operating Activities

Net cash used inprovided by operating activities forduring the three-month period ended November 30, 2022 was $459,537 (November 30, 2021 was $52,626 (2020: net cash provided by operating activities of $441,654)- $52,626). The primary reason for the decreaseincrease in cash flows from operating activities is related to changes in working capital which are expected to reverse over time.was the timing of receipts from our customers.

Investing Activities

Net cash used in investing activities for the three-month period ended November 30, 20212022 was $80,287 (2020:$248,309, compared to cash provided fromused in investing activities of $758,561).$80,287 for the period ended November 30, 2021. During the three-month period ended November 30, 2021, $72,2902022, the contributions made towards investing activities was used in software under development.cash spent on new capital assets and internally developed computer software.

Financing Activities

Net cash used in financing activities during the three-month period ended November 30, 2022 was Nil (November 30, 2021 was $44,166 (2020: $nil), related to cash used to repurchase and retire 30,300 shares of common stock (2020: Nil) of the Company under the NCIB.- $44,166).

CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT JUDGEMENTS AND ESTIMATES

We prepareOur management's discussion and analysis of our interim condensed consolidatedfinancial condition and results of operations is based on our financial statements, which have been prepared in accordance with generally accepted accounting principles generally accepted in the United States, or GAAP. The preparation of America, andour financial statements requires us to make estimates and assumptions that affect ourthe reported amounts of assets, liabilities revenue and expenses and the related disclosuresdisclosure of contingent liabilities.assets and liabilities in our financial statements and accompanying notes. We evaluate these estimates and judgments on an ongoing basis. We base our estimates on historical experience and on various other assumptionsfactors that we believe are reasonable inunder the circumstances.circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.estimates under different assumptions or conditions.

For a description of our critical accounting policies, see the sections entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates" and "Financial Statements and Supplementary Data - Note 2, Summary of Significant Accounting Policies" contained in our 2022 Form 10-K. There have not been no significantany material changes into the critical accounting policies and estimates described in our Annual Report on Form 10-K fordiscussed therein during the yearthree months ended August 31, 2021 as filed with the SEC on November 23, 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.30, 2022.

NEW ACCOUNTING PRONOUNCEMENTSOFF-BALANCE SHEET ARRANGEMENTS

Please referAs of November 30, 2022, the Company has no off-balance sheet arrangements that have or are reasonably likely to Note 8 "New Accounting Pronouncements"have a current or future material effect on its financial condition, changes in the notes to our Interim Condensed Consolidated Financial Statements included in this Form 10-Q.financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Item 3.17

 Quantitative and Qualitative Disclosures About Market Risk.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Exchange Risk

Our revenues are denominated primarily in United States dollars and Euros while our operating expenses are incurred 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 the Canadian dollar to these currencies. During the three month periods ended November 30, 2021, as a result ofWe do not believe aggregated foreign exchange fluctuations in the Euro, and the Australian, Canadian, and US dollars have had a material effect on our results of operations during 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.years presented.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

DisclosureWe maintain disclosure controls and procedures and other procedures that are designed to ensureprovide reasonable assurance that material information required to be disclosed in our periodic reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periodperiods specified in the SEC's rules and forms. Disclosure controlsforms and procedures include, without limitation, controls and procedures designed to ensureprovide reasonable assurance that such information required to be disclosed in our reports filed under the Securities Exchange Act of 1934 is accumulated and communicated to our management, including our Chief Executive Officer and our 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 haveWe carried out an evaluation, under the supervision and with the participation of our management, including our principal executive and principal financial officer, of the effectiveness of the design and operation of our company's disclosure controls and procedures. This evaluation was carried outprocedures, as defined in Rule 13(a)-15(e) under the supervision and with the participation of our Company's management, including our company's Chief Executive Officer and Chief Financial Officer.Exchange Act. Based upon thaton this evaluation, our company's Chief Executive Officerprincipal executive officer and Chief Financial Officerprincipal financial officer concluded that as of November 30, 2021, our disclosure controls and procedures were effective, as at the end of the period covered by this report.November 30, 2022.

Changes in Internal Control over Financial Reporting

There were no changes that would impactin our internal controls forcontrol over financial reporting identified in management's evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the period from September 1, 2021 toExchange Act during the quarter ended November 30, 2021. 2022 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

18

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

Item 1.From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. Except as described below, we are not aware of any such legal proceedings or claims against us.Legal Proceedings.

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 will defend itself against the claims.

ITEM 1A. RISK FACTORS.

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, 2021 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.

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

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

Item 3.Defaults Upon Senior Securities.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Item 4.Mine Safety Disclosures.

Not Applicable.


ITEM 5. OTHER INFORMATION.

Item 5.Other Information.

None.

ITEM 6. EXHIBITS.

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.INS*Inline 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.SCH*XBRL Taxonomy Extension Schema Document
  
101.CAL*101.SCH*Inline XBRL Taxonomy Extension Calculation LinkbaseSchema Document
  
101.DEF*101.CAL*Inline XBRL Taxonomy Extension DefinitionCalculation Linkbase Document
  
101.LAB*101.DEF*Inline XBRL Taxonomy Extension LabelDefinition Linkbase Document
  
101.PRE*101.LAB*Inline XBRL Taxonomy Extension PresentationLabel Linkbase Document
  
104*101.PRE*Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

* Filed herewith

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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 Executive Officer)
Date: Jan 03, 2023
By:/s/ Olya Massalitina
Olya Massalitina
Chief Financial Officer, Treasurer
(Principal Financing and Accounting Officer)
Date: Jan 03, 2023

20

By:/s/Frederick Vandenberg______________________
Frederick Vandenberg
              Chief Executive Officer, President
(Principal Executive Officer)
Date:January 13, 2022

By:/s/Samuel Ritchie______________________
Samuel Ritchie
              Chief Financial Officer, Treasurer
(Principal Financing and Accounting Officer)
Date:January 13, 2022