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| Share Name | Share Symbol | Market | Type |
|---|---|---|---|
| Destiny Media Technologies Inc (QB) | USOTC:DSNY | OTCMarkets | Common Stock |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0.68 | 0.2751 | 1.00 | 0.68 | 0.60 | 0.66 | 5,200 | 22:00:01 |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
[
For the quarterly period ended
For the transition period from _____ to _____
Commission File Number
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
(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]
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]
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 | [ ] | |
| [ ] | Smaller reporting company | |||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
[ ] Yes [ ] No
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)
[ ] Yes [X]
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 July 15, 2024 was
DESTINY MEDIA TECHNOLOGIES, INC.
FORM 10-Q
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DESTINY MEDIA TECHNOLOGIES, INC.
Condensed Consolidated Balance Sheets
| Notes | May 31, 2024 |
August 31, 2023 |
|||||
| (unaudited) | (audited) | ||||||
| ASSETS | |||||||
| Cash and cash equivalents | 3 | $ | $ | ||||
| Accounts receivable, net of allowance for credit losses of $ |
|||||||
| Other receivables | |||||||
| Prepaid expenses | |||||||
| Deposits | |||||||
| Total current assets | |||||||
| Property and equipment, net | 4 | ||||||
| Intangible assets, net | 5 | ||||||
| Total assets | $ | $ | |||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
| Current | |||||||
| Accounts payable | $ | $ | |||||
| Accrued liabilities | |||||||
| Deferred revenue | |||||||
| Total current liabilities | |||||||
| Total liabilities | |||||||
| Commitments and contingencies | 7 | ||||||
| Stockholders' equity | |||||||
| Common stock, par value $ Issued and outstanding - |
6 | ||||||
| Additional paid-in capital | |||||||
| Accumulated deficit | ( |
) | ( |
) | |||
| Accumulated other comprehensive loss | ( |
) | ( |
) | |||
| Total stockholders' equity | |||||||
| Total liabilities and stockholders' equity | $ | $ |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
1
DESTINY MEDIA TECHNOLOGIES, INC.
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
| Three months ended May 31, | Nine months ended May 31, | ||||||||||||
| Notes | 2024 | 2023 | 2024 | 2023 | |||||||||
| Service revenue | 8 | $ | $ | $ | $ | ||||||||
| Cost of revenue | |||||||||||||
| Hosting costs | |||||||||||||
| Internal engineering support | |||||||||||||
| Customer support | |||||||||||||
| Third-party and transactions costs | |||||||||||||
| Gross margin | |||||||||||||
| Operating expenses | |||||||||||||
| General and administrative | |||||||||||||
| Sales and marketing | |||||||||||||
| Product development | |||||||||||||
| Depreciation and amortization | 4,5 | ||||||||||||
| Income from operations | |||||||||||||
| Other income | |||||||||||||
| Interest and other income | |||||||||||||
| Net income before income tax | $ | $ | $ | $ | |||||||||
| Current income tax expense | ( |
) | |||||||||||
| Net income | $ | $ | $ | $ | |||||||||
| Foreign currency translation adjustments | ( |
) | ( |
) | ( |
) | |||||||
| Total comprehensive income | $ | $ | $ | $ | |||||||||
| Net income per common share | |||||||||||||
| Basic and diluted | 6(d) | $ | $ | $ | $ | ||||||||
| Weighted average common shares outstanding: | |||||||||||||
| Basic | 6(d) | ||||||||||||
| Diluted | 6(d) | ||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2
DESTINY MEDIA TECHNOLOGIES, INC.
Condensed Consolidated Statements of Stockholders' Equity
Three and Nine Months Ended May 31, 2024 and 2023
(Unaudited)
| Common stock | |||||||||||||||||||
| Notes | Shares | Amount | Additional Paid-in Capital |
Accumulated Deficit |
Accumulated Other Comprehensive Income (Loss) |
Total Stockholders' Equity |
|||||||||||||
| Balance, August 31, 2022 | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||
| Total comprehensive income (loss) | - | - | - | ( |
) | ||||||||||||||
| Stock-based compensation | - | - | - | - | |||||||||||||||
| Balance, November 30, 2022 | ( |
) | ( |
) | |||||||||||||||
| Total comprehensive loss | - | - | - | ( |
) | ( |
) | ( |
) | ||||||||||
| Stock-based compensation | - | - | - | - | |||||||||||||||
| Balance, February 28, 2023 | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||
| Total comprehensive income | - | - | - | ||||||||||||||||
| Stock-based compensation | - | - | - | - | |||||||||||||||
| Common shares retired | 6(a) | ( |
) | - | ( |
) | - | - | ( |
) | |||||||||
| Balance, May 31, 2023 | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||
| Common stock | |||||||||||||||||||
| Notes | Shares | Amount | Additional Paid-in Capital |
Accumulated Deficit |
Accumulated Other Comprehensive Income (Loss) |
Total Stockholders' Equity |
|||||||||||||
| Balance, August 31, 2023 | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||
| Total comprehensive income (loss) | - | - | - | ( |
) | ||||||||||||||
| Stock-based compensation | 6(b) | - | - | - | - | ||||||||||||||
| Common shares retired | 6(a) | ( |
) | ( |
) | ( |
) | - | - | ( |
) | ||||||||
| Balance, November 30, 2023 | ( |
) | ( |
) | |||||||||||||||
| Total comprehensive income (loss) | - | - | - | ( |
) | ( |
) | ||||||||||||
| Stock-based compensation | 6(b) | - | - | - | - | ||||||||||||||
| Common shares retired | 6(a) | ( |
) | ( |
) | ( |
) | - | - | ( |
) | ||||||||
| Balance, February 29, 2024 | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||
| Total comprehensive income (loss) | - | - | - | ( |
) | ||||||||||||||
| Stock-based compensation | 6(b) | - | - | - | - | ||||||||||||||
| Common shares retired | 6(a) | ( |
) | ( |
) | ( |
) | - | - | ( |
) | ||||||||
| Balance, May 31, 2024 | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
DESTINY MEDIA TECHNOLOGIES, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| Nine months ended May 31, | ||||||
| 2024 | 2023 | |||||
| Operating Activities | ||||||
| Net income | $ | $ | ||||
| Adjustments to reconcile net income to net cash provided by operations: | ||||||
| Depreciation and amortization | ||||||
| Stock-based compensation | ||||||
| Bad debt | ( |
) | ||||
| Unrealized foreign exchange gain | ( |
) | ||||
| Changes in non-cash working capital: | ||||||
| Accounts receivable | ( |
) | ( |
) | ||
| Other receivables | ( |
) | ( |
) | ||
| Prepaid expenses and deposits | ||||||
| Accounts payable | ( |
) | ||||
| Accrued liabilities | ( |
) | ||||
| Deferred revenue | ||||||
| Net cash provided by operating activities | ||||||
| Investing Activities | ||||||
| Development of software | ( |
) | ( |
) | ||
| Purchase of property, equipment, and intangibles | ( |
) | ( |
) | ||
| Net cash used in investing activities | ( |
) | ( |
) | ||
| Financing Activity | ||||||
| Common stock repurchased for cancellation | ( |
) | ( |
) | ||
| Net cash used in financing activity | ( |
) | ( |
) | ||
| Effect of foreign exchange rate changes on cash and cash equivalents | ( |
) | ( |
) | ||
| Net decrease in cash and cash equivalents | ( |
) | ( |
) | ||
| Cash and cash equivalents, beginning of period | ||||||
| Cash and cash equivalents, end of period | $ | $ | ||||
| Supplementary disclosure: | ||||||
| Interest paid | $ | $ | ||||
| Income taxes paid | $ | $ | ( |
) | ||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
DESTINY MEDIA TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2024
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 North America, 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.V" on the TSX Venture Exchange (the "TSXV") and under the symbol "DME1.F" 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. ("DSPI"), MPE Distributions, Inc. ("MPE"), Tonality, Inc. ("Tonality"), and Sonox Digital Inc. ("Sonox"). All intercompany transactions have been eliminated on consolidation. All figures are in United States dollars unless otherwise stated.
The accompanying unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q have been prepared in conformity with 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 28, 2023 (the "2023 Form 10-K"). The condensed consolidated balance sheet as of August 31, 2023 was derived from audited consolidated financial statements included in the 2023 Form 10-K but does not include all disclosures required by U.S. GAAP for complete financial statements. The Company's significant accounting policies are described in Note 2 to those consolidated financial statements.
Interim results may not be indicative of the results that may be expected for the 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 presentation 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 preparation of the consolidated financial statements in accordance with U.S. GAAP requires management to make use of certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the unaudited condensed consolidated financial statements and the reported amounts of revenue and expenses during the reported periods. The Company bases its estimates on historical experience and on various other assumptions that management believes are reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates. Significant estimates are related to the labour capitalized to software under development and computer software, the recoverability of long-term assets including property, equipment, and intangible assets, amortization expense, credit losses, and valuation of stock-based compensation.
5
3. CASH AND CASH EQUIVALENTS
The Company's cash include cash in readily available checking accounts. The Company's cash equivalents consist of investments in mutual funds with a major Canadian financial institution that earn interest at variable interest rates ranging from
4. PROPERTY AND EQUIPMENT, NET
| May 31, 2024 | |||||||||
| Property and Equipment | Cost | Accumulated Amortization |
Net Book Value | ||||||
| Furniture and fixtures | $ | $ | ( |
) | $ | ||||
| Computer hardware | ( |
) | |||||||
| Computer software | ( |
) | |||||||
| Total property and equipment | $ | $ | ( |
) | $ | ||||
| August 31, 2023 | |||||||||
| Property and Equipment | Cost | Accumulated Amortization |
Net Book Value | ||||||
| Furniture and fixtures | $ | $ | ( |
) | $ | ||||
| Computer hardware | ( |
) | |||||||
| Computer software | ( |
) | |||||||
| Total property and equipment | $ | $ | ( |
) | $ | ||||
During the three and nine months ended May 31, 2024, the Company reclassified a total of $
Depreciation on property and equipment for the three and nine months ended May 31, 2024 was $
5. INTANGIBLE ASSETS, NET
| May 31, 2024 | |||||||||
| Intangible Assets | Cost | Accumulated Amortization |
Net Book Value | ||||||
| Software under development | $ | $ | $ | ||||||
| Patents, trademarks, and lists | ( |
) | |||||||
| Total intangible assets | $ | $ | ( |
) | $ | ||||
| August 31, 2023 | |||||||||
| Intangible Assets | Cost | Accumulated Amortization |
Net Book Value | ||||||
| Software under development | $ | $ | $ | ||||||
| Patents, trademarks, and lists | ( |
) | |||||||
| Total intangible assets | $ | $ | ( |
) | $ | ||||
During the three and nine months ended May 31, 2024, the Company capitalized a total of $
Amortization of intangible assets for the three and nine months ended May 31, 2024 was $
6
6. STOCKHOLDERS' EQUITY
[a] Common stock issued and authorized
The Company is authorized to issue up to
During the three and nine months ended May 31, 2024, the Company did not issue any common stock (May 31, 2023 -
[b] Stock option plans
Pursuant to the Company's 2015 Stock Option Plan (the "2015 Plan"),
The options generally vest over a range of periods from the date of grant, some are immediate, and others vest over 24 months. Any options that do not vest as the result of a grantee leaving the Company are forfeited and the underlying common shares are returned to the reserve. The options generally have a contractual term of five years.
Stock-Based Payment Award Activity
A summary of stock option activity under the Plans as of May 31, 2024, and changes during the period were the following:
| Number of Options |
Weighted Average Exercise Price |
Weighted Average Contractual Term (Years) |
Aggregate Intrinsic Value |
|||||||||
| Outstanding at August 31, 2022 | $ | $ | ||||||||||
| Granted | $ | $ | ||||||||||
| Forfeited | ( |
) | $ | $ | ||||||||
| Outstanding at August 31, 2023 | $ | $ | ||||||||||
| Granted | $ | $ | ||||||||||
| Forfeited | ( |
) | $ | $ | ||||||||
| Expired | ( |
) | $ | $ | ||||||||
| Outstanding at May 31, 2024 | $ | $ | ||||||||||
| Exercisable at May 31, 2024 | $ | $ |
During the three and nine months ended May 31, 2024, the Company granted
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 as of May 31, 2024. As of May 31, 2024, the aggregate intrinsic value of outstanding and exercisable options was $
As of May 31, 2024, there was $
During the three and nine months ended May 31, 2024, the Company recorded $
7
[c] Employee Stock Purchase Plan
The Company's 2011 Employee Stock Purchase Plan (the "ESPP") became effective on February 22, 2011. Under the ESPP, employees of the Company can contribute up to 5% of their annual salary into a pool which is matched equally by the Company in order to purchase the Company's common shares under certain terms. Directors can contribute a maximum of $
During the three and nine months ended May 31, 2024, the Company recognized compensation expense of $
[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. The following table shows the computation of basic and diluted earnings per share for the three and nine months ended May 31, 2024, and 2023:
| Three Months Ended May 31, | Nine Months Ended May 31, | |||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||
| Numerator: | ||||||||||||
| Net income | $ | $ | $ | $ | ||||||||
| Denominator: | ||||||||||||
| Weighted-average basic shares outstanding | ||||||||||||
| Effect of dilutive stock-based awards | ||||||||||||
| Weighted-average diluted shares | ||||||||||||
| Basic and diluted earnings per share | $ | $ | $ | $ | ||||||||
7. COMMITMENTS AND 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. CONCENTRATIONS, ECONOMIC DEPENDENCE AND SEGMENTS
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 and nine months ended May 31, 2024 and 2023, by product and location of customer, was as follows:
| Three Months Ended May 31, | Nine Months Ended May 31, | |||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||
| Play MPE® | ||||||||||||
| North America | $ | $ | $ | $ | ||||||||
| Europe | ||||||||||||
| Australasia | ||||||||||||
| Africa | ||||||||||||
| Total Play MPE® | $ | $ | $ | $ | ||||||||
Revenue presented above is based on the location of the customer's billing address. Some of these customers have distribution centers located around the globe and distribute around the world. During the three and nine months ended May 31, 2024, the Company generated
As at May 31, 2024, one customer represented $
The Company has substantially all its assets in Canada and its current and planned future operations are, and will be, located in Canada.
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD LOOKING STATEMENTS
This report on Form 10-Q contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 under Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or 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 other than statements of historical fact 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.
There are a number of important factors that could cause the actual results to differ materially from those expressed in any forward-looking statement made by us. These factors include, but are not limited to:
These forward-looking statements reflect our management's beliefs and views with respect to future events and are based on estimates and assumptions and are subject to risks and uncertainties, including those described in the Part II, Item 1A under the heading "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. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances 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. ("DSPI"), 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 subsidiaries: Destiny Software Productions Inc., a British Columbia company 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.
Our principal executive office is located at Suite 428, 1575 West Georgia Street, Vancouver, British Columbia 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.V", on the OTCQB U.S. ("OTCQB") under the symbol "DSNY", and on various German exchanges (Frankfurt, Berlin, Stuttgart and Xetra) under the symbol "DME1.F".
Our corporate website is located at https://investors.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.
Play MPE®
Currently, the Company's core business is the Play MPE® online platform. Play MPE® distributes promotional content (broadcast quality audio, video, images, promotional information, metadata and other digital content) from record labels and artists to broadcasting professionals, music curators and music reviewers to discover, download, broadcast and review the content. Curators include radio programmers, digital streaming broadcasters, media reviewers, industry VIP's, DJ's, film and TV personnel, sports stadiums, retailers etc. In providing the distribution, Play MPE® provides several capabilities developed and designed to address the unique needs of both music promoters and broadcasters. Play MPE® was first to market and is the largest provider of this service and provides the most feature rich platform in the world.
Record labels and artists are Play MPE®'s customers. When adding music to the Play MPE® system, clients are targeting specific industry recipients who review and broadcast their music. Play MPE®'s primary value proposition in this marketing effort is a direct increase to record label and artist revenue through on-air broadcast royalties, streaming royalties and synchronization revenue (revenue collected when a song is placed within video advertisements, television, or film), and indirect increases in revenue through growing song and artists' popularity.
Also, Play MPE® provides numerous capabilities that dramatically reduce record label costs while providing functionality necessary for certain strategic marketing plans. The platform also provides administrative controls to enhance security for 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 (the "Major Record Labels"). The Major Record Labels are Universal Music Group ("Universal"), Warner Music Group ("Warner") and Sony Music Entertainment ("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 Group, EMI, RCA Records, Epic Records, Columbia Records, Arista Records, Legacy Recordings, Provident Entertainment, Warner Records, Hollywood Records, 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.
Play MPE® CASTER (local distribution software)
Play MPE®'s cloud-based Caster software includes local distribution functions that provide capabilities for a client to create and schedule release announcements and select its targeted audience. Play MPE® is designed uniquely to suit music marketing plans and its significant components include:
11
Intuitive designs and functionality across all areas of this portion of the platform simplify the distribution process, reduce customer time required to distribute, and facilitate the inclusion of information to improve engagement which ultimately increases record label and artist revenue.
Caster is currently available in English, Spanish, German, Japanese and French.
When competing with an established service within a local market, it is these features balanced against changing consumer behaviors that determine 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, capabilities and on its ultimate effectiveness. Public reviews can be found at https://www.plaympe.com/testimonials/.
Play MPE® Quickshare
Play MPE®'s Quickshare provides a simplified distribution tool for Play MPE® customers to promote music directly to anyone inside or outside the Play MPE® platform. Quickshare is a simplified local distribution tool. With this feature, customers can send a link to a dedicated webpage to allow streaming or downloading of content outside of Play MPE® Player. The distribution does not include numerous features included within Caster's full version and distribution is intended only to replace other file sharing services while attracting greater use within the Play MPE® platform. The initial version will provide limited access and sharing capabilities free of charge and is a value-added feature within Play MPE® local distribution suite of features.
Play MPE® CASTER (global architecture)
Play MPE®'s global distribution architecture was developed in close collaboration with our largest client to address the needs of its global approach to release distribution. This architecture provides functionality required for our largest client to conduct their unique approach to music distribution and provides numerous significant competitive advantages for this client. These features improve marketing coordination and revenue generation while reducing overall label staff time and costs.
Significant components include:
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Collectively, functionality in global release management provides 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 functions.
Play MPE® CASTER (targeted list management services)
Recipient lists are bundles of active and engaged recipients with an interest in specific music types or genres. Lists are sold as a fixed price per list (or package). As recipient lists are adjusted in real time, changes in gross recipient numbers or active recipients does not directly 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 or "packages". 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 400 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 at least one targeted distribution list, curated by Play MPE®.
Play MPE® Player
Music curators review and download content through a cloud-based player and mobile apps (iOS and Android). Web players are currently available in 15 different languages: English, Spanish, Swedish, Finnish, Italian, Dutch, Portuguese, French, Japanese, German, Norwegian, Latvian, Lithuanian, Estonian, and Danish.
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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 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 within the Play MPE® platform has a unique library of music catered to, and 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 release metadata. Recipient side satisfaction directly increases activity which directly improves the effectiveness of promotional efforts of record label customers.
MTR™
MTR™ (or "Music Tracking Radar" or "Meter" https://www.plaympe.com/track/) is a digital tracking service that tracks and reports the number and times an individual track is played. MTR™ uses a proprietary algorithm to uniquely identify and match a track. The Company launched MTR™ in beta in fourth quarter of 2023. During the beta phase of this new product, the Company tested monitoring uptime, customer acquisition activities and added functionality for sale at scale. The beta version of the platform initially monitored digital broadcasts of 800 stations in Canada.
Digital transmission of music has provided the music industry new opportunities to reach and target its audience. These opportunities include digital streaming providers, social media, radio broadcasting, narrowcasting, and other transmissions. Traditional terrestrial radio and newer internet only stations now stream to digital receivers. With this industry change, a product like MTR™ is now possible.
MTR™ is a standalone business distinct from the Play MPE® platform. The Company expects that MTR™'s initial customers will overlap with the Play MPE® customer base. Play MPE® customers have expressed an interest in this type of service.
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.
Products under development
Destiny is currently developing additional functionality and complimentary services that are expected to expand the Company's addressable market, or act as catalysts to the Company's sales activities for Play MPE®. These are described more fully in the business development section of our Annual Report on Form 10-K for the fiscal year ended August 31, 2023, filed on November 28, 2023.
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RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MAY 31, 2024 AND 2023
| Three Months Ended May 31, | |||||||||
| 2024 | 2023 | Change | |||||||
| Service revenue | $ | 1,155,442 | $ | 1,068,007 | $ | 87,435 | |||
| Cost of revenue | 150,044 | 133,753 | 16,291 | ||||||
| Gross margin | 1,005,398 | 934,254 | 71,144 | ||||||
| Operating expenses | 884,607 | 836,795 | 47,812 | ||||||
| Income from operations | 120,791 | 97,459 | 23,332 | ||||||
| Other income | 13,685 | 9,593 | 4,092 | ||||||
| Net income | $ | 134,476 | $ | 107,052 | $ | 27,424 | |||
Revenue
Total revenue for the three months ended May 31, 2024 was $1,155,442 compared to the revenue of $1,068,007 for the three months ended May 31, 2023, an increase of 8.2% period over period. After adjusting for foreign exchange rates, the Company's revenue for the three-month period grew by 8.5%. The growth in revenue for the quarter arose from both our Major Label customers (increase of 10.7% quarter over quarter) and independent labels (increase of 5.5% quarter over quarter).
Gross Margin
Gross margin for the three months ended May 31, 2024, was 87.0% of revenue, compared to 87.5% for the three months ended May 31, 2023. 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 May 31, 2024, our gross margin remained relatively unchanged compared to the same period last year, indicating that the growth in the cost of sales has kept pace with the growth in revenue.
Operating Expenses
Operating costs during the three months ended May 31, 2024 increased by 5.7% to $884,607 (May 31, 2023 - $836,795). The increase in operating costs was primarily the result of the following:
For ease of reference the following table has been prepared to present operating results had the Company not capitalized software development salaries for the three months ended May 31, 2024 and 2023.
| Three Months Ended May 31, | ||||||
| 2024 | 2023 | |||||
| Net income for the period | $ | 134,476 | $ | 107,052 | ||
| Capitalized software under development | (123,695 | ) | (237,297 | ) | ||
| Adjustment to depreciation of capitalized computer software | 80,598 | 23,752 | ||||
| Adjusted net income (loss) for the period | $ | 91,379 | $ | (106,493 | ) | |
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| Three Months Ended May 31, | ||||||||||||
| General and administrative expenses | 2024 | 2023 | $ Change | % Change | ||||||||
| Wages and benefits | $ | 80,200 | $ | 141,400 | (61,200 | ) | (43.3%) | |||||
| Professional fees | 13,258 | 117,279 | (104,021 | ) | (88.7%) | |||||||
| Office and miscellaneous | 26,521 | 23,734 | 2,787 | 11.7% | ||||||||
| Shareholder relations | 10,579 | 10,664 | (85 | ) | (0.8%) | |||||||
| Rent | 10,168 | 16,963 | (6,795 | ) | (40.1%) | |||||||
| Foreign exchange loss (gain) | 2,555 | (5,656 | ) | 8,211 | (145.2%) | |||||||
| Telecommunications | 4,306 | 4,773 | (467 | ) | (9.8%) | |||||||
| Bad debt | 2,746 | (7 | ) | 2,753 | (39328.6%) | |||||||
| Other | 9,607 | 5,237 | 4,370 | 83.4% | ||||||||
| Total general and administrative expenses | $ | 159,940 | $ | 314,387 | (154,447 | ) | (49.1%) | |||||
The decrease in wages and benefits is primarily due to a one-time recruitment fee and the Company's portion of matching ESPP contributions incurred during the comparative period ending May 31, 2023. Professional fees also decreased due to the timing of services provided and the resolution of a one-time litigation favorably for the Company in the preceding year.
| Three Months Ended May 31, | ||||||||||||
| Sales and marketing expenses | 2024 | 2023 | $ Change | % Change | ||||||||
| Wages and benefits | $ | 238,593 | $ | 208,385 | 30,208 | 14.5% | ||||||
| Advertising and marketing | 30,639 | 20,955 | 9,684 | 46.2% | ||||||||
| Rent | 9,381 | 7,104 | 2,277 | 32.1% | ||||||||
| Telecommunications | 1,695 | 1,390 | 305 | 21.9% | ||||||||
| Total sales and marketing expenses | $ | 280,308 | $ | 237,834 | 42,474 | 17.9% | ||||||
The increase in wages and benefits is primarily attributed to one-time costs associated with a restructuring of the business development group that commenced in the third quarter of 2024.
| Three Months Ended May 31, | ||||||||||||
| Product development expenses | 2024 | 2023 | $ Change | % Change | ||||||||
| Wages and benefits | $ | 277,119 | $ | 177,145 | 99,974 | 56.4% | ||||||
| Software services | 25,463 | 23,170 | 2,293 | 9.9% | ||||||||
| Rent | 17,977 | 17,149 | 828 | 4.8% | ||||||||
| Telecommunications | 36,040 | 29,928 | 6,112 | 20.4% | ||||||||
| Product development expenses | $ | 356,599 | $ | 247,392 | 109,207 | 44.1% | ||||||
The increase in wages and benefits is partly due to a lower amount capitalized to software under development intangible assets in the current period. During the comparative period, the Company capitalized the development of its new product, MTR™, which launched in beta in Canada in the fourth quarter of fiscal 2023. Following the launch, there has been a reduction in the capitalization rate of these development costs.
Depreciation and Amortization
Depreciation and amortization expense increased to $87,760 for the three months ended May 31, 2024, from $37,182 for the three months ended May 31, 2023, an increase of 136.0%. This increase was due to the depreciation of newly enhanced features in the Play MPE® Player and Caster computer software applications.
Other Income
Interest income earned on the Company's mutual funds was $13,685 for the three months ended May 31, 2024 (May 31, 2023 - $9,593).
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RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED MAY 31, 2024 AND 2023
| Nine Months Ended May 31, | |||||||||
| 2024 | 2023 | Change | |||||||
| Service revenue | $ | 3,296,582 | $ | 2,987,786 | $ | 308,796 | |||
| Cost of revenue | 448,808 | 389,794 | 59,014 | ||||||
| Gross margin | 2,847,774 | 2,597,992 | 249,782 | ||||||
| Operating expenses | 2,634,466 | 2,256,388 | 378,078 | ||||||
| Income from operations | 213,308 | 341,604 | (128,296 | ) | |||||
| Other income | 40,672 | 26,038 | 14,634 | ||||||
| Income tax expense | - | (3,600 | ) | 3,600 | |||||
| Net income | $ | 253,980 | $ | 364,042 | $ | (110,062 | ) | ||
Revenue
Total revenue for the nine months ended May 31, 2024 increased by 10.3% to $3,296,582, compared to $2,987,786 for the nine months ended May 31, 2023. After adjusting for foreign exchange rates, the Company's revenue for the nine-month period grew by 9.4%. The revenue increase in the nine months ended May 31, 2024 was driven by both our Major Label customers (increase of 8.6% period over period) and independent labels (increase of 11.9% period over period).
Gross Margin
Gross margin for the nine months ended May 31, 2024 was 86.4% of revenue, compared to 87.0% for the nine months ended May 31, 2023. During the nine months ended May 31, 2024, our gross margin remained relatively unchanged compared to the same period last year, indicating that the growth in the cost of sales has kept pace with the growth in revenue.
Operating Expenses
Operating costs during the nine months ended May 31, 2024 increased by 16.8% to $2,634,466 (May 31, 2023 - $2,256,388). This rise can be primarily attributed to the following factors:
For ease of reference the following table has been prepared to present operating results had the Company not capitalized software development salaries for the nine months ended May 31, 2024 and 2023.
| Nine Months Ended May 31, | ||||||
| 2024 | 2023 | |||||
| Net income for the period | $ | 253,980 | $ | 364,042 | ||
| Capitalized software under development | (404,652 | ) | (689,366 | ) | ||
| Adjustment to depreciation of capitalized computer software | 233,187 | 71,603 | ||||
| Adjusted net income (loss) for the period | $ | 82,515 | $ | (253,721 | ) | |
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| Nine Months Ended May 31, | ||||||||||||
| General and administrative expenses | 2024 | 2023 | $ Change | % Change | ||||||||
| Wages and benefits | $ | 244,475 | $ | 300,001 | (55,526 | ) | (18.5%) | |||||
| Professional fees | 55,688 | 255,914 | (200,226 | ) | (78.2%) | |||||||
| Office and miscellaneous | 75,385 | 69,047 | 6,338 | 9.2% | ||||||||
| Shareholder relations | 65,875 | 60,611 | 5,264 | 8.7% | ||||||||
| Rent | 30,714 | 39,931 | (9,217 | ) | (23.1%) | |||||||
| Foreign exchange loss (gain) | 841 | (113,600 | ) | 114,441 | (100.7%) | |||||||
| Telecommunications | 7,039 | 9,174 | (2,135 | ) | (23.3%) | |||||||
| Bad debt | 736 | 3,119 | (2,383 | ) | (76.4%) | |||||||
| Other | 32,334 | 28,596 | 3,738 | 13.1% | ||||||||
| Total general and administrative expenses | $ | 513,087 | $ | 652,793 | (139,706 | ) | (21.4%) | |||||
The decrease in wages and benefits is primarily due to a one-time recruitment fee and the Company's portion of matching ESPP contributions incurred during the comparative period ending May 31, 2023. Professional fees also decreased due to the timing of services provided and the resolution of a one-time litigation favorably for the Company in the preceding year. Additionally, during the comparative period, the Company maintained a substantial cash balance in the foreign currency accounts, resulting in a significant foreign exchange gain recorded upon the revaluation of cash.
| Nine Months Ended May 31, | ||||||||||||
| Sales and marketing expenses | 2024 | 2023 | $ Change | % Change | ||||||||
| Wages and benefits | $ | 672,298 | $ | 557,451 | 114,847 | 20.6% | ||||||
| Advertising and marketing | 75,807 | 73,834 | 1,973 | 2.7% | ||||||||
| Rent | 28,273 | 33,153 | (4,880 | ) | (14.7%) | |||||||
| Telecommunications | 4,788 | 5,922 | (1,134 | ) | (19.1%) | |||||||
| Total sales and marketing expenses | $ | 781,166 | $ | 670,360 | 110,806 | 16.5% | ||||||
The increase in wages and benefits is primarily attributed to the addition of key personnel in the department along with staff turnover during the current period.
| Nine Months Ended May 31, | ||||||||||||
| Product development expenses | 2024 | 2023 | $ Change | % Change | ||||||||
| Wages and benefits | $ | 854,536 | $ | 600,434 | 254,102 | 42.3% | ||||||
| Software services | 75,283 | 67,163 | 8,120 | 12.1% | ||||||||
| Rent | 54,053 | 66,062 | (12,009 | ) | (18.2%) | |||||||
| Telecommunications | 100,457 | 90,063 | 10,394 | 11.5% | ||||||||
| Product development expenses | $ | 1,084,329 | $ | 823,722 | 260,607 | 31.6% | ||||||
The increase in wages and benefits is due to a lower amount capitalized to software under development intangible assets in the current period. During the comparative period, the Company capitalized the development of its new product, MTR™, which was launched in beta in Canada in the fourth quarter of fiscal 2023. Following the launch, there has been a reduction in the capitalization rate of these development costs.
Depreciation and Amortization
Depreciation and amortization expense increased to $255,884 for the nine months ended May 31, 2024 from $109,513 for the nine months ended May 31, 2023, an increase of 133.7%. This increase was due to the depreciation of recently capitalized additions in the Play MPE® Player and Caster computer software applications.
Other Income
Interest income earned on the Company's mutual funds was $40,672 for the nine months ended May 31, 2024 (May 31, 2023 - $26,038).
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Net Income
During the three and nine months ended May 31, 2024 the Company reported a net income of $134,476 and $253,980, respectively (May 31, 2023 -$107,052 and $364,042, respectively).
For the three and nine months ended May 31, 2024, adjusted EBITDA was $219,910 and $505,011, respectively (May 31, 2023 - $172,726 and $560,844, respectively). Adjusted EBITDA is not defined under 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 the Company. Adjusted EBITDA has limitations as a profitability measure in that it does not include provisions for income taxes, the effect of our expenditures on 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 from operations to Adjusted EBITDA:
| Q3 2024 | Q2 2024 | Q1 2024 | Q4 2023 | Q3 2023 | Q2 2023 | Q1 2023 | Q4 2022 | |||||||||||||||||
| Net income (loss) | $ | 134,476 | (130,012 | ) | 249,516 | (28,944 | ) | 107,052 | (1,276 | ) | 258,266 | 194,673 | ||||||||||||
| Stock-based compensation | 11,359 | 10,655 | 13,805 | 34,605 | 38,085 | 38,085 | 37,157 | (21,281 | ) | |||||||||||||||
| Depreciation and amortization | 87,760 | 87,026 | 81,098 | 128,842 | 37,182 | 35,952 | 36,379 | 52,603 | ||||||||||||||||
| Interest income | (13,685 | ) | (15,461 | ) | (11,526 | ) | (10,460 | ) | (9,593 | ) | (8,777 | ) | (7,668 | ) | (4,460 | ) | ||||||||
| Adjusted EBITDA | $ | 219,910 | (47,792 | ) | 332,893 | 124,043 | 172,726 | 63,984 | 324,134 | 221,535 |
LIQUIDITY AND FINANCIAL CONDITION
As at May 31, 2024, we held $1,390,887 (August 31, 2023 - $2,002,769) in cash and cash equivalents. The Company's cash equivalents consist of investments in mutual funds with a major Canadian financial institution that earn interest at variable interest rates ranging from 4.55% - 4.90%.
At May 31, 2024, we had working capital of $1,820,539 compared to $2,185,960 as at August 31, 2023. The decrease in our working capital was primarily due to operating results.
Cash Flows
The following table sets forth a summary of the net cash flow activity for the periods indicated:
| Nine Months Ended May 31, | ||||||||||||
| Net cash and cash equivalents provided by (used in) | 2024 | 2023 | $ Change | % Change | ||||||||
| Operating activities | $ | 291,047 | $ | 507,816 | (216,769 | ) | (42.7%) | |||||
| Investing activities | (422,965 | ) | (708,945 | ) | 285,980 | (40.3%) | ||||||
| Financing activity | (470,271 | ) | (4,463 | ) | (465,808 | ) | 10437.1% | |||||
| Effect of foreign exchange rate changes on cash and cash equivalents | (9,693 | ) | (65,164 | ) | 55,471 | (85.1%) | ||||||
| Net decrease in cash and cash equivalents | $ | (611,882 | ) | $ | (270,756 | ) | (341,126 | ) | 126.0% | |||
Operating Activities
Net cash provided by operating activities during the nine months ended May 31, 2024 was $291,047 (May 31, 2023 - $507,816). The primary reason for the decrease in cash flows from operating activities is related to the timing of receipts from our customers.
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Investing Activities
Net cash used in investing activities for the nine months ended May 31, 2024 was $422,965, compared to cash used in investing activities of $708,945 for the nine months ended May 31, 2023. The period-over-period decrease was mainly driven by the lower proportion of software development salaries and wages capitalized in the current period.
Financing Activity
Net cash used in financing activity during the nine months ended May 31, 2024 was $470,271 (May 31, 2023 - $4,463) - this cash was used to repurchase and retire 459,200 shares of common stock (May 31, 2023 - 5,685) of the Company under the Normal Course Issuer Bid ("NCIB").
CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT JUDGEMENTS AND ESTIMATES
Our management's discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States, or GAAP. The preparation of our financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities and expenses and the disclosure of contingent 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 factors that we believe are reasonable under the 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 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 Policies and Significant Judgements and Estimates" and "Financial Statements and Supplementary Data - Note 2, Summary of Significant Accounting Policies" contained in our 2023 Form 10-K. There have not been any material changes to the critical accounting policies discussed therein during the three and nine months May 31, 2024.
OFF-BALANCE SHEET ARRANGEMENTS
As of May 31, 2024, the Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
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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. We 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 periods presented.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Disclosure controls and procedures and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time period specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934 is accumulated and communicated to management including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
In connection with this quarterly report, as required by Rule 13a-15 under the Securities Exchange Act of 1934, we have carried out an evaluation of the effectiveness of the design and operation of our Company's disclosure controls and procedures. This evaluation was carried out under supervision and with the participation of our Company's management, including our company's Chief Executive Officer and Chief Financial Officer. Based upon that evaluation, our Company's Chief Executive Officer and Chief Financial Officer concluded that as of May 31, 2024, our disclosure controls and procedures were effective as at the end of the period covered by this report.
Changes in Internal Control over Financial Reporting
There were no changes that would impact our internal controls for the period from September 1, 2023, to May 31, 2024.
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PART II - OTHER INFORMATION
ITEM 1. 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 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.
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, 2023, 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.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not Applicable.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS.
| 31.1* | Section 302 Certification of Chief Executive Officer |
| 31.2* | Section 302 Certification of Chief Financial Officer |
| 32.1* | Section 906 Certification of Chief Executive Officer and Chief Financial Officer |
| 101* | 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* | Inline XBRL Taxonomy Extension Schema Document |
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document |
| 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
22
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: July 15, 2024
By: /s/Olya Massalitina__________________________
Olya Massalitina
Chief Financial Officer, Treasurer
(Principal Financing and Accounting Officer)
Date: July 15, 2024
23
Exhibit 31.1
CERTIFICATIONS
I, Frederick Vandenberg, certify that:
(1) I have reviewed this Quarterly Report on Form 10-Q of Destiny Media Technologies Inc.;
(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
(4) The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
(5) The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's Board of Directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: July 15, 2024
/s/Frederick Vandenberg
Frederick Vandenberg
Chief Executive Officer, President
(Principal Executive Officer)
Exhibit 31.2
CERTIFICATIONS
I, Olya Massalitina, certify that:
(1) I have reviewed this Quarterly Report on Form 10-Q of Destiny Media Technologies Inc.;
(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
(4) The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
(5) The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's Board of Directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: July 15, 2024
/s/Olya Massalitina
Olya Massalitina
Chief Financial Officer, Treasurer
(Principal Financial and Accounting Officer)
Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Destiny Media Technologies Inc. (the "Company") on Form 10-Q for the three months ended May 31, 2024 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, in the capacities and on the date indicated below, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of our knowledge, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| By: | /s/ Frederick Vandenberg |
| Name: | Frederick Vandenberg |
| Title: | Chief Executive Officer, President (Principal Executive Officer) |
| Date: | July 15, 2024 |
| By: | /s/Olya Massalitina |
| Name: | Olya Massalitina |
| Title: | Chief Financial Officer, Treasurer (Principal Financial and Accounting Officer) |
| Date: | July 15, 2024 |
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) |
May 31, 2024 |
Aug. 31, 2023 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| Accounts receivable, allowance for credit losses | $ 40,950 | $ 41,331 |
| Common stock, par value per share | $ 0.001 | $ 0.001 |
| Common stock, shares authorized | 20,000,000 | 20,000,000 |
| Common stock, shares issued | 9,637,410 | 10,096,610 |
| Common stock, shares outstanding | 9,637,410 | 10,096,610 |
Condensed Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
May 31, 2024 |
May 31, 2023 |
May 31, 2024 |
May 31, 2023 |
|
| Service revenue | $ 1,155,442 | $ 1,068,007 | $ 3,296,582 | $ 2,987,786 |
| Cost of revenue | 150,044 | 133,753 | 448,808 | 389,794 |
| Gross margin | $ 1,005,398 | $ 934,254 | $ 2,847,774 | $ 2,597,992 |
| Percentage of gross margin | 87.00% | 87.50% | 86.40% | 87.00% |
| Operating expenses | ||||
| General and administrative | $ 159,940 | $ 314,387 | $ 513,087 | $ 652,793 |
| Sales and marketing | 280,308 | 237,834 | 781,166 | 670,360 |
| Product development | 356,599 | 247,392 | 1,084,329 | 823,722 |
| Depreciation and amortization | 87,760 | 37,182 | 255,884 | 109,513 |
| Total operating expenses | 884,607 | 836,795 | 2,634,466 | 2,256,388 |
| Income from operations | 120,791 | 97,459 | 213,308 | 341,604 |
| Other income | ||||
| Interest and other income | 13,685 | 9,593 | 40,672 | 26,038 |
| Net income before income tax | 134,476 | 107,052 | 253,980 | 367,642 |
| Current income tax expense | 0 | 0 | 0 | (3,600) |
| Net income | 134,476 | 107,052 | 253,980 | 364,042 |
| Foreign currency translation adjustments | (16,714) | 1,429 | (27,065) | (109,977) |
| Total comprehensive income | $ 117,762 | $ 108,481 | $ 226,915 | $ 254,065 |
| Net income per common share | ||||
| Basic | $ 0.01 | $ 0.01 | $ 0.03 | $ 0.04 |
| Diluted | $ 0.01 | $ 0.01 | $ 0.03 | $ 0.04 |
| Weighted average common shares outstanding: | ||||
| Basic | 9,689,303 | 10,123,984 | 9,846,942 | 10,124,168 |
| Diluted | 9,722,035 | 10,123,984 | 9,888,441 | 10,124,168 |
| Hosting costs [Member] | ||||
| Cost of revenue | $ 35,036 | $ 30,555 | $ 95,692 | $ 84,040 |
| Internal engineering support [Member] | ||||
| Cost of revenue | 14,249 | 12,707 | 44,245 | 38,160 |
| Customer support [Member] | ||||
| Cost of revenue | 80,746 | 72,001 | 250,721 | 216,237 |
| Third-party and transactions costs [Member] | ||||
| Cost of revenue | $ 20,013 | $ 18,490 | $ 58,150 | $ 51,357 |
ORGANIZATION |
9 Months Ended |
|---|---|
May 31, 2024 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| ORGANIZATION [Text Block] |
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 North America, 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.V" on the TSX Venture Exchange (the "TSXV") and under the symbol "DME1.F" on the Berlin, Frankfurt, Xetra and Stuttgart exchanges in Germany. |
BASIS OF PRESENTATION |
9 Months Ended |
|---|---|
May 31, 2024 | |
| Basis Of Presentation [Abstract] | |
| BASIS OF PRESENTATION [Text Block] |
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. ("DSPI"), MPE Distributions, Inc. ("MPE"), Tonality, Inc. ("Tonality"), and Sonox Digital Inc. ("Sonox"). All intercompany transactions have been eliminated on consolidation. All figures are in United States dollars unless otherwise stated. The accompanying unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q have been prepared in conformity with 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 28, 2023 (the "2023 Form 10-K"). The condensed consolidated balance sheet as of August 31, 2023 was derived from audited consolidated financial statements included in the 2023 Form 10-K but does not include all disclosures required by U.S. GAAP for complete financial statements. The Company's significant accounting policies are described in Note 2 to those consolidated financial statements. Interim results may not be indicative of the results that may be expected for the 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 presentation 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 preparation of the consolidated financial statements in accordance with U.S. GAAP requires management to make use of certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the unaudited condensed consolidated financial statements and the reported amounts of revenue and expenses during the reported periods. The Company bases its estimates on historical experience and on various other assumptions that management believes are reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates. Significant estimates are related to the labour capitalized to software under development and computer software, the recoverability of long-term assets including property, equipment, and intangible assets, amortization expense, credit losses, and valuation of stock-based compensation. |
CASH AND CASH EQUIVALENTS |
9 Months Ended |
|---|---|
May 31, 2024 | |
| Cash and Cash Equivalents [Abstract] | |
| CASH AND CASH EQUIVALENTS [Text Block] |
3. CASH AND CASH EQUIVALENTS The Company's cash include cash in readily available checking accounts. The Company's cash equivalents consist of investments in mutual funds with a major Canadian financial institution that earn interest at variable interest rates ranging from 4.55% - 4.90%. |
PROPERTY AND EQUIPMENT, NET |
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| Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PROPERTY AND EQUIPMENT, NET [Text Block] |
4. PROPERTY AND EQUIPMENT, NET
During the three and nine months ended May 31, 2024, the Company reclassified a total of $26,670 and $77,125 in salaries and wages from software under development to computer software, respectively (May 31, 2023 - $Nil and $Nil, respectively). Depreciation on property and equipment for the three and nine months ended May 31, 2024 was $84,960 and $245,515, respectively (May 31, 2023 - $34,315 and $102,401, respectively). |
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INTANGIBLE ASSETS, NET |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| INTANGIBLE ASSETS, NET [Text Block] |
5. INTANGIBLE ASSETS, NET
During the three and nine months ended May 31, 2024, the Company capitalized a total of $123,695 and $404,652 in salaries and wages related to software under development, respectively (May 31, 2023 - $237,297 and $689,366, respectively), out of this amount, $26,670 and $77,125, respectively, was subsequently reclassified to computer software assets as the projects were completed (Note 4) (May 31, 2023- $Nil and $Nil, respectively). Amortization of intangible assets for the three and nine months ended May 31, 2024 was $2,800 and $10,369, respectively (May 31, 2023 - $2,867 and $7,112, respectively). |
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STOCKHOLDERS' EQUITY |
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May 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| STOCKHOLDERS' EQUITY [Text Block] |
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 and nine months ended May 31, 2024, the Company did not issue any common stock (May 31, 2023 - Nil and Nil, respectively). During the three and nine months ended May 31, 2024, the Company repurchased and cancelled 149,900 and 459,200 common shares for $163,591 and $470,271 respectively (during the three and nine months ended May 31, 2023 - repurchased and cancelled 5,685 common shares for $4,463). [b] Stock option plans Pursuant to the Company's 2015 Stock Option Plan (the "2015 Plan"), 530,000 shares of common stock have been reserved for issuance. A total of 420,000 common shares remain eligible for issuance under the 2015 Plan. On February 18, 2022 the Company received shareholder approval for the 2022 Stock Option Plan (the "2022 Plan") (together with the 2015 Plan, the "Plans"), whereby 1,000,000 common shares are reserved for issuance. As of May 31, 2024, 367,000 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 vest over 24 months. Any options that do not vest as the result of a grantee leaving the Company are forfeited and the underlying common shares are returned to the reserve. The options generally have a contractual term of five years. Stock-Based Payment Award Activity A summary of stock option activity under the Plans as of May 31, 2024, and changes during the period were the following:
During the three and nine months ended May 31, 2024, the Company granted 20,000 stock options to the employees of the Company (three and nine months ended May 31, 2023 - Nil). The weighted-average assumptions used to estimate the fair value of stock options using the Black-Scholes option valuation model were as follows: risk-free interest rate - 4.37%, volatility - 85.31%, exercise price - $1.15, dividend yield - 0%, forfeiture rate - 0%, expected life - 2.13 years. 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 as of May 31, 2024. As of May 31, 2024, the aggregate intrinsic value of outstanding and exercisable options was $10,200 and $4,511, respectively (May 31, 2023 - $Nil and $Nil, respectively). As of May 31, 2024, there was $59,082 (May 31, 2023 - $72,153) of total unrecognized compensation cost related to non-vested stock-based compensation awards. The unrecognized compensation cost is expected to be recognized over a weighted average period of 0.77 years (May 31, 2023 - 1.5 years). During the three and nine months ended May 31, 2024, the Company recorded $11,359 and $35,819 in non-cash stock-based compensation, respectively (May 31, 2023 - $38,085 and $113,327, respectively). [c] Employee Stock Purchase Plan The Company's 2011 Employee Stock Purchase Plan (the "ESPP") became effective on February 22, 2011. Under the ESPP, employees of the Company can contribute up to 5% of their annual salary into a pool which is matched equally by the Company in order to purchase the Company's common shares under certain terms. Directors can 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 TSXV by a third-party plan agent. The third-party plan agent is also responsible for the administration of the ESPP on behalf of the Company and the participants. During the three and nine months ended May 31, 2024, the Company recognized compensation expense of $17,734 and $51,664, respectively (May 31, 2023 - $47,878 and $87,100, respectively) in salaries and wages on the condensed consolidated statement of comprehensive income (loss) in respect of the ESPP, representing the Company's employee matching of cash contributions to the ESPP. The shares were purchased on the open market at an average price of $1.02 over a nine-month period (May 31, 2023 - $1.09). The shares are held in trust by the Company for a period of one year from the date of purchase. As of May 31, 2024, 139,293 shares were held in trust by the Company. [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. The following table shows the computation of basic and diluted earnings per share for the three and nine months ended May 31, 2024, and 2023:
479,000 stock options were excluded from the computation of diluted earnings per share for the three and nine months ended May 31, 2024, because their effect would have been antidilutive. |
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COMMITMENTS AND CONTINGENCIES |
9 Months Ended |
|---|---|
May 31, 2024 | |
| Commitments and Contingencies Disclosure [Abstract] | |
| COMMITMENTS AND CONTINGENCIES [Text Block] |
7. COMMITMENTS AND 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. |
CONCENTRATIONS, ECONOMIC DEPENDENCE AND SEGMENTS |
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| Geographic Areas, Revenues from External Customers [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CONCENTRATIONS, ECONOMIC DEPENDENCE AND SEGMENTS [Text Block] |
8. CONCENTRATIONS, ECONOMIC DEPENDENCE AND SEGMENTS 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 and nine months ended May 31, 2024 and 2023, by product and location of customer, was as follows:
Revenue presented above is based on the location of the customer's billing address. Some of these customers have distribution centers located around the globe and distribute around the world. During the three and nine months ended May 31, 2024, the Company generated 42.1% of total revenue from one customer (May 31, 2023 - 40.5% and 42.0%, respectively). As at May 31, 2024, one customer represented $338,959 (or 56%) of the trade receivables balance (August 31, 2023, one customer represented $143,689 (or 36%)). The Company has substantially all its assets in Canada and its current and planned future operations are, and will be, located in Canada. |
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BASIS OF PRESENTATION (Policies) |
9 Months Ended |
|---|---|
May 31, 2024 | |
| Accounting Policies [Abstract] | |
| Use of Estimates [Policy Text Block] |
Use of Estimates The preparation of the consolidated financial statements in accordance with U.S. GAAP requires management to make use of certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the unaudited condensed consolidated financial statements and the reported amounts of revenue and expenses during the reported periods. The Company bases its estimates on historical experience and on various other assumptions that management believes are reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates. Significant estimates are related to the labour capitalized to software under development and computer software, the recoverability of long-term assets including property, equipment, and intangible assets, amortization expense, credit losses, and valuation of stock-based compensation. |
PROPERTY AND EQUIPMENT, NET (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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May 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of property, plant and equipment [Table Text Block] |
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INTANGIBLE ASSETS, NET (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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May 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of finite-lived intangible assets [Table Text Block] |
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STOCKHOLDERS' EQUITY (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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May 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of stock option activity [Table Text Block] |
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| Schedule of computation of basic and diluted earnings per share [Table Text Block] |
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CONCENTRATIONS, ECONOMIC DEPENDENCE AND SEGMENTS (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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May 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Geographic Areas, Revenues from External Customers [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of revenue from external customers [Table Text Block] |
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CASH AND CASH EQUIVALENTS (Narrative) (Details) |
May 31, 2024 |
|---|---|
| Minimum [Member] | |
| Schedule of Investments [Line Items] | |
| Rate of investment interest | 4.55% |
| Maximum [Member] | |
| Schedule of Investments [Line Items] | |
| Rate of investment interest | 4.90% |
PROPERTY AND EQUIPMENT, NET (Narrative) (Details) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
May 31, 2024 |
May 31, 2023 |
May 31, 2024 |
May 31, 2023 |
|
| Property, Plant and Equipment [Abstract] | ||||
| Capitalized computer software development | $ 26,670 | $ 0 | $ 77,125 | $ 0 |
| Depreciation expense | $ 84,960 | $ 34,315 | $ 245,515 | $ 102,401 |
INTANGIBLE ASSETS, NET (Narrative) (Details) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
May 31, 2024 |
May 31, 2023 |
May 31, 2024 |
May 31, 2023 |
|
| Goodwill and Intangible Assets Disclosure [Abstract] | ||||
| Capitalized software under development | $ 123,695 | $ 237,297 | $ 404,652 | $ 689,366 |
| Capitalized computer software development | 26,670 | 0 | 77,125 | 0 |
| Amortization | $ 2,800 | $ 2,867 | $ 10,369 | $ 7,112 |
INTANGIBLE ASSETS, NET - Schedule of finite-lived intangible assets (Details) - USD ($) |
May 31, 2024 |
Aug. 31, 2023 |
|---|---|---|
| Finite-Lived Intangible Assets [Line Items] | ||
| Intangibles, Cost | $ 1,424,950 | $ 1,092,391 |
| Intangibles, Accumulated Amortization | (454,287) | (446,917) |
| Intangibles, Net book value | 970,663 | 645,474 |
| Software under development [Member] | ||
| Finite-Lived Intangible Assets [Line Items] | ||
| Intangibles, Cost | 946,850 | 624,539 |
| Intangibles, Accumulated Amortization | 0 | 0 |
| Intangibles, Net book value | 946,850 | 624,539 |
| Patents, trademarks and lists [Member] | ||
| Finite-Lived Intangible Assets [Line Items] | ||
| Intangibles, Cost | 478,100 | 467,852 |
| Intangibles, Accumulated Amortization | (454,287) | (446,917) |
| Intangibles, Net book value | $ 23,813 | $ 20,935 |
STOCKHOLDERS' EQUITY - Schedule of stock option activity (Details) - USD ($) |
9 Months Ended | 12 Months Ended | ||
|---|---|---|---|---|
May 31, 2024 |
Aug. 31, 2023 |
Aug. 31, 2022 |
May 31, 2023 |
|
| Number of Shares | ||||
| Outstanding Balance | 749,000 | 593,000 | ||
| Granted | 20,000 | 228,000 | ||
| Forfeited | (23,416) | (72,000) | ||
| Expired | (2,584) | |||
| Outstanding Balance | 743,000 | 749,000 | 593,000 | |
| Exercisable | 608,807 | |||
| Weighted Average Exercise Price | ||||
| Outstanding Balance | $ 1.3 | $ 1.49 | ||
| Granted | 1.15 | 0.85 | ||
| Forfeited | 1.13 | 1.41 | ||
| Expired | 1.29 | |||
| Outstanding Balance | 1.31 | $ 1.3 | $ 1.49 | |
| Exercisable | $ 1.39 | |||
| Weighted Average Remaining Contractual Term | ||||
| Granted | 4 years 10 months 9 days | 4 years 10 months 24 days | ||
| Forfeited | 3 years 4 months 20 days | 3 years 4 months 28 days | ||
| Expired | 2 years 11 months 23 days | |||
| Weighted Average Remaining Contractual Term Outstanding Balance | 2 years 7 months 28 days | 3 years 4 months 13 days | 3 years 9 months 14 days | |
| Weighted Average Remaining Contractual Term Exercisable | 2 years 3 months 21 days | |||
| Aggregate Intrinsic Value | ||||
| Outstanding Balance | $ 0 | $ 0 | ||
| Granted | 0 | 0 | ||
| Forfeited | 658 | 0 | ||
| Exercised | 42 | |||
| Outstanding Balance | 10,200 | $ 0 | $ 0 | |
| Exercisable | $ 4,511 | $ 0 | ||
STOCKHOLDERS' EQUITY - Schedule of computation of basic and diluted earnings per share (Details) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
May 31, 2024 |
May 31, 2023 |
May 31, 2024 |
May 31, 2023 |
|
| Stockholders' Equity Note [Abstract] | ||||
| Net income | $ 134,476 | $ 107,052 | $ 253,980 | $ 364,042 |
| Denominator: | ||||
| Weighted-average basic shares outstanding | 9,689,303 | 10,123,984 | 9,846,942 | 10,124,168 |
| Effect of dilutive stock-based awards | 32,732 | 0 | 41,499 | 0 |
| Weighted-average diluted shares | 9,722,035 | 10,123,984 | 9,888,441 | 10,124,168 |
| Earnings Per Share [Abstract] | ||||
| Basic | $ 0.01 | $ 0.01 | $ 0.03 | $ 0.04 |
| Diluted | $ 0.01 | $ 0.01 | $ 0.03 | $ 0.04 |
CONCENTRATIONS, ECONOMIC DEPENDENCE AND SEGMENTS (Narrative) (Details) - USD ($) |
3 Months Ended | 9 Months Ended | 12 Months Ended | ||
|---|---|---|---|---|---|
May 31, 2024 |
May 31, 2023 |
May 31, 2024 |
May 31, 2023 |
Aug. 31, 2023 |
|
| Concentration Risk [Line Items] | |||||
| Accounts receivable, net of allowance for doubtful accounts | $ 682,359 | $ 682,359 | $ 432,501 | ||
| Customer Concentration Risk [Member] | Customer One [Member] | Revenue Benchmark [Member] | |||||
| Concentration Risk [Line Items] | |||||
| Concentration risk, percentage | 42.10% | 40.50% | 42.10% | 42.00% | |
| Customer Concentration Risk [Member] | Customer One [Member] | Trade Accounts Receivable [Member] | |||||
| Concentration Risk [Line Items] | |||||
| Accounts receivable, net of allowance for doubtful accounts | $ 338,959 | $ 338,959 | $ 143,689 | ||
| Concentration risk, percentage | 56.00% | 36.00% | |||
CONCENTRATIONS, ECONOMIC DEPENDENCE AND SEGMENTS - Schedule of revenue by customer (Details) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
May 31, 2024 |
May 31, 2023 |
May 31, 2024 |
May 31, 2023 |
|
| Concentration Risk [Line Items] | ||||
| Revenue | $ 1,155,442 | $ 1,068,007 | $ 3,296,582 | $ 2,987,786 |
| North America [Member] | ||||
| Concentration Risk [Line Items] | ||||
| Revenue | 583,195 | 534,667 | 1,668,512 | 1,476,444 |
| Europe [Member] | ||||
| Concentration Risk [Line Items] | ||||
| Revenue | 514,792 | 477,912 | 1,468,018 | 1,367,190 |
| Australasia [Member] | ||||
| Concentration Risk [Line Items] | ||||
| Revenue | 52,705 | 49,553 | 144,239 | 123,402 |
| Africa [Member] | ||||
| Concentration Risk [Line Items] | ||||
| Revenue | $ 4,750 | $ 5,875 | $ 15,813 | $ 20,750 |
1 Year Destiny Media Technologies (QB) Chart |
1 Month Destiny Media Technologies (QB) Chart |
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