DESTINY MEDIA TECHNOLOGIES INC
For the period ended Nov 30, 2024. Filed Jan 14, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Nov 30, 2024 · Filed Jan 14, 2025
Extracted filing text, with the paragraph anchors used by the comparison.
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Item 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets
| Notes | November 30,2024 | August 31, 2024 | |
|---|---|---|---|
| (unaudited) · (audited) | |||
| ASSETS | |||
| Cash and cash equivalents | 3 | $1,526,761 | $1,481,582 |
| Accounts receivable, net of allowance for doubtful accounts of $29,486 (August 31, 2024 - $41,334) | 8 | 722,594 | 681,146 |
| Other receivables | 90,189 | 82,585 | |
| Prepaid expenses | 51,725 | 87,345 | |
| Deposits | 31,144 | 32,347 | |
| Total current assets | 2,422,413 | 2,365,005 | |
| Property and equipment, net | 4 | 1,086,889 | 1,174,370 |
| Intangible assets, net | 5 | 119,463 | 148,977 |
| Total assets | $3,628,765 | $3,688,352 | |
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||
| Current | |||
| Accounts payable | $144,882 | $151,734 | |
| Accrued liabilities | 278,071 | 328,801 | |
| Deferred revenue | 24,164 | 42,399 | |
| Total current liabilities | 447,117 | 522,934 | |
| Total liabilities | 447,117 | 522,934 | |
| Stockholders' equity | |||
| Common stock, par value $0.001, authorized 20,000,000 shares.Issued and outstanding - 9,637,410 shares (August 31, 2024 - 9,637,410 shares) | 6 | 9,637 | 9,637 |
| Additional paid-in capital | 8,830,544 | 8,819,785 | |
| Accumulated deficit | (5,074,469) | (5,192,609) | |
| Accumulated other comprehensive loss | (584,064) | (471,395) | |
| Total stockholders' equity | 3,181,648 | 3,165,418 | |
| Total liabilities and stockholders' equity | $3,628,765 | $3,688,352 | |
Condensed Consolidated Statements of Comprehensive Income
| For the three months ended November 30, | |||
|---|---|---|---|
| Notes | 2024 | 2023 | |
| Service revenue | 8 | $1,226,757 | $1,154,802 |
| Cost of revenue | |||
| Hosting costs | 46,941 | 28,273 | |
| Internal engineering support | 13,365 | 17,070 | |
| Customer support | 75,733 | 96,728 | |
| Third-party and transactions costs | 20,076 | 21,347 | |
| 156,115 | 163,418 | ||
| Gross margin | 1,070,642 | 991,384 | |
| 87.3% | 85.8% | ||
| Operating expenses | |||
| General and administrative | 151,329 | 147,892 | |
| Sales and marketing | 230,558 | 215,857 | |
| Product development | 412,044 | 308,547 | |
| Depreciation and amortization | 4,5 | 166,979 | 81,098 |
| 960,910 | 753,394 | ||
| Income from operations | 109,732 | 237,990 | |
| Other income | |||
| Interest and other income | 8,408 | 11,526 | |
| Net income before income tax | $118,140 | $249,516 | |
| Current income tax expense | - | - | |
| Net income | $118,140 | $249,516 | |
| Foreign currency translation adjustments | (112,669) | (12,692) | |
| Total comprehensive income | $5,471 | $236,824 | |
| Net income per common share | |||
| Basic and diluted | 6(d) | $0.01 | $0.02 |
| Weighted average common shares outstanding: | |||
| Basic | 6(d) | 9,637,410 | 10,010,534 |
| Diluted | 6(d) | 9,824,120 | 10,286,534 |
Condensed Consolidated Statements of Stockholders' Equity
Three Months Ended November 30, 2024 and 2023
| Common stock | |||||||
|---|---|---|---|---|---|---|---|
| Notes | Shares | Amount | AdditionalPaid-inCapital | AccumulatedDeficit | AccumulatedOtherComprehensiveIncome (Loss) | TotalStockholders'Equity | |
| Balance, August 31, 2023 | 10,096,610 | 10,096 | 9,242,671 | (5,304,367) | (474,759) | 3,473,641 | |
| Total comprehensive income | - | - | - | 249,516 | (12,692) | 236,824 | |
| Stock-based compensation | 6(b) | - | - | 13,805 | - | - | 13,805 |
| Common shares retired | 6(a) | (172,000) | (172) | (170,606) | - | - | (170,778) |
| Balance, November 30, 2023 | 9,924,610 | 9,924 | 9,085,870 | (5,054,851) | (487,451) | 3,553,492 | |
| Common stock | |||||||
|---|---|---|---|---|---|---|---|
| Notes | Shares | Amount | AdditionalPaid-inCapital | AccumulatedDeficit | AccumulatedOtherComprehensiveIncome (Loss) | TotalStockholders'Equity | |
| Balance, August 31, 2024 | 9,637,410 | 9,637 | 8,819,785 | (5,192,609) | (471,395) | 3,165,418 | |
| Total comprehensive income | - | - | - | 118,140 | (112,669) | 5,471 | |
| Stock-based compensation | 6(b) | - | - | 10,759 | - | - | 10,759 |
| Balance, November 30, 2024 | 9,637,410 | 9,637 | 8,830,544 | (5,074,469) | 584,064 | 3,181,648 | |
Condensed Consolidated Statements of Cash Flows
| For the three months endedNovember 30, | |||
|---|---|---|---|
| Notes | 2024 | 2023 | |
| Operating Activities | |||
| Net income | $118,140 | $249,516 | |
| Adjustments to reconcile net income to net cash provided (used) in operations: | |||
| Depreciation and amortization | 4,5 | 166,979 | 81,098 |
| Stock-based compensation | 6(b) | 10,759 | 13,805 |
| Allowance for doubtful accounts | - | 578 | |
| Unrealized foreign exchange gain | - | (1,833) | |
| Changes in non-cash working capital: | |||
| Accounts receivable | (25,986) | (152,051) | |
| Other receivables | (10,532) | 2,092 | |
| Prepaid expenses and deposits | 33,835 | 20,789 | |
| Accounts payable | (2,803) | (55,411) | |
| Accrued liabilities | (40,335) | 37,325 | |
| Deferred revenue | (16,967) | (7,139) | |
| Net cash provided by operating activities | 217,619 | 188,769 | |
| Investing Activities | |||
| Development of software | (92,647) | (154,064) | |
| Purchase of property, equipment, and intangibles | 4,5 | (4,333) | (23,338) |
| Net cash used in investing activities | (96,980) | (177,402) | |
| Financing Activity | |||
| Common stock repurchased for cancellation | 6(a) | - | (170,778) |
| Net cash used in financing activity | - | (170,778) | |
| Effect of foreign exchange rate changes on cash and cash equivalents | (775,460) | (10,993) | |
| Net increase (decrease) in cash and cash equivalents | 45,179 | (170,404) | |
| Cash and cash equivalents, beginning of period | 1,481,582 | 2,002,769 | |
| Cash and cash equivalents, end of period | $1,526,761 | $1,832,365 | |
**DESTINY MEDIA TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 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 the United States, Europe, and Australia.
The Company's stock is listed for trading under the symbol "DSNY" on the OTCQB U.S. in the United States, under the symbol "DSY" on the TSX Venture Exchange (the "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. ("DSNY"), 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 21, 2024 (the "2024 Form 10-K"). The balance sheet as of August 31, 2024 was derived from audited consolidated financial statements included in the 2024 Form 10-K but these unaduited condensed consolidated financial statements 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 expected credit losses for accounts receivable, the labour capitalized to software under development and computer software, the recoverability of long-term assets including property, equipment, and intangible assets, amortization expense, and valuation of stock-based compensation.
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 4.30% -4.90%.
4. PROPERTY AND EQUIPMENT, NET
| Property and Equipment | Cost | AccumulatedAmortization | Net Book Value |
|---|---|---|---|
| Furniture and fixtures | $127,522 | $(119,511) | $8,011 |
| Computer hardware | 316,824 | (278,308) | 38,516 |
| Computer software | 1,843,907 | (803,545) | 1,040,362 |
| Total property and equipment | $2,288,253 | $(1,201,364) | $1,086,889 |
| Property and Equipment | Cost | AccumulatedAmortization | Net Book Value |
|---|---|---|---|
| Furniture and fixtures | $132,444 | $(123,687) | $8,757 |
| Computer hardware | 325,845 | (285,808) | 40,037 |
| Computer software | 1,796,786 | (671,210) | 1,125,576 |
| Total property and equipment | $2,255,075 | $(1,080,705) | $1,174,370 |
During the three months ended November 30, 2024, the Company reclassified a total of $116,039 in salaries and wages from computer software under development (November 30, 2023 - $23,338).
Depreciation on property and equipment for the three months ended November 30, 2024 was $163,803 (November 30, 2023 - $77,472).
5. INTANGIBLE ASSETS, NET
| Intangible Assets · Cost · AccumulatedAmortization · Net Book Value | ||||
|---|---|---|---|---|
| Software under development | $97,104 | $ | - | $97,104 |
| Patents, trademarks, and lists | 470,575 | (448,216) | 22,359 | |
| Total intangible assets | $567,679 | $(448,216) | $119,463 | |
| Intangible Assets · Cost · AccumulatedAmortization · Net Book Value | ||||
|---|---|---|---|---|
| Software under development | $124,678 | $ | - | $124,678 |
| Patents, trademarks, and lists | 486,579 | (462,280) | 24,299 | |
| Total intangible assets | $611,257 | $(462,280) | $148,977 | |
During the three months ended November 30, 2024, the Company capitalized a total of $92,647 in salaries and wages related to software under development (November 30, 2023 - $177,402), out of this amount, $92,647 (November 30, 2023 - $23,338) was subsequently reclassified to Computer software assets as the projects were completed (Note 4).
Amortization on intangible assets for the three months ended November 30, 2024 was $3,176 (November 30, 2023 - $3,626).
6. STOCKHOLDERS' EQUITY
[a] Common stock issued and authorized
The Company is authorized to issue up to 20,000,000 shares of common stock, par value $0.001 per share.
During the three months ended November 30, 2024, the Company did not issue any common stock (November 30, 2023 -Nil). During the three months ended November 30, 2024, the Company did not repurchase nor and cancel any common shares (November 30, 2023 - repurchased and cancelled 172,000 common shares for $170,778).
[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 November 30, 2024,363,250 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 November 30, 2024, and changes during the period were the following:
| Number of Options | Weighted AverageExercise Price | WeightedAverageContractualTerm (Years) | |
|---|---|---|---|
| Outstanding at August 31, 2023 | 749,000 | $1.30 | 3.37 |
| Granted | 20,000 | $1.15 | 4.61 |
| Forfeited | (46,122) | $1.14 | 3.14 |
| Expired | (7,168) | $1.01 | 3.47 |
| Outstanding at August 31, 2024 | 715,710 | $1.31 | 2.37 |
| Forfeited | (44,422) | $1.14 | 2.89 |
| Outstanding at November 30, 2024 | 671,288 | $1.31 | 2.12 |
| Exercisable at November 30, 2024 | 619,847 | $1.38 | 1.88 |
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 November 30, 2024. As of November 30, 2024, the aggregate intrinsic value of outstanding and exercisable options was $6,908 and $4,027 respectively (November 30, 2023 - $37,920 and $8,400, respectively).
As of November 30, 2024, there was $125,580 (November 30, 2023 - $73,958) 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 0.9 years (November 30, 2023 -0.96 years).
During the three months ended November 30, 2024 and 2023, the Company recorded $10,759 and $13,805 in non-cash stock-based compensation, 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 months ended November 30, 2024, the Company recognized compensation expense of $14,467 (November 30, 2023 - $21,822) in salaries and wages on the condensed consolidated statement of comprehensive income 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 $0.84 (November 30, 2023 - $0.97). The shares are held in trust by the Company for a period of one year from the date of purchase. As of November 30, 2024,227,801 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 months ended November 30, 2024 and 2023:
| Three Months Ended November 30, | ||
|---|---|---|
| 2024 | 2023 | |
| Numerator: | ||
| Net Income | $118,140 | $249,516 |
| Denominator: | ||
| Weighted-average basic shares outstanding | 9,637,410 | 10,010,534 |
| Effect of dilutive stock options | 186,710 | 276,000 |
| Weighted-average diluted shares | 9,824,120 | 10,286,534 |
| Basic and diluted earnings per share | $0.01 | $0.02 |
470,750 stock options were excluded from the computation of diluted earnings per share for the three months ended November 30, 2024 because their effect would have been antidilutive.
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. 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 months ended November 30, 2024 and 2023, by product and location of customer, was as follows:
| Three Months Ended November 30, | ||
|---|---|---|
| 2024 | 2023 | |
| Play MPE® | ||
| North America | $608,575 | $639,027 |
| Europe | 562,054 | 460,422 |
| Australasia | 51,378 | 49,665 |
| Africa | 4,750 | 5,688 |
| Total Play MPE® | $1,226,757 | $1,154,802 |
Revenue presented above is based on 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 months ended November 30, 2024, the Company generated 43% of total revenue from one customer (November 30, 2023 -39%).
As at November 30, 2024, one customer represented $554,589 (or 55%) of the trade receivables balance (August 31, 2024, one customer represented $520,089 (or 60%)).
The Company has substantially all its assets in Canada and its current and planned future operations are, and will be, located in Canada.
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.