DESTINY MEDIA TECHNOLOGIES INC

Condensed Consolidated Balance Sheets

Condensed Consolidated Statements of Comprehensive Income (Loss)

Condensed Consolidated Statements of Stockholders' Equity

Three and Nine Months Ended May 31, 2026 and 2025

Condensed Consolidated Statements of Cash Flows

**DESTINY MEDIA TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

May 31, 2026

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 24, 2025 (the "2025 Form 10-K"). The condensed consolidated balance sheet as of August 31, 2025 was derived from audited consolidated financial statements included in the 2025 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, and valuation of stock-based compensation.

3. CASH AND CASH EQUIVALENTS

The Company's cash includes 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 an average interest of 1.65%.

4. PROPERTY AND EQUIPMENT, NET

During the three and nine months ended May 31, 2026, the Company reclassified a total of $16,926 and $56,651 in salaries and wages from software under development to computer software, respectively (May 31, 2025 - $124,500 and $310,633, respectively).

Depreciation on property and equipment for the three and nine months ended May 31, 2026 was $161,912 and $494,911, respectively (May 31, 2025 - $186,754 and $530,854, respectively).

5. INTANGIBLE ASSETS, NET

During the three and nine months ended May 31, 2026, the Company capitalized a total of $1,585 and $40,136 in salaries and wages related to software under development, respectively (May 31, 2025 - $82,592 and $285,297, respectively). During the three and nine months ended May 31, 2026, $16,926 and $56,651, respectively, was subsequently reclassified to computer software assets as the projects were completed (Note 4) (May 31, 2025 - $124,500 and $310,633, respectively).

Amortization of intangible assets for the three and nine months ended May 31, 2026 was $2,587 and $9,090, respectively (May 31, 2025 - $3,671 and $10,274, respectively).

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, 2026, the Company did not issue any common stock (May 31, 2025 -Nil). During the three and nine months ended May 31, 2026, the Company did not repurchase and cancel any common shares (May 31, 2025 -Nil).

[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. As of May 31, 2026,481,870 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, 2026,416,500 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, 2026, and changes during the period were the following:

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, 2026. As of May 31, 2026, the aggregate intrinsic value of outstanding and exercisable options were both $nil, respectively (May 31, 2025 - $nil).

As of May 31, 2026, there was $nil (May 31, 2025 - $7,423) of total unrecognized compensation cost related to non-vested stock-based compensation awards. As of May 31, 2026, there is no unrecognized compensation cost (May 31, 2025 - expected to be recognized over the weighted average of 0.46 years).

During the three and nine months ended May 31, 2026, the Company recorded $353 and $2,391 in non-cash stock-based compensation, respectively (May 31, 2025 - $8,929 and $27,832, 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 the TSX-V 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, 2026, the Company recognized compensation expense of $15,788 and $37,766, respectively (May 31, 2025 - $19,960 and $52,170, 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 $0.74 over a nine-month period (May 31, 2025 - $0.67). The shares are held in trust by the Company for a period of one year from the date of purchase. As of May 31, 2026,157,810 shares were held in trust by the Company (May 31, 2025 -680,610 shares).

[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, 2026, and 2025:

501,000 stock options were excluded from the computation of diluted earnings per share for the three and nine months ended May 31, 2026, 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.

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, 2026 and 2025, by location of customers, 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, 2026, the Company generated 41.9% and 43.4% of total revenue from one customer (May 31, 2025 -47.0% and 47.1%, respectively).

As at May 31, 2026, one customer represented $266,666 (or 45.3%) of the trade receivables balance (August 31, 2025, one customer represented $571,642 (or 66.2%)).

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