What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2020-07-15 compared with 2020-04-15 · 57 added, 36 removed, 130 unchanged (42% of the section changed)

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Our telephone number is (604) 609-7736 and our facsimile number is (604) 609-0611.

Our common stock trades on TSX Venture Exchange in Canada under the symbol "DSY", on the OTCQB U.S.

Our common stock trades on the TSX Venture Exchange in Canada under the symbol "DSY", on the OTCQB U.S.

("OTCQB") under the symbol "DSNY", and on various German exchanges (Frankfurt, Berlin, Stuttgart and Xetra) under the symbol DME, WKN 935 410.

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Finally, it also allows for easy translation into multiple languages to accelerate international expansion.

We continue to invest in additional development of Play MPE® Version 8 and related tools and applications.

Throughout 2020, the Company has continued to invest in its technology stack.

These investments in the Play MPE® technology stack intended to increase the speed and efficiency of new feature implementation and expand the efficient use of software resources.

The Company concurrently is continuing to add functionality and improvements to the user experience.

Improvements in user experience will facilitate greater success in global expansion while added functionality is designed to both improve business development success and to provide added saleable services.

In December 2019, the Company announced the new "localization" capability of the sending side of the Play MPE® platform.

This feature supports easy translation of the platform.

The Company then added Spanish, German, Japanese and French to the sending side software.

The Company believes these language translations will facilitate global expansion of the Play MPE® platform.

In January 2020, the Company announced an improved recipient side platform for Play MPE® which has added advanced recipient authentication, improved song search capabilities, and content management features all designed to increase recipient side functionality and ease of use.

These features are designed to increase song discovery and activity within the Play MPE® platform.

Play MPE® then added Spanish, German, Japanese and French to the sending side software.

In January 2020, Play MPE® added several updates to the recipient side of the platform including advanced recipient authentication, improved song search capabilities, and various content management features.

These updates are designed to increase recipient side functionality, ease of use, increased song discovery and increased activity within the Play MPE® platform.

In late January 2020, Universal Music Canada commenced distribution of all releases within Canada through the Play MPE® platform.

In March, this incremental use of the Play MPE® platform in Canada extended to all new music from Sony Music Canada.

Play MPE® continues to grow new use within Canada with newly added distribution for several major independent record labels towards the end of the third quarter.

This new use is "seeding" the Canadian segment for the Play MPE® platform with associated revenue expected to commence near the end of calendar 2020.

Concurrently, Play MPE® list management completed a review of the Canadian recipient lists to update and include all relevant radio personnel including major conglomerates Bell Media, Corus, Pattison, Stingray and others.

Play MPE®'s list management department maintains the most accurate and complete recipient lists in the industry.

In February 2020 Play MPE® completed the reconstruction of the US Latin Radio lists, updating categories and segmentation, and updated represented stations and recipients.

Concurrently, the Play MPE® platform has commenced seeding the network with content from Universal Music Latin Entertainment and major independent record labels.

By the end of the third quarter, Play MPE® had also completed the construction of Mexican distribution lists, and has commenced seeding the platform with suitable content.

In March, the Company appointed Glenn Mattern as Director of Business Development for Play MPE®.

Mattern brings 25 years of business development experience into this newly created position.

In April, the Company commenced its collaborative thought leadership program with initiation of the Play MPE® panel, webinar and Instagram Live series.

These panels and live interviews showcase success stories, share opinions and impressions, and convey industry insights.

These programs are designed to grow collaborative customer interactions, align Play MPE® and record label activities and expand Play MPE® platform interactions.

In May 2020, the Company commenced its Beta testing program with trials on a new release creator.

This program immediately followed the Alpha release the distribution software, now branded as "Caster".

The Beta program actively seeks feedback into the user interface, feature improvements, and new features.

Participants in the Beta program will be recognized as champions and earn certificates of participation and involvement.

This program is expected to improve brand loyalty and customer engagement.

The Company expects that this process will greatly enhance the ability of the Company to ensure that global label customers, with diverse requirements, can easily develop, upload, and distribute customized content to recipients through the Play MPE® platform.

By the end of the third quarter, Play MPE® completed an update to the web player interface to include the left navigation bar.

This alteration will allow additional feature sets and functionality to be added and accessed easily by customers.

Immediately following the quarter, the Play MPE® announced the translation of our Play MPE® website into Spanish.

The Company also has a legacy business, Clipstream®, in the online video industry for which it is pursuing strategic alternatives.

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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, is protected by over two dozen patents claiming initial priority to 2011.

This product is has incidental revenues and is not supported or marketed.

RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTH PERIODS ENDED FEBRUARY 29.

2020 AND FEBRUARY 28, 2019

Total revenue for the six months ending February 29, 2020 declined by less than 1% ($1,852,585 in 2020 - $1,863,383 in 2019) due to the decline in Clipstream related revenue which now represents approximately 1% of the Company's revenue.

Play MPE® revenue, which represents all other revenue of the Company (approximately 99%) increased by less than 1%.

Total revenue for the three-month period ended February 29, 2020 declined by $72,635 over the comparable quarter in fiscal 2019, to $806,729 (2019 - $879,364).

Foreign exchange did not significantly impact revenue for either the three or six month periods.

The decline in Play MPE® revenue realized during our second quarter is primarily a temporary adjustment as we renew agreements in the United States.

In late January 2020, Play MPE® launched in Canada with Universal Music Canada (UMC) distributing all releases through the Play MPE® platform.

Concurrently, several major independent record labels and a second major record label started distributing releases through Play MPE® under trial arrangements.

With the greater content available within the Play MPE® platform, recipient side activity within Play MPE® has grown substantially and user reception has been very positive.

Play MPE® will continue to expand usage on both sides of the platform prior to negotiating commercial agreements and commencing revenue generation.

The Company expects revenue to commence during the fiscal year.

The Company's unique software-based approach to rendering video, has patents claiming initial priority to 2011.

This product has incidental revenues and is not supported or marketed.

RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTH PERIODS ENDED MAY 31.

2020 AND 2019

Total revenue for the nine-month period ended May 31, 2020 declined by 1.5% ($2,792,458 in 2020 - $2,833,818 in 2019) due to the decline in Clipstream related revenue which now represents approximately 1% of the Company's revenue.

Play MPE® revenue, which represents all other revenue of the Company (approximately 99%) decreased by less than 1%.

Total revenue for the three-month period ended May 31, 2020 declined by $30,562 over the comparable quarter in fiscal 2019, to $939,873 (2019 - $970,435).

Foreign exchange did not significantly impact revenue in the three and nine month periods ended May 31, 2020.

Operating Expenses

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The Company maintains a large portion of its financial reserves in Canadian dollars to mitigate the downside risk of adverse exchange rates on its operating expenditures.

Operating costs during the six-month period ended February 29, 2020 increased by 23.2% to $1,757,029 (2019 - $1,425,647).

Operating costs during the nine-month period ended May 31.

2020 increased by 19.7% to $2,559,608 (2019 - $2,137,604).

The increase in costs was primarily the result of non-recurring (one-time) costs associated with staff restructuring, professional fees associated with the Company's Normal Course Issuer Bid (NCIB) repurchase of the 5% of the Company's shares, professional fees associated with the share consolidation.

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Depreciation and Amortization

Depreciation and amortization expense increased to $67,550 for the six-month period ended February 29, 2020 from $40,335 for the period ended February 28, 2019, an increase of 67.5% due to an increase in computer software costs associated with externally developed Play MPE® recipient player applications.

Depreciation and amortization expense increased to $100,744 for the nine-month period ended May 31, 2020 from $67,099 for the period ended May 31, 2019, an increase of 50.1% due to an increase in computer software costs associated with externally developed Play MPE® recipient player applications.

Other earnings and expenses

Interest income was $14,477 for the six-month period ended February 29, 2020 (2019:

Interest income was $19,743 for the nine-month period ended May 31, 2020 (2019:

$21,154) and is derived from one-year Guaranteed Investment Certificates.

During the six-month period ended February 29, 2020 we had net loss of $43,673 (2019 - $300,909 net income).

During the nine-month period ended May 31, 2020 we had net income of $11,226 (2019:

Overall, a modest decline in revenue was accompanied by increased spending on staffing and marketing and advertising costs, as discussed above.

For the three-month period ended February 29, 2020, adjusted EBITDA was ($126,136) (2019 - EBITDA $105,239).

For the three-month period ended May 31, 2020, adjusted EBITDA was $98,103 (2019:

EBITDA $223,883).

Adjusted EBITDA is not defined under generally accepted accounting principles ("GAAP") and it may not be comparable to similarly titled measures reported by other companies.

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LIQUIDITY AND FINANCIAL CONDITION

Our cash and cash equivalents balance decreased by $1,461,961 during the six-month period ended February 29, 2020, due in part to the investment of surplus funds in short-term deposits with a one-year maturity.

As at February 29, 2020, we held $1,050,177 (August 31, 2019 - $2,512,138) in cash and cash equivalents.

As at May 31, 2020, we held $913,349 (August 31, 2019 - $2,512,138) in cash and cash equivalents.

Our short-term investments consist of one-year Guaranteed Investment Certificates (GICs) held through a major Canadian financial institution increased by $717,750 to $1,097,806 (August 31, 2019 - $380,056).

At February 29, 2020, we had working capital of $2,097,522 compared to $2,809,689 as at August 31, 2019.

At May 31, 2020, we had working capital of $2,131,144 compared to $2,809,689 as at August 31, 2019.

The decrease in our working capital was primarily due to the repurchase of common stock under a common stock repurchase program, pursuant to a Normal Course Issuer Bid ("NCIB") facilitated through the TSX Venture Exchange, which commenced in September 2019.

During the three and six-month periods ended February 29, 2020, the Company completed open market purchases of 251,385 and 298,755 common shares for a total cost of $241,334 and $291,889 respectively, for total repurchases of $533,223.

Working capital also declined following the recognition of an operating lease liability following adoption of ASU 2016-02, at February 29, 2020 the current portion of the operating lease liability was $219,894 (August 31, 2019 - $nil).

Net cash used in operating activities for the six-month period ended February 29, 2020 was $133,752, compared to net cash provided by of $433,660 for the six months ended February 28, 2019.

During the three-month period ended May 31, 2020, the Company did not complete any NCIB purchases.

During the nine-month period ended May 31, 2020, the Company completed open market purchases of 550,140 common shares for a total cost of $533,223.

Working capital also declined following the recognition of an operating lease liability following adoption of ASU 2016-02, at May 31, 2020 the current portion of the operating lease liability was $219,864 (August 31, 2019 - $nil).

Net cash used in operating activities for the nine-month period ended May 31, 2020 was $234,343, compared to net cash provided by of $635,568 for the nine-month period ended May 31, 2020.

The primary reason for the decrease in cash flows from operating activities is due to an increase in operating expenses, as described above, as well as an increase in accounts receivable during the quarter.

Net cash used in investing activities for the six-month period ended February 29, 2020 was $796,851, compared to $64,284 for the six-month period ended February 28, 2020.

During the six-month period ended February 29, 2020, approximately $753,000 was spent on the investment of cash in GICs during the period.

Investing activities during the six-month period ended February 28, 2019 were attributable solely to expenditures on property, equipment and intangibles.

Net cash used in financing activities during the six-month period ended February 29, 2020 was $533,223, related to cash used to repurchase and retire 550,140 shares of common stock of the Company under the NCIB.

There were no cash flows from financing activities during the six-month period ended February 28, 2019.

Net cash used in investing activities for the nine-month period ended May 31, 2020 was $797,612, compared to $458,300 for the nine-month period ended May 31, 2019.

During the nine-month period ended May 31 2020, approximately $743,002 was spent on the investment of cash in GICs during the period.

Investing activities during the nine-month period ended May 31, 2019 were attributable largely to expenditures on property, equipment and intangibles.

Net cash used in financing activities during the nine-month period ended May 31, 2020 was $533,223, related to cash used to repurchase and retire 550,140 shares of common stock of the Company under the NCIB.

There were no cash flows from financing activities during the nine-month period ended May 31, 2019.

CRITICAL ACCOUNTING POLICIES

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis