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Item 1. Business

2020-11-18 compared with 2019-11-18 · 203 added, 299 removed, 27 unchanged (95% of the section changed)

1 unchanged sentence

Destiny Media Technologies Inc.

was incorporated in August 1998

under the laws of the State of Colorado and the corporate jurisdiction was

changed to Nevada effective October 8, 2014.

We carry out our business

operations through our wholly owned subsidiary, Destiny Software Productions

Inc., a British Columbia company that was incorporated in 1992, MPE

Distribution, Inc.

a Nevada company that was incorporated in 2007 and Sonox

was incorporated in August 1998 under the laws of the State of Colorado and the corporate jurisdiction was changed to Nevada effective October 8, 2014.

We carry out our business operations through our wholly owned subsidiary, Destiny Software Productions Inc., a British Columbia company that was incorporated in 1992, MPE Distribution, Inc.

a Nevada company that was incorporated in 2007 and Sonox Digital Inc.

incorporated under the Canada Business Corporations Act in 2012.

The Company, Destiny Media, Destiny, we or us refers to the

consolidated activities of all four companies.

Our principal executive office is located at Suite 1110, 885

West Georgia Street, Vancouver, British Columbia V6C 3E8.

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.

(OTCQB) under the symbol DSNY, and on

various German exchanges (Frankfurt, Berlin, Stuttgart and Xetra) under the

symbol DME, WKN 935 410.

The "Company", "Destiny Media", "Destiny", "we" or "us" refers to the consolidated activities of all four companies.

Our principal executive office is located at Suite 1110, 885 West Georgia Street, Vancouver, British Columbia V6C 3E8.

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.

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

Our corporate website is located at http://www.dsny.com .

OUR PRODUCTS AND SERVICES

Our core business is the Play MPE® platform, a two sided

marketplace that enables music labels and artists to create and distribute

promotional content and musical assets on the one side, and for music

broadcasting professionals, music curators and music reviewers to be able to

discover, listen to, download and consume, on the other.

Play MPE® is a

cloud-based enterprise SaaS product.

Typically, record labels and artists promote new music through

the presentation of broadcast quality audio, video, images, promotional

information, industry required meta data, and other digital content.

presentation of this promotional material is catered to music curators who can

expose that music to a larger consumer audience through broadcasts (examples

include radio, internet radio, streaming services, DJs etc.) or publicity and

media destinations.

The system is also used to promote music and artists to

label A&R teams, and music supervisors (who work with TV/movie producers to

recommend musical content to accompany video productions).

Broadcast play of music provides revenue directly to record

labels and artists through royalties and indirectly through sales, concerts /

live performances, merchandise sales etc.

as the profile and popularity of the

musical work and artist increase.

Effective marketing is critical in growing the

popularity of a song or an artist and thereby revenue for a particular artist.

Play MPE® is a critical step in this process.

Easy-to-use and collaborative

tools on the player side (music curator side) improves activity which improves

the likelihood that a particular track obtains broadcast play.

recipient activity provides valuable information to record labels improving data

centric marketing decision making.

Our customers range from small independent artists, small to

large independent record labels (Indies), to promoters, and to the worlds

largest record labels (the Major Record Labels) (Universal Music Group, Warner

Music Group and Sony Music Entertainment).

Our Major Record Label clients have

offices around the world and typically represent the worlds largest recording

All three Major Record Labels, and thousands of Indies use Play MPE®

for promotional distribution.

Play MPE® provides a wide array of features which provide

efficient access to a promotional hub of activity.

Client characteristics

determine which features are of greater interest with the active promotional

recipients being of common interest to all clients.

Major Labels can take

advantage of the platforms more powerful and efficiency producing features

including tiered rights, permissions based user profiles, integration with

database archives, release sharing with foreign territories etc.

some customer staff may manage assets (album cover imagery, music videos, the

raw music, promotional information and other metadata), while others manage

hierarchical permission-based lists of recipients.

These more powerful features

are unique to the Play MPE® platform.

The release dates for music can be dependent on the territory

and, where administrative settings permit, local promotions staff may generate a

localized distribution of the song with modified marketing information in the

local language.

Local staff may select pre-existing assets from the system and

combine them together with a local recipient lists to form a send.

customers also choose the level of access for the recipients assigned to the

release by designating whether the release can be streamed, downloaded, exported

into an unlocked digital format or burned to a CD.

While many clients are set up to manage and upload recipient

lists, many rely on the proprietary lists provided within the service.

manages lists of recipients in various formats and geographies and those lists

are made available to our customers using the Play MPE® system.

The Play MPE®

system provides Play MPE® staff with the feedback and resources necessary to

manage and maintain this network of recipients, which is not available with

physical distribution or by smaller competitors.

Customers select lists of

recipients within the proprietary network based on music format and geography.

All exported songs are marked in real time with Destinys

watermark technology, which has received three US patents and a number of

analogous patents globally.

From information provided by Play MPE®, songs

appearing on the internet can be scanned by the International Federation of the

Phonographic Industrys (IFPI).

Headquartered in London, UK, the IFPI is the

organization that represents the interests of the recording industry worldwide

and one of its missions is to safeguard the rights of record producers.

crawlers visit torrents, peer to peer networks and websites searching for

unauthorized content.

When problem files are identified, the IFPI can run

proprietary software to identify Play MPE®s unique watermark to identify the

originating source.

After the content is released, all activity by the recipient is

logged in real time, providing record labels and promotions staff real time

detail on which songs are accessed, streamed, downloaded and exported.

information provides valuable feedback in real time to marketing and promotions

staff who can cater their programs appropriately.

Recipients receive a custom

library of available tracks and are able to repeat the download if music is

In July 2018, we launched version 8 of our release publishing

tools for Play MPE®.

These new browser-based tools are accessible on any

computer without installation and completely replaced the Windows based desktop

tools previously used by our customers.

This new solution provides for increased

usage of Play MPE® through an easier to use, faster, more intuitive and

streamlined experience, access to both Mac and PC users, new release creation

workflows, and more configuration options.

The tool provides release sharing

capabilities, to facilitate faster more user-friendly sharing of assets by our

global label customers.

Finally, it also allows for easy translation into

multiple languages to accelerate international expansion.

The new encoder has

been fully adopted by our sales department and by the majority of our customers

into their own internal workflows.

We continue to invest in additional development of Play MPE®

Version 8 and related tools and applications.

In July 2018, we integrated with

Aspen, an archival system used by one of our key customers, Universal Music

This integration provided improved efficiencies in UMGs daily

In March 2019, we announced a new integration of Play MPE® with

Nielsens BDSradio, which provides Nielsen Music users with an instant gateway

into Play MPE®s extensive release catalog and high-quality content directly

from the BDSradio platform.

In May 2019, we released new iOS and Android apps of our Play

MPE® recipient player.

The new apps feature added capabilities from previous

versions, including Google Chromecast and Airplay streaming capabilities for

greater recipient collaboration, additional playlists, sorting, flagging and

archiving features, improved search capabilities, and easier to access release

In addition, we are developing a new entirely browser-based Play MPE®

recipient player, which should lead to higher usage by our customers and

Given the current music promotion and discovery landscapes, we

plan to expand Play MPE®s reach more broadly from its current service

We believe there is great business value in integrating our Play MPE®

service into additional workflows which are already a part of our customers

daily routine, so that we eventually are the entire software ecosystem for our

Clipstream®

The Company also has a legacy business, Clipstream®, in 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, is protected by over two dozen patents claiming initial priority to 2011.

This product is marketed in a limited way and has incidental revenues.

BUSINESS DEVELOPMENT

Play MPE®

During the year ended August 31, 2019, we generated revenues of $3,809,092, of which 99% was derived from Play MPE®

and was 5.6% higher than prior year, or 8.6% higher than prior year on a currency adjusted basis.

During fiscal 2019, our focus was to transition our clients to newly released Play MPE®

Version 8 tools and applications, and to continue to develop features within the system to improve ease of use and business development conversion.

user experience improvements we were able to increase customer usage, reacquire customers and commence trial usage.

Our strategy within new market segments is to create a hub of activity by providing content and attracting recipient usage.

Easier to use tools facilitate this process.

In fiscal 2019, we have also expanded use with Major Labels in new genres in

the United States, new usage in the Baltic countries, and have commenced early trial use with new customers in the United Kingdom, Canada and, immediately following fiscal year end, we have commenced new trial usage in South Africa.

Play MPE®

staff regularly attend various industry events, conferences and seminars, to establish and strengthen relationships with industry promoters, record labels, and other key industry people.

Potential new customers may be set up on an

initial trial of our system, providing for increased engagement and feedback from these industry professionals.

Other business development efforts are also focused on moving existing customers to monthly subscription or custom pricing that

encourages more usage of the system.

We have significantly increased our business development efforts during fiscal 2019, adding additional staff, and establishing a more organized process of engaging with our existing and prospective customers.

In 2019, we doubled the size of our business development team including our first marketing manager.

Our focus going forward will be to leverage the expanded business development team to grow usage in new markets, add product features, and improve

product design to facilitate the expanded development team’s success with enterprise accounts as well as provide easy access to self-serve customers.

Longer term the Company will continue to add premium features and products to expand the

addressable market.

Clipstream®

In fiscal 2018, after completing a detailed review of the resources required to progress Clipstream further, the Company transitioned the Clipstream®

product to maintenance only, stopping development of new major features.

The Company's core business is the Play MPE® platform.

Play MPE® is a two-sided B2B marketplace that enables music labels and artists to create and distribute promotional content and musical assets on the one side, and for music broadcasting professionals, music curators and music reviewers to be able to discover, download, broadcast and review the music, on the other.

Our customers range from small independent artists, to the world's largest record label;

Universal Music Group "Universal".

We have thousands of clients spread over numerous countries that also include large independent record labels ("Indies" or "Independent Record Labels"), promoters or pluggers, and the world's largest record labels (the "Major Record Labels") (who, along with Universal, include Warner Music Group "Warner" and Sony Music Entertainment "Sony").

Our Major Record Label clients have offices around the world and typically represent the world's largest recording artists.

When uploading to the Play MPE® platform, the goal of our customers is to increase demand for their music and artists by distributing that content to 'music influencers' who can, in turn, expose the music or artist to a wider consumer audience.

This exposure can have a direct increase to record label revenue through performance royalties or indirect impacts to revenue as the music and artists gain popularity.

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

A submission into the Play MPE® platform is targeted to appropriate recipients.

Each recipient within the Play MPE® platform has a unique library of music catered and appropriate for that recipient.

Currently the Play MPE® platform has over 47,000 active recipients around the globe in excess of 100 countries.

The majority of recipients are determined by our customers who maintain their own private contact lists and input recipient information into the Play MPE® platform.

When our customers do not have sufficient resources to maintain contacts for music influencers, or wish to supplement their own distribution channels, the Play MPE® list management team maintains recipient distribution channels.

These channels are presented for sale and are separated by numerous factors including the recipient type, genre of music, geographic location etc.

Currently, Play MPE® maintains selectable distribution lists in 12 countries across 4 continents (North America, Europe, Australasia, and Africa).

Play MPE® also provides 4 distribution lists that have a more global presence with several countries being represented.

We are unaware of any other system with such a broad offering of lists.

These lists offer significant value to all customers, but are particularly valuable in the sales process to smaller independent labels.

Currently, the Play MPE® product and engineering staff are developing new technical processes to facilitate list development and maintenance.

With these technical solutions, it is expected that existing Play MPE® list management staff will increase the capacity to develop and maintain available lists and thereby increase saleable lists.

This will be especially advantageous as Play MPE® expands into new territories.

Recipients benefit from an easy-to-use player and player apps (iOS and Android) with many features that promote use, review, search and collaboration.

Players are currently available in English, Spanish, Swedish, Finnish, Italian, Dutch, Portuguese, French, Japanese, German, Norwegian, Latvian, Lithuanian, Estonian, and Danish.

During the year, the Company added features to the player side of the platform that include advanced recipient authentication, advanced search and content sorting features.

These features improve the ease-of-use and utility of the platform to its recipients.

These features were added to the mobile player apps released just following fiscal 2020 year-end.

Also added to the mobile apps were an off-line listening capability, the ability to utilize Google Chromecast and Apple Airplay streaming capabilities for greater recipient collaboration, additional playlists, sorting, flagging and archiving features, and easier to access release metadata.

All of these features greatly enhance the recipient side of the platform.

Recipient side satisfaction directly increases activity and lead generation for record label customers.

Customers are generally either enterprise customers with full access to Caster (the distribution side of the Play MPE® platform), or full-service customers.

Full-service customers use a simplified version of Caster (the "uploader") which gives these customers limited capabilities.

Play MPE® staff then complete the release, quote the distribution and collect payment.

Caster is the world's largest and most sophisticated distribution platform and has a broad range of features essential to our customers.

Caster can be grouped into several components that include administrative modules (label, staff, asset and list management), release creator/replication/management modules, a reporting module, and security features.

Not all features are used by all customers.

For example, the security, administration and release replication features are critical to our global agreement with Universal, while the provision of distribution lists are more important to smaller "indies".

The richness of the offering within Play MPE® caters to a wide assortment of stakeholders, increases content flow, promotes activity and improves the success of the marketing investment made by our customers.

Play MPE® has direct and indirect positive impacts to record label revenue.

The release creator module of Caster underwent a major restructure and upgrade in fiscal 2020 which was launched immediately following year-end.

This new release creator is easier to use, more intuitive, has more powerful notification creation features and notification template saving.

The Company expects that this module will result in increased use by our enterprise customers.

This is also the first step to allow non-enterprise customers to fully self-serve.

The Company will build out a "checkout" feature that will not require Play MPE® staff to be involved in the release distribution and sale.

The Company expects that this will allow greater scalability of the platform as it expands globally.

During fiscal 2020, the Company added the "localization" capabilities of Caster.

This feature supports easy translation of the platform and allowed the addition of Spanish, German, Japanese and French, in addition to English, languages to Caster during the year.

The expansion of languages was undertaken to facilitate the expansion of Play MPE® in non-English speaking countries.

These features primarily improve the salability of the platform as the Company targets significant global expansion.

The Company also has a legacy business, Clipstream®, in 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.

BUSINESS DEVELOPMENT

efforts are focused on identifying strategic alternatives for this product, business, and intellectual property outside the Company.

The Company's immediate goal is to significantly expand its global market share of the promotion distribution of music.

While the Company believes it has the largest worldwide market share, we estimate that Play MPE® holds less than 10% of the global addressable market.

To grow Play MPE® revenue, the Company can increase distributions in well-established markets and by adding new market segments or territories.

To establish a foothold within a new market, it is necessary to build content from desirable artists, and garner recipient activity.

These are circularly reinforcing;

desirable content garners recipient activity, recipient activity generates more content and so on.

One significant advantage is Play MPE®'s global agreement and established use with Universal in numerous territories.

When sufficient activity is observed within the system, Play MPE® converts strategic users to paying customers.

The Company has a significant and well-established market share in Australia, New Zealand, Sweden, Finland, Norway, Denmark, and several genres of music in the USA.

Newer territories include Latvia, Lithuania, Estonia and South Africa, additional genres of music within the USA and a global Jazz presence.

Universal uses the Play MPE® platform in many additional countries to varying degrees.

While Universal has used Play MPE® in more than 100 countries, regular and consistently high-volume use is limited to approximately 25 countries.

These territories include areas where Play MPE® does not currently have a significant presence with other customers and thus, represents areas of significant growth potential.

Further growth is also possible by expanding Universal's use in new market segments.

The Company believes that it has multiple market advantages over competing solutions.

Play MPE®'s platform advantages will be discussed more fully under the Competition portion of this Form 10-K.

To facilitate business development efforts, the Company has made significant investments in the Play MPE® platform over the previous two years.

These improvements were primarily designed to increase the accessibility of the platform by designing processes that are more intuitive, accessible by both Macs and PCs, translating Caster into multiple languages and by adding functionality.

The primary goal of these investments is to increase sales conversions.

Entering new markets requires a strong business development group that focusses on that market, builds relationships, introduces the platform and builds usage with strategic clients providing desirable content.

These strategic clients typically represent larger, well established artists with known and desirable music.

Play MPE® list management staff assists the business development group's efforts by focusing on accurate recipient lists and recipient activity.

Typically, the Company provides trial use at no charge or nominal fees while a "network" of use is created.

To strengthen our team, the Company conducted a major restructuring of its business development group mid-year.

In April, we appointed Glenn Mattern as Director of Business Development.

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

Following Mr.

Mattern's appointment, the Company began recruiting to further expand and improve the business development team.

When a base of activity is established within a market with larger strategic clients, revenue from smaller independent record label revenue can be targeted.

This revenue involves a more programmatic selling effort involving marketing, lead generation and sales conversion.

In the United States, Play MPE® established a network of use in several genres of music more than decade ago.

Play MPE® then commenced collecting revenue from independent record labels in the fourth quarter of 2007.

Since that time, independent revenue has grown in all but five of the intervening fifty-three quarters.

Average growth in the US independent record label group over the last decade has been 10.4%.

A recent example of acquiring a new territory is our success in South Africa.

Starting in fiscal 2020, Play MPE® added Warner Music South Africa's trial use to existing use with Universal Music South Africa.

By the end of the fiscal year we announced a reseller agreement in South Africa with Stamp Communications ("Stamp").

In August, we commenced our first independent record label sales in South Africa.

We expect to see a long analogous revenue growth with South Africa independent record labels and to expand in the sub-Saharan African market.

In addition to the efforts in South Africa, we have also initiated on expansion into Canada, new genres of music within the United States, and the Latin music market.

Near the latter half of the fiscal year, we began targeting major independent record labels with a global presence that will provide strategic content in multiple territories.

Play MPE® has several features that add significant value to these multi-national customers that are not available with competing services.

The Latin music segment does not have an entrenched competitor.

In 2020 we began updating, restructuring and expanding our US Latin lists and began creating recipient lists in Mexico.

Concurrently, Play MPE® commenced seeding the US and Mexican markets with content from Universal Music Latin Entertainment and several major independent record labels.

We also translated Caster into Spanish to complement our Spanish player.

Through 2021 we will continue to build the network of use and expand geographic areas.

The Latin market is very large and we expect this market to add significant revenue.

We also saw an opportunity to expand into Canada due to our relative strengths over a competing system.

Canada has been serviced by a local system that has been the primary service in English speaking Canada for a number of years.

While the competing system has established use on both the recipient and sender side, it suffers from user frustration due to product limitations and a lack of investment into the platform.

Play MPE® recently began marketing in Canada with the goal to displace this competing system.

Whether Play MPE® will be successful in the Canadian market will depend on whether the superior user experience of the Play MPE® platform and our preferred customer support will outweigh the inertia of established customer and recipient behavior.

In this regard, Play MPE® has made very significant progress during the year.

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

Universal Music Canada can now use a much stronger, easier to use distribution tool with a number of efficiencies and strengths over the competing system.

Where Universal Music Canada distributes international content, that content is already imbedded within the system with already uploaded audio and associated metadata.

In March, we expanded this use to include a second major record label and throughout the balance of the fiscal year we continued to grow recipient engagement and add major independent record labels.

To assist in this effort, Play MPE®'s list management team 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.

"Major independent record labels" differ from Major Record Labels in their size, and from independent record labels due the breadth of their international presence.

Our major independent record label initiative is in its early stages as we establish relationships and introduce Play MPE®.

We have several major independent record label clients that use Play MPE® in established territories.

Our approach here will be to obtain introductions through satisfied customers, leverage Play MPE®'s unique global label features, and grow strategic use in new market segments.

We have seen very positive results, getting numerous introductions, training sessions and some trial use.

A "Send" within the Play MPE® platform is a song or group of songs (bundle or albums) sent to an individual recipient.

With the improving business development group and platform accessibility, the Company has seen a significant growth in sends.

This increase in sends comes from an increase in commercial use and an increase in "seeding use" which should have a positive impact in revenue over time.

Growth in Sends over the prior year

Growth in number of Sends over prior year

As we grow strategic client use in new market segments, we expect small independent record label demand to grow significantly.

To scale more efficiently, Play MPE® product staff are building a fully self-serve checkout capability.

To that end, the Company released the new release creator just following year-end.

While this new release creator will assist in sales conversion to enterprise clients, it is the first step to ensuring smaller clients can self-serve and self-checkout.

To increase the revenue growth in these areas, we are expanding our marketing efforts to increase lead generation, process and conversion.

The Covid-19 pandemic has altered the way we interact with many of our customers, with our attendance at various industry events, conferences and seminars being limited due to travel restrictions and cancellations.

We have shifted to a virtual customer engagement strategy, to establish, and strengthen, relationships with industry promoters, record labels, and other key industry contacts.

Potential new customers may be set up on an initial trial of our system, providing for increased engagement and feedback from these industry professionals.

Other business development efforts are also focused on moving existing customers to monthly subscription or custom pricing that encourages more usage of the system.

Our customer engagement strategies include collaborative thought leadership programs 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.

Our focus going forward will be to leverage the expanded business development team to grow usage in new markets, add product features, and improve product design to facilitate the expanded development team's success with enterprise accounts as well as provide easy access to self-serve customers.

Over the last quarter of fiscal 2019 and continuing into fiscal 2020, the Company made significant improvements to its product management team and processes.

In the intermediate term, the Company will pursue an expanded product base that will likely leverage the customers, content and recipient engagement inherent in the Play MPE® platform.

The Company sees tremendous opportunities in ancillary and complimentary services.

In fiscal 2018, after completing a detailed review of the resources required to progress Clipstream further, the Company transitioned the Clipstream® product to maintenance only, stopping development of new major features.

Business development efforts are focused on identifying strategic alternatives for this product, business, and intellectual property outside the Company.

Significant Customers

1 unchanged sentence

OUR BUSINESS OPERATIONS

We lease approximately 6,600 square feet of office space, with

the lease expiring in June of 2022, and we currently have 29 total employees.

Our employees include our President and Chief Executive Officer, our Chief

Financial Officer, two finance and administrative personnel, five operational

and technical support staff, seven sales and marketing staff, two product

development staff, and eleven software developers.

We also employ contractors as

Play MPE® has regional competitors with limited global presence

and limited functionality while Play MPE® has Major Record Label use globally.

network effect entrenches the system, as it is difficult for any single user to

switch to an alternative without the entire industry switching.

Play MPE® has a

dominant network position in several markets including in the United States (in

the country, Christian and alternative genres of music), Australia and New

Zealand, Sweden, and Finland, with various levels of market penetration in

numerous additional markets around the globe.

The system was built to facilitate sharing of assets and

content with regional subsidiaries and affiliates of our Major Record Label

This allows local representatives to localize the release resulting

in costs savings and efficiencies not available in competing solutions.

Play MPE® began a digital replacement to physical distribution

(mail, courier or hand delivery) of manufactured CDs establishing a foothold of

use with recipients and record labels in 2002 through 2007.

Play MPE® still

encounters physical distribution as a competitive option for promotional

distribution.

Play MPE® has several advantages over physical distribution.

Digital distribution through Play MPE® is faster, less expensive, more reliable,

more secure, provides additional real time and more accurate reporting of usage,

provides a great deal of added functionality and provides the error free and

automatic transmission of metadata.

Metadata includes International Standard

Recording Codes (ISRC) which is a standard code for uniquely identifying sound

recordings and music video recordings - song and artist names, beats per minute,

release and impact dates, etc.

The automatic transmission of this metadata

reduces the time required for manual data entry into radio automation software

on the receiving side and eliminates inaccuracies in royalty reporting.

benefits labels who want to be in third party databases as the transmission of

this data is immediate and reliable.

The Play MPE® system provides our clients with a sophisticated

content management tool that includes privilege control, release sharing amongst

global territories (saving our clients time and money when conducting global

distributions), enhanced email notification and promotions tools, social media

announcements, recipient player apps (iPhone, iPad, Android, Mac, Windows, and

Web Browser), with a fully redundant high speed infrastructure that is more

sophisticated and has higher functionality than quickly developed lower cost

alternatives.

The Company expects that competition will be strongest where audio

quality, security, recipient network, and reporting are not as important as

We lease approximately 6,600 square feet of office space, with the lease expiring in June of 2022, and we currently have 27 total employees.

Our employees include our President and Chief Executive Officer, our Chief Financial Officer, two finance and administrative personnel, five operational and technical support staff, seven sales and marketing staff, two product development staff, and nine software developers.

We also employ contractors as needed.

The Play MPE® system is a platform designed for the music promotion industry.

Play MPE® was first to market and has significant technical and customer relationship advantages over competing services.

Not only is Play MPE® the most user-friendly system in the industry, it is the most feature-rich.

No competing service has the depth of product offering and many of Play MPE®'s features do not exist at all in competing services.

Play MPE® has numerous smaller competitors that are generally described in three main categories;

digital archives, digital delivery services or physical deliveries.

Play MPE® is a digital archive where recipients can review content from a variety of sources and can return, review, organize and download at later dates.

Digital delivery services do not provide organization of content and generally have a one-time delivery from one source.

Play MPE® offers significant advantages over these services.

On the recipient side, Play MPE® includes significant content organization tools, downloads and reviews at later dates, players and mobile apps etc.

In many cases, these options are not designed for the industry and are difficult to use and ineffective.

Play MPE® has significant advantages over other digital archive services.

Perhaps most significantly are Play MPE®'s content security features, enhanced, efficient and easier to use distribution and administrative modules which greatly enhance global distributions.

Play MPE® rarely encounters a competitor, whether digital delivery or digital archive, that provides recipient lists, mobile apps, or language translations.

Play MPE® is vastly more efficient, cost effective, fast, secure, and provides feedback reporting of use as compared to physical delivery.

Play MPE® has regional competitors with limited global presence and limited functionality while Play MPE® has Major Record Label and Major Independent Label use in several countries.

A network effect entrenches the system in territories with well-established use, as it is difficult for any single user to switch to an alternative without the entire industry switching.

Play MPE® has a dominant network position in several markets including in numerous genres of music in the United States (Country, Christian, AAA and Alternative), Australia and New Zealand, Sweden, Norway, Denmark and Finland, with various levels of market penetration in numerous additional markets around the globe.

While competing services claim to have agreements with the major record labels, these agreements are normally isolated to a single geographic market.

The system was built to facilitate sharing of assets and content with regional subsidiaries and affiliates of our Major Record Label customers.

This allows local representatives to localize the release resulting in costs savings and efficiencies not available in competing solutions.

For larger, multi-national customers, Play MPE® system provides modules that cater to efficient global distribution and several content protection features.

All clients enjoy a very easy to use and catered recipient lists that are typically not available in other systems.

The Play MPE® system provides our clients with a content management tool that includes privilege control, release sharing amongst global territories (saving our clients time and money when conducting global distributions), enhanced email notification and promotions tools, social media announcements, recipient player apps (iPhone, iPad, Android, Mac, Windows, and Web Browser), with a fully redundant high speed infrastructure that is more sophisticated and has higher functionality than quickly developed lower cost alternatives.

The Company expects that competition will be strongest where audio quality, security, recipient network, and reporting are not as important as cost.

For smaller customers, the Play MPE® offers several selectable recipient lists and offers a network of use in several geographic territories.

GOVERNMENT REGULATION

We are not currently subject to direct regulation by any

governmental agency other than laws and regulations generally applicable to

It is possible that a number of laws and regulations may be adopted

in both the United States and Canada with particular applicability to the

Governments have and may continue to enact legislation applicable to

us in areas such as content distribution, performance and copying, other

privacy protection, caching of content by server products, electronic

authentication or digital signatures, illegal or obscene content, access

charges and retransmission activities.

The applicability to the Internet of

existing laws governing issues such as property ownership, content, taxation,

defamation and personal privacy is also uncertain.

Export or import

restrictions, new legislation or regulation or governmental enforcement of

existing regulations may limit the growth of the Internet, increase our costs of

doing business or increase its legal exposure.

The Company owns proprietary algorithms, source code, web

domain addresses, patents, trademarks and other intellectual property.

Digital Locking "Digital Media Distribution Method and System" (US Patent

This patent provides a method of

locking digital content which prevents play back on unauthorized machines and

Claims include separating security from the content, so that content

files can be shared securely over peer to peer networks.

This is one of the

earliest patents for securing peer to peer distributed content.

One of the more important claims in

this patent is the ability to uniquely recognize a particular computer.

identifying a persons computer is a common issue which is usually approached by

saving cookies or beacons to the users computer or by tracking IP addresses.

These are not reliable solutions as cookies are easily deleted and IP addresses

easily changed.

Destinys propriety hash code process creates a serial number

that can be used to recognize the user on subsequent visits without ever saving

anything to that users computer.

We are not currently subject to direct regulation by any governmental agency other than laws and regulations generally applicable to businesses.

It is possible that a number of laws and regulations may be adopted in both the United States and Canada with particular applicability to the Internet.

Governments have and may continue to enact legislation applicable to us in areas such as content distribution, performance and copying, other copyright issues, network security, encryption, the use of key escrow data, privacy protection, caching of content by server products, electronic authentication or "digital" signatures, illegal or obscene content, access charges and retransmission activities.

The applicability to the Internet of existing laws governing issues such as property ownership, content, taxation, defamation and personal privacy is also uncertain.

Export or import restrictions, new legislation or regulation or governmental enforcement of existing regulations may limit the growth of the Internet, increase our costs of doing business or increase its legal exposure.

The Company owns proprietary algorithms, source code, web domain addresses, patents, trademarks and other intellectual property.

Digital Locking "Digital Media Distribution Method and System" (US Patent No.

This patent provides a method of locking digital content which prevents play back on unauthorized machines and devices.

Claims include separating security from the content, so that content files can be shared securely over peer to peer networks.

This is one of the earliest patents for securing peer to peer distributed content.

One of the more important claims in this patent is the ability to uniquely recognize a particular computer.

Uniquely identifying a person's computer is a common issue which is usually approached by saving cookies or beacons to the user's computer or by tracking IP addresses.

These are not reliable solutions as cookies are easily deleted and IP addresses easily changed.

Destiny's propriety hash code process creates a serial number that can be used to recognize the user on subsequent visits without ever saving anything to that user's computer.

Watermarking "Methods for Watermarking Media Data"

5 unchanged sentences

Europe and UK Patent No.

We have a developed a watermarking

technology which can uniquely identify the individual who originally accessed a

particular song.

Our watermark is unique as it can be embedded and identified

rapidly, it is inaudible, it survives on air broadcast, compression and

conversion to other formats and is virtually impossible to remove.

watermarking technology is used in the Play MPE® distribution system when songs

are exported or when streaming a track.

Other watermarking technologies are slow

and provide a trade-off between a destruction of audio quality and the ease that

they can be filtered out.

When the original patent claims were granted in the

US, the Company filed a set of new additional, broader claims in a continuation

application in Canada and the US to further protect the technology.

Cross Platform

Streaming Video Script Based Video Rendering

We have a developed a watermarking technology which can uniquely identify the individual who originally accessed a particular song.

Our watermark is unique as it can be embedded and identified rapidly, it is inaudible, it survives on air broadcast, compression and conversion to other formats and is virtually impossible to remove.

Our watermarking technology is used in the Play MPE® distribution system when songs are exported or when streaming a track.

Other watermarking technologies are slow and provide a trade-off between a destruction of audio quality and the ease that they can be filtered out.

When the original patent claims were granted in the US, the Company filed a set of new additional, broader claims in a continuation application in Canada and the US to further protect the technology.

Cross Platform Streaming Video "Script Based Video Rendering"

US Patents No.

9143826, 9137567, 9215499, 9571886,

9143826, 9137567, 9215499, 9571886, 9380338, 9432726 and 9432727

3 unchanged sentences

1961/DELNO/2014

This solution enables publishers to serve streaming video from

their web site without the need for a separate streaming server.

will play instantly in all recent browsers, including mobile devices, without

the need for a separate video player.

This solution enables publishers to serve streaming video from their web site without the need for a separate streaming server.

The solution will play instantly in all recent browsers, including mobile devices, without the need for a separate video player.

Registered Trademarks

USA, Canada, Japan, European Union, China

and Australia

USA, Canada, Japan, European Union, China and Australia

Canada, Japan,

1 unchanged sentence

China, Canada

USA, Canada, Japan, Israel, European

Union, China and Australia

We own a large number of domain names, including many valuable

four-letter domain names (dice.net, dsny.com) and URLs featuring common words

(radio-play.com, streamingaudio.com, pirateradio.com and many others.)

USA, Canada, Japan, Israel, European Union, China and Australia

We own a large number of domain names, including many valuable four-letter domain names (dice.net, dsny.com) and URL's featuring common words (radio-play.com, streamingaudio.com, pirateradio.com and many others.)

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-K

Item 1. Business