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Item 8. Financial Statements and Supplementary Data

2020-11-18 compared with 2019-11-18 · 370 added, 832 removed, 275 unchanged (81% of the section changed)

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Index to Audited Consolidated Financial Statements for the

Years Ended August 31, 2019 and 2018:

Report of Independent Registered Public Accounting Firm

Davidson & Company LLP;

Report of Independent Registered Public Accounting Firm

BDO Canada LLP;

Index to Audited Consolidated Financial Statements for the Years Ended August 31, 2020 and 2019:

Report of Independent Registered Public Accounting Firm - Davidson & Company LLP;

Consolidated Balance Sheets as at August 31, 2020 and 2019;

Consolidated Statement of Comprehensive Income for the

Years Ended August 31, 2019 and 2018;

Consolidated Statement of Changes in Stockholders' Equity

for the Years Ended August 31, 2019 and 2018;

Consolidated Statement of Cash Flows for the Years Ended

August 31, 2019 and 2018;

Notes to Consolidated Financial

Consolidated Statement of Comprehensive Income for the Years Ended August 31, 2020 and 2019;

Consolidated Statement of Changes in Stockholders' Equity for the Years Ended August 31, 2020 and 2019;

Consolidated Statement of Cash Flows for the Years Ended August 31, 2020 and 2019;

Notes to Consolidated Financial Statements.

Consolidated Financial Statements

1 unchanged sentence

August 31, 2020 and 2019

(Expressed in United States

(Expressed in United States dollars)

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

2 unchanged sentences

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of Destiny Media Technologies Inc.

(the “Company”), as of August 31, 2019, and the related consolidated statements of comprehensive income, changes in stockholders’

equity, and cash flows for the year ended August 31, 2019, and the related notes (collectively referred to as the “financial statements”).

We have audited the accompanying consolidated balance sheets of Destiny Media Technologies Inc.

(the “Company”), as of August 31, 2020 and 2019, and the related consolidated statements of comprehensive income, changes in stockholders’ equity, and cash flows for the years ended August 31, 2020 and 2019, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Destiny Media Technologies Inc.

as of August 31, 2019, and the results of its operations and its cash flows for the year ended August 31, 2019 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatements of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides a reasonable basis for our opinion.

We have served as the Company’s auditor since 2019.

“DAVIDSON & COMPANY LLP”

Vancouver, Canada

Chartered Professional Accountants

November 15, 2019

BDO Canada LLP

600 Cathedral Place

vancouver@bdo.ca

925 West Georgia Street

Vancouver BC V6C 3L2 Canada

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of

Destiny Media Technologies Inc.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of Destiny Media Technologies Inc.

(the “Company”) and subsidiaries as of August 31, 2018, the related consolidated statements of comprehensive income, stockholders’ equity, and cash flows for the year ended August 31, 2018, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company and subsidiaries at August 31, 2018, and the results of their operations and their cash flows for the year ended August 31, 2018 , in conformity with accounting principles generally accepted in the United States of America.

as of August 31, 2020 and 2019, and the results of its operations and its cash flows for the years ended August 31, 2020 and 2019 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Our audits included performing procedures to assess the risks of material misstatements of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides a reasonable basis for our opinion.

We served as the Company's auditor since 2010.

Chartered Professional Accountants

We believe that our audits provide a reasonable basis for our opinion.

We have served as the Company’s auditor since 2019.

"DAVIDSON & COMPANY LLP"

Vancouver, Canada

Chartered Professional Accountants

November 18, 2020

BDO Canada LLP, a Canadian limited liability partnership, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms.

Destiny Media Technologies Inc.

CONSOLIDATED BALANCE

CONSOLIDATED BALANCE SHEETS

As at August 31,

2 unchanged sentences

Short-term investments [note 3]

Accounts receivable, net of allowance for

doubtful accounts of $10,106 [2018 $6,031]

Accounts receivable, net of allowance for doubtful accounts of $23,412 [2019 – $10,106] [note 10]

Other receivables

2 unchanged sentences

Property and equipment, net [note 4]

Intangible assets,

Intangible assets, net [note 4]

Right of use assets [note 5]

LIABILITIES AND STOCKHOLDERS’ EQUITY

3 unchanged sentences

Deferred revenue

Obligation under capital lease

Obligation under capital lease [note 5]

Total current liabilities

Operating lease liability, net of current portion [note 7]

Total liabilities

Commitments and contingencies [notes 5, 8 and 9]

3 unchanged sentences

Issued and outstanding:

11,000,786 shares

[2018 issued and outstanding 11,002,786 shares]

10,450,646 shares [2019 – issued and outstanding 11,000,786 shares]

Additional paid-in capital [ note 6 ]

1 unchanged sentence

Accumulated other comprehensive loss

stockholders equity

Total stockholders’ equity

Total liabilities and stockholders’ equity

2 unchanged sentences

Destiny Media Technologies Inc.

CONSOLIDATED STATEMENTS

OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Years ended August 31,

13 unchanged sentences

Interest income

Other income (expense)

Income before provision for income taxes

Income tax expense

- deferred [note 6]

Income tax expense - deferred [note 7]

Foreign currency translation adjustments

1 unchanged sentence

Net income per common share, basic and diluted

Weighted average common shares

Weighted average common shares outstanding:

See accompanying notes

Destiny Media Technologies Inc.

CONSOLIDATED STATEMENTS OF CHANGES IN

STOCKHOLDERS EQUITY

Years ended August 31,

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

As at August 31,

(Expressed in United States dollars)

1 unchanged sentence

comprehensive

Balance, September 1, 2017

Balance, August 31, 2018

Total comprehensive income

Shares repurchased for cancellation

Stock based compensation - Note 6

6 unchanged sentences

Destiny Media Technologies Inc.

CONSOLIDATED STATEMENTS OF CASH

Years ended August 31,

CONSOLIDATED STATEMENTS OF CASH FLOWS

As at August 31,

(Expressed in United States dollars)

5 unchanged sentences

Unrealized foreign exchange

Loss on disposal of property and equipment

Allowance for doubtful accounts

Changes in non-cash working capital:

5 unchanged sentences

Deferred revenue

Deferred leasehold inducement

Short term receivable

provided by operating activities

Right of use Liability

Net cash provided by operating activities

INVESTING ACTIVITIES

Purchase of property, equipment and

Sales (Purchase)

of short-term investments

Purchase of property, equipment and intangibles

Sales (Purchase) of short-term investments

Net cash provided by (used in) investing activities

FINANCING ACTIVITY

repurchased for cancellation

Common stock repurchased for cancellation

Net cash used in financing activity

Effect of foreign exchange rate changes

Net increase (decrease) in cash and

cash equivalents during the year

Cash and cash

equivalents, beginning of year

Effect of foreign exchange rate changes on cash

Net increase (decrease) in cash and cash equivalents during the year

Cash and cash equivalents, beginning of year

Cash and cash equivalents, end of year

4 unchanged sentences

Destiny Media Technologies Inc.

NOTES TO CONSOLIDATED FINANCIAL

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2020 and 2019

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.

Company develops technologies that allow for the distribution over the internet

of digital media files in either a streaming or digital download format.

technologies are proprietary.

The Company operates out of Vancouver, BC, Canada

and serves customers predominantly located in the United States, Europe and

The Companys 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 and under the symbol DME on the Berlin, Frankfurt, Xetra and

Stuttgart exchanges in Germany.

Effective September 13, 2019, the Company effected a reverse

stock split on the basis of 5:1.

As such, the Companys authorized capital was

decreased from 100,000,000 shares of common stock, par value $0.001 to

20,000,000 shares of common stock, par value $0.001 and all shares of common

stock issued and outstanding were decreased on the basis of one new share for

each five old shares.

These consolidated financial statements give retroactive

effect to such reverse stock split and all share and per share amounts have been

adjusted accordingly.

(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 and under the symbol "DME" on the Berlin, Frankfurt, Xetra and Stuttgart exchanges in Germany.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of the significant accounting

policies used in the preparation of these consolidated financial statements:

The following is a summary of the significant accounting policies used in the preparation of these consolidated financial statements:

Basis of presentation and fiscal year

These consolidated financial statements and related notes are

presented in accordance with accounting principles generally accepted in the

United States, and are expressed in US dollars.

The Companys fiscal year-end is

These consolidated financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States, and are expressed in US dollars.

The Company's fiscal year-end is August 31.

Principles of consolidation

The accompanying consolidated financial statements include the

accounts of the Company, and its wholly owned subsidiaries, Destiny Software

Productions Inc., MPE Distribution Inc., and Sonox Digital Inc.

inter-company balances and transactions have been eliminated on consolidation.

The accompanying consolidated financial statements include the accounts of the Company, and its wholly owned subsidiaries, Destiny Software Productions Inc., MPE Distribution Inc., and Sonox Digital Inc.

All inter-company balances and transactions have been eliminated on consolidation.

Destiny Media Technologies Inc.

NOTES TO CONSOLIDATED FINANCIAL

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2020 and 2019

1 unchanged sentence

Use of estimates

The preparation of financial statements in accordance with

United States generally accepted accounting principles requires management to

make estimates and assumptions that affect the reported amounts of assets and

liabilities at the dates of the financial statements and the reported amounts of

net revenue and expenses in the reporting periods.

We regularly evaluate

estimates and assumptions related to revenue recognition, estimated useful lives

for property and equipment, allowances for doubtful accounts, stock-based

compensation expense, deferred income tax asset valuation allowances, uncertain

tax positions, litigation and other loss contingencies.

These estimates and

assumptions are based on current facts, historical experience and various other

factors that we believe to be reasonable under the circumstances, the results of

which form the basis for making judgments about the carrying values of assets

and liabilities and the recording of revenue, costs and expenses that are not

readily apparent from other sources.

The actual results we experience may differ

materially and adversely from our original estimates.

To the extent there are

material differences between the estimates and actual results, our future

results of operations will be affected.

The preparation of financial statements in accordance with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the dates of the financial statements and the reported amounts of net revenue and expenses in the reporting periods.

We regularly evaluate estimates and assumptions related to revenue recognition, estimated useful lives for property and equipment, allowances for doubtful accounts, stock-based compensation expense, deferred income tax asset valuation allowances, uncertain tax positions, litigation and other loss contingencies.

These estimates and assumptions are based on current facts, historical experience and various other factors

that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of revenue, costs and expenses that are not readily apparent from other sources.

The actual results we experience may differ materially and adversely from our original estimates.

To the extent there are material differences between the estimates and actual results, our future results of operations will be affected.

Cash and cash equivalents

We consider all highly liquid investments that are readily

convertible into cash and have an original maturity of three months or less at

the time of purchase to be cash equivalents.

We consider all highly liquid investments that are readily convertible into cash and have an original maturity of three months or less at the time of purchase to be cash equivalents.

Short-term investments

We classify our short-term investments as available-for-sale.

Our investments classified as available-for-sale are recorded at fair value

based upon third party pricing at period end.

Unrealized gains and losses that

are deemed temporary in nature are recorded in accumulated other comprehensive

income a separate component of stockholders equity.

A decline in the fair value of any security below cost that is

deemed other than temporary results in a charge to earnings and the

corresponding establishment of a new cost basis for the security.

discounts are amortized (accreted) over the life of the related security as an

adjustment to its yield.

Dividend and interest income are recognized when

Realized gains and losses are included in earnings and are derived using

the specific identification method for determining the cost of investments sold.

We classify our short-term investments as held to maturity.

Our investments classified as held-to-maturity are recorded at amortized cost, which their carrying values approximate fair value.

Interest earned on the short-term investments are included in interest income.

Destiny Media Technologies Inc.

NOTES TO CONSOLIDATED FINANCIAL

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2020 and 2019

1 unchanged sentence

Revenue recognition

The Companys revenue is derived from software as a service

(SaaS) arrangements.

The Company accounts for revenue in accordance with ASC

606, which the Company adopted on September 1, 2018 using the modified

retrospective method.

The core principle of ASC 606 is to recognize revenue upon the

transfer of products or services to customers in an amount that reflects the

consideration the Company expects to be entitled to in exchange for those

products or services.

ASC 606 prescribes a five-step model for recognizing

revenue from contracts with customers:

(1) identify the contract(s) with

The Company's revenue is derived from software as a service (SaaS) arrangements.

The Company accounts for revenue in accordance with ASC 606, which the Company adopted on September 1, 2018 using the modified retrospective method.

The core principle of ASC 606 is to recognize revenue upon the transfer of products or services to customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those products or services.

ASC 606 prescribes a five-step model for recognizing revenue from contracts with customers:

(1) identify the contract(s) with customers;

(2) identify the separate performance obligations in the contract;

(3) determine the transaction price;

(4) allocate the transaction price to the

separate performance obligations in the contract;

and (5) recognize revenue when

(or as) the performance obligations are satisfied.

The Company applies the five-step model to recognize revenue as

Identification of the contract, or contracts, with the

The Company considers the terms and conditions of written

contracts and its customary business practices in identifying its contracts

under ASC 606.

The Company determines that it has a contract with a customer

when the contract is approved, the Company can identify each partys rights

regarding the services to be transferred, the Company can identify the payment

terms for the services, the Company has determined that the customer has the

ability and intent to pay, and the contract has commercial substance.

general, contract terms will be reflected in a written document that is signed

by both parties.

Identification of the performance obligation in the

Performance obligations are promises in a contract to transfer

distinct products or services to a customer, and is the unit of account under

A contracts transaction price is allocated to each distinct

performance obligation and revenue is recognized when the performance obligation

is satisfied.

A product or service is a distinct performance obligation if the

customer can both benefit from the product or service either on its own or

together with other resources that are readily available to the customer, and it

is separately identifiable from other items within the context of the contract.

Performance obligations are satisfied by transferring control of the product or

service to the customer.

Control of the product or service is transferred either

at a point in time or over time depending on the performance obligation.

To the extent a contract includes multiple promised services or

products, the Company applies judgment to determine whether promised services or

products are capable of being distinct and distinct in the context of the

If these criteria are not met, the promised services are accounted for

as a combined performance obligation.

(4) allocate the transaction price to the separate performance obligations in the contract;

and (5) recognize revenue when (or as) the performance obligations are satisfied.

The Company applies the five-step model to recognize revenue as follows:

Identification of the contract, or contracts, with the customer

The Company considers the terms and conditions of written contracts and its customary business practices in identifying its contracts under ASC 606.

The Company determines that it has a contract with a customer when the contract is approved, the Company can identify each party's rights regarding the services to be transferred, the Company can identify the payment terms for the services, the Company has determined that the customer has the ability and intent to pay, and the contract has commercial substance.

In general, contract terms will be reflected in a written document that is signed by both parties.

Identification of the performance obligation in the contract

Performance obligations are promises in a contract to transfer distinct products or services to a customer, and is the unit of account under ASC 606.

A contract's transaction price is allocated to each distinct performance obligation and revenue is recognized when the performance obligation is satisfied.

A product or service is a distinct performance obligation if the customer can both benefit from the product or service either on its own or together with other resources that are readily available to the customer, and it is separately identifiable from other items within the context of the contract.

Performance obligations are satisfied by transferring control of the product or service to the customer.

Control of the product or service is transferred either at a point in time or over time depending on the performance obligation.

To the extent a contract includes multiple promised services or products, the Company applies judgment to determine whether promised services or products are capable of being distinct and distinct in the context of the contract.

If these criteria are not met, the promised services are accounted for as a combined performance obligation.

Destiny Media Technologies Inc.

NOTES TO CONSOLIDATED FINANCIAL

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2020 and 2019

1 unchanged sentence

Revenue recognition (cont'd.)

The Company generates revenue primarily from usage fees for the

Companys digital media distribution service.

Usage fees are generally

recognized as they are billed based on volume and size of distribution services

provided in a given month.

The Companys other performance obligations include

maintenance services, email and phone support, and unspecified software updates

released when, and if, available.

Under the guidance of ASC 606, the Company has

concluded that maintenance services and unspecified software upgrades are not

distinct in the context of the Companys contracts because the Companys service

is considered a multi-tenant software environment, and these activities

represent a single combined performance obligation in connection with the

Companys digital media distribution service, recognized at a point in time when

the service is delivered to the customer.

Support activities are considered a separate performance

obligation which is satisfied over time;

however, such activities are performed

substantially concurrently with the satisfaction of digital media distribution

From time to time, certain of the Companys contracts contain

additional separate performance obligations, including specific enhancements and

The Company generates revenue primarily from usage fees for the Company's digital media distribution service.

Usage fees are generally recognized as they are billed based on volume and size of distribution services provided in a given month.

The Company's other performance obligations include maintenance services, email and phone support, and unspecified software updates released when, and if, available.

Under the guidance of ASC 606, the Company has concluded that maintenance services and unspecified software upgrades are not distinct in the context of the Company's contracts because the Company's service is considered a multi-tenant software environment, and these activities represent a single combined performance obligation in connection with the Company's digital media distribution service, recognized at a point in time when the service is delivered to the customer.

Support activities are considered a separate performance obligation which is satisfied over time;

however, such activities are performed substantially concurrently with the satisfaction of digital media distribution services.

From time to time, certain of the Company's contracts contain additional separate performance obligations, including specific enhancements and upgrades.

Determination of the transaction price

The transaction price is determined based on the consideration

to which the Company expects to be entitled in exchange for providing services

to the customer.

Digital media distribution services may be subject to either

fixed or variable pricing.

Variable consideration is allocated entirely to

distinct service periods when it can be tied to a single performance obligation.

Variable consideration is estimated and included in the transaction price if, in

the Companys judgment, it is probable that there will not be a significant

future reversal of cumulative revenue under the contract.

When variable

consideration is contingent and cannot be tied to a single performance

obligation performed in a particular billing period, the Company estimates

contingent variable consideration using the most likely method and recognizes

consideration to the extent that the estimate for variable consideration is not

constrained pursuant to the guidance provided in ASU 606.

A significant financing component generally does not exist

under the Companys standard contracting and billing practices.

The transaction price is determined based on the consideration to which the Company expects to be entitled in exchange for providing services to the customer.

Digital media distribution services may be subject to either fixed or variable pricing.

Variable consideration is allocated entirely to distinct service periods when it can be tied to a single performance obligation.

Variable consideration is estimated and included in the transaction price if, in the Company's judgment, it is probable that there will not be a significant future reversal of cumulative revenue under the contract.

When variable consideration is contingent and cannot be tied to a single performance obligation performed in a particular billing period, the Company estimates contingent variable consideration using the most likely method and recognizes consideration to the extent that the estimate for variable consideration is not constrained pursuant to the guidance provided in ASU 606.

A significant financing component generally does not exist under the Company's standard contracting and billing practices.

Destiny Media Technologies Inc.

NOTES TO CONSOLIDATED FINANCIAL

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2020 and 2019

1 unchanged sentence

Revenue recognition (cont'd.)

Allocation of the transaction price to the performance

obligations in the contract

If the contract contains a single combined performance

obligation, the entire transaction price is allocated to the single combined

performance obligation.

Contracts that contain multiple performance obligations

require an allocation of the transaction price to each performance obligation

based on its standalone selling price (SSP) in relation to the total fair

value of all performance obligations in the arrangement.

The majority of the

Companys contracts contain two separate performance obligations that are

performed concurrently.

The Company allocates consideration to each performance

obligation under the guidance of ASC 606 on a relative standalone selling price

Where SSP is not directly observable, the Company determines the

SSP using information that may include market conditions and other observable

Consideration associated with support activities is estimated

using a cost-plus reasonable margin approach, as there is no observable SSP.

Consideration associated with specified enhancements and

upgrades is estimated using a cost-plus reasonable margin approach, as there is

no observable SSP.

Recognition of revenue when, or as, the Company satisfies a

performance obligation

The Company recognizes revenue when the services are delivered

to its customers, in an amount that reflects the consideration the Company

expects to be entitled to in exchange for those services.

The Company is

principally responsible for the satisfaction of its distinct performance

obligations, which are satisfied either at a point in time or over a period of

Performance obligations satisfied at a point in

Allocation of the transaction price to the performance obligations in the contract

If the contract contains a single combined performance obligation, the entire transaction price is allocated to the single combined performance obligation.

Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on its standalone selling price ("SSP") in relation to the total fair value of all performance obligations in the arrangement.

The majority of the Company's contracts contain two separate performance obligations that are performed concurrently.

The Company allocates consideration to each performance obligation under the guidance of ASC 606 on a relative standalone selling price (SSP) basis.

Where SSP is not directly observable, the Company determines the SSP using information that may include market conditions and other observable inputs.

Consideration associated with support activities is estimated using a cost-plus reasonable margin approach, as there is no observable SSP.

Consideration associated with specified enhancements and upgrades is estimated using a cost-plus reasonable margin approach, as there is no observable SSP.

Recognition of revenue when, or as, the Company satisfies a performance obligation

The Company recognizes revenue when the services are delivered to its customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services.

The Company is principally responsible for the satisfaction of its distinct performance obligations, which are satisfied either at a point in time or over a period of time.

Performance obligations satisfied at a point in time

Media distribution services

Media distribution services comprise the majority of distinct

performance obligations that are satisfied at a point in time, and revenue is

recognized at the point in which the distribution service has been completed.

Consideration for these services is typically billed in the same period that the

service has been delivered to the customer.

Performance obligations satisfied over a period of

Customer support activities comprise the majority of distinct

performance obligations that are satisfied over a period of time.

Media distribution services comprise the majority of distinct performance obligations that are satisfied at a point in time, and revenue is recognized at the point in which the distribution service has been completed.

Consideration for these services is typically billed in the same period that the service has been delivered to the customer.

Performance obligations satisfied over a period of time

Customer support activities comprise the majority of distinct performance obligations that are satisfied over a period of time.

Destiny Media Technologies Inc.

NOTES TO CONSOLIDATED FINANCIAL

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2020 and 2019

1 unchanged sentence

Revenue recognition (cont'd.)

Revenue from support activities is recognized over an estimated

support period since this activity is considered a stand-ready obligation.

This support period is substantially concurrent with the performance of media

distribution services, as these services are performed substantially in

conjunction with the related distribution.

Any support activities provided

outside of this billing period are not considered material.

Revenue from specified enhancements and upgrades is recognized

over an estimated performance period.

Revenue from support activities is recognized over an estimated support period since this activity is considered a 'stand-ready obligation'.

This support period is substantially concurrent with the performance of media distribution services, as these services are performed substantially in conjunction with the related distribution.

Any support activities provided outside of this billing period are not considered material.

Revenue from specified enhancements and upgrades is recognized over an estimated performance period.

Contract Costs

Contract costs consists of two components, customer acquisition

costs and costs to fulfill a contract.

Customer acquisition costs are

capitalized only if the costs are incrementally incurred to obtain a customer

contract and may consist of sales commissions paid to sales personnel or

third-party resellers.

Generally, the Company does not incur any contract costs

outside of the period that the related revenue is recognized.

Contract costs consists of two components, customer acquisition costs and costs to fulfill a contract.

Customer acquisition costs are capitalized only if the costs are incrementally incurred to obtain a customer contract and may consist of sales commissions paid to sales personnel or third-party resellers.

Generally, the Company does not incur any contract costs outside of the period that the related revenue is recognized.

Contract Modifications

Contract modifications may create new, or change existing,

enforceable rights and obligations of the parties to the contract.

modify an existing contract using an addendum or signed change order.

modification is accounted for as a new contract if it reflects an increase in

scope that is regarded as distinct from the original contract and is priced

in-line with the standalone selling price for the related product or services

If a contract modification is not considered a new contract, the

modification is combined with the original contract and the impact on the

revenue recognition profile depends on whether the remaining products and

services are distinct from the original contract.

If the remaining goods or

services are distinct from those in the original contract, all remaining

performance obligations will be accounted for on a prospective basis with

unrecognized consideration allocated to the remaining performance obligations.

If the remaining goods or services are not distinct, the modification will be

treated as if it were a part of the existing contract, and the effect that the

contract modification has on the transaction price, and on our measure of

progress toward satisfaction of the performance obligations, is recognized as an

adjustment to revenue (either as an increase in or a reduction of revenue) at

the date of the contract modification on a cumulative catch-up basis.

Contract modifications may create new, or change existing, enforceable rights and obligations of the parties to the contract.

We generally modify an existing contract using an addendum or signed change order.

A contract modification is accounted for as a new contract if it reflects an increase in scope that is regarded as distinct from the original contract and is priced in-line with the standalone selling price for the related product or services obligated.

If a contract modification is not considered a new contract, the modification is combined with the original contract and the impact on the revenue recognition profile depends on whether the remaining products and services are distinct from the original contract.

If the remaining goods or services are distinct from those in the original contract, all remaining performance obligations will be accounted for on a prospective basis with unrecognized consideration allocated to the remaining performance obligations.

If the remaining goods or services are not distinct, the modification will be treated as if it were a part of the existing contract, and the effect that the contract modification has on the transaction price, and on our measure of progress toward satisfaction of the performance obligations, is recognized as an adjustment to revenue (either as an increase in or a reduction of revenue) at the date of the contract modification on a cumulative catch-up basis.

Destiny Media Technologies Inc.

NOTES TO CONSOLIDATED FINANCIAL

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2020 and 2019

1 unchanged sentence

Cost of revenue

Cost of revenue primarily consists of personnel costs for our

operations service and technical support employees and engineering support

staff, cloud infrastructure costs, incremental transaction costs such as

merchant and processing fees, and costs of external customer support software

and services.

In each case, personnel costs include salaries, benefits and any

other compensation paid to such staff.

Cost of revenue primarily consists of personnel costs for our operations service and technical support employees and engineering support staff, cloud infrastructure costs, incremental transaction costs such as merchant and processing fees, and costs of external customer support software and services.

In each case, personnel costs include salaries, benefits and any other compensation paid to such staff.

Long-lived assets

Long-lived assets held for use are evaluated for impairment

when events or changes in business circumstances indicate that the carrying

amount of property, equipment and intangible assets may not be fully

Long-lived assets held for use are evaluated for impairment when events or changes in business circumstances indicate that the carrying amount of property, equipment and intangible assets may not be fully recoverable.

Impairment is measured by a two-step process:

Step 1) the carrying

amount of the asset is compared with its estimated undiscounted future cash

flows expected to result from the use of the assets and its eventual

If the carrying amount is lower than the undiscounted future

cash-flows, no impairment loss is recognized.

Step 2) if the carrying amount is

higher than the undiscounted future cash-flows then an impairment loss is

measured as the difference between the carrying amount and fair value which may

be based on internally developed discounted cash flow estimates, quoted market

prices, when available, or independent appraisals.

The determination of whether

or not long-lived assets have become impaired involves a significant level of

judgment in the assumptions underlying the approach used to determine the

estimated future cash flows expected to result from the use of those assets.

Changes in the Companys strategy, assumptions and/or market conditions could

significantly impact these judgments and require adjustments to recorded amounts

of long-lived assets.

As of August 31, 2019, there were no impairment indicators

Step 1) the carrying amount of the asset is compared with its estimated undiscounted future cash flows expected to result from the use of the assets and its eventual disposition.

If the carrying amount is lower than the undiscounted future cash-flows, no impairment loss is recognized.

Step 2) if the carrying amount is higher than the undiscounted future cash-flows then an impairment loss is measured as the difference between the carrying amount and fair value which may be based on internally developed discounted cash flow estimates, quoted market prices, when available, or independent appraisals.

The determination of whether or not long-lived assets have become impaired involves a significant level of judgment in the assumptions underlying the approach used to determine the estimated future cash flows expected to result from the use of those assets.

Changes in the Company's strategy, assumptions and/or market conditions could significantly impact these judgments and require adjustments to recorded amounts of long-lived assets.

As of August 31, 2020, there were no impairment indicators present.

Litigation and settlement costs

From time to time, we may be involved in disputes, litigation

and other legal actions.

In accordance with ASC 450, Contingencies, we record a

charge equal to at least the minimum estimated liability for a loss contingency

when both of the following conditions are met:

(i) information available prior

to issuance of the financial statements indicates that it is probable that an

asset has been impaired or a liability had been incurred at the date of the

financial statements and (ii) the range of loss can be reasonably estimated.

During the year ended August 31, 2019, the Company incurred

approximately $59,310 (2018:

$82,354) in professional legal fees in connection

with legal actions against the Company and legal actions initiated by the

These costs are expensed as incurred and are recorded as a component of

general and administrative expenses.

From time to time, we may be involved in disputes, litigation and other legal actions.

In accordance with ASC 450, Contingencies, we record a charge equal to at least the minimum estimated liability for a loss contingency when both of the following conditions are met:

(i) information available prior to issuance of the financial statements indicates that it is probable that an asset has been impaired or a liability had been incurred at the date of the financial statements and (ii) the range of loss can be reasonably estimated.

During the year ended August 31, 2020, the Company incurred approximately $103,073 (2019:

$59,310) in professional legal fees in connection with legal actions against the Company and legal actions initiated by the Company.

These costs are expensed as incurred and are recorded as a component of general and administrative expenses.

Destiny Media Technologies Inc.

NOTES TO CONSOLIDATED FINANCIAL

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2020 and 2019

1 unchanged sentence

Allowance for doubtful accounts

The Company establishes an allowance for doubtful accounts

through review of open accounts, and historical collection and allowance

The allowance for doubtful accounts is intended to reduce trade

accounts receivable to the amount that reasonably approximates their fair value

due to their short-term nature.

The amount ultimately realized from trade

accounts receivable may differ from the amount estimated in the consolidated

financial statements based on collection experience.

The Company establishes an allowance for doubtful accounts through review of open accounts, and historical collection and allowance amounts.

The allowance for doubtful accounts is intended to reduce trade accounts receivable to the amount that reasonably approximates their fair value due to their short-term nature.

The amount ultimately realized from trade accounts receivable may differ from the amount estimated in the consolidated financial statements based on collection experience.

Research and development costs

Research costs are expensed as incurred.

Development costs are

expensed as incurred, unless such costs are within the scope of ASC 985-20

Software Costs of Software to be Sold, Leased or Marketed (ASC 985-20), in

which case such costs are subject to capitalization beginning when a products

technological feasibility has been established and ending when a product is

available for general release to customers.

The Companys products are generally

released soon after technological feasibility has been established and therefore

costs incurred subsequent to achievement of technological feasibility are not

significant and have been expensed as incurred.

Development costs are expensed as incurred, unless such costs are within the scope of ASC 985-20 Software - Costs of Software to be Sold, Leased or Marketed ("ASC 985-20"), in which case such costs are subject to capitalization beginning when a product's technological feasibility has been established and ending when a product is available for general release to customers.

The Company's products are generally released soon after technological feasibility has been established and therefore costs incurred subsequent to achievement of technological feasibility are not significant and have been expensed as incurred.

Property and equipment and intangibles

Property and equipment are stated at cost.

Depreciation and

amortization is taken over the estimated useful lives of the assets and is

calculated using the following rates, and methods, commencing upon utilization

of the assets:

Depreciation and amortization is taken over the estimated useful lives of the assets and is calculated using the following rates, and methods, commencing upon utilization of the assets:

Furniture and fixtures

7 unchanged sentences

The Company's functional currency is the U.S.

statements of foreign operations for which the functional currency is the local

currency are translated into U.S.

dollars with assets and liabilities translated

at the rate of exchange in effect at the balance sheet date and revenue and

expense items translated at the average rates for the period.

Unrealized gains

and losses resulting from the translation of the consolidated financial

statements are deferred and accumulated in a separate component of stockholders

equity as a foreign currency translation gain (loss) in accumulated other

comprehensive income (loss).

Financial statements of foreign operations for which the functional currency is the local currency are translated into U.S.

dollars with assets and liabilities translated at the rate of exchange in effect at the balance sheet date and revenue and expense items translated at the average rates for the period.

Unrealized gains and losses resulting from the translation of the consolidated financial statements are deferred and accumulated in a separate component of stockholders' equity as a foreign currency translation gain (loss) in accumulated other comprehensive income (loss).

Destiny Media Technologies Inc.

NOTES TO CONSOLIDATED FINANCIAL

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2020 and 2019

1 unchanged sentence

Translation of foreign currencies (cont'd)

Transactions denominated in foreign currencies are translated

at the exchange rate in effect on the transaction date.

These foreign currency

gains and losses are included as a component of general and administrative

expenses in the consolidated statements of comprehensive income.

The Company operates internationally, which gives rise to the

risk that cash flows may be adversely impacted by exchange rate fluctuations.

Transactions denominated in foreign currencies are translated at the exchange rate in effect on the transaction date.

These foreign currency gains and losses are included as a component of general and administrative expenses in the consolidated statements of comprehensive income.

The Company operates internationally, which gives rise to the risk that cash flows may be adversely impacted by exchange rate fluctuations.

The Company has not entered into contracts for foreign exchange hedges.

Advertising costs are expensed as incurred and totaled $12,017

and $3,333 during the years ended August 31, 2019 and 2018, respectively.

The Company utilizes the liability method of accounting for

income taxes as set forth in ASC 740, Income Taxes .

Under the liability

method, deferred taxes are determined based on the temporary differences between

the financial statement and tax basis of assets and liabilities using tax rates

expected to be in effect during the years in which the basis that give rise to

the differences reverse.

A valuation allowance is recorded when it is more

likely than not that some of the deferred tax assets will not be realized.

determining the need for valuation allowances we consider projected future

taxable income and the availability of tax planning strategies.

If in the future

we determine that we would not be able to realize our recorded deferred tax

assets, an increase in the valuation allowance would be recorded, decreasing

earnings in the period in which such determination is made.

We assess our income tax positions and record tax benefits for

all years subject to examination based upon our evaluation of the facts,

circumstances and information available at the reporting date.

For those tax

positions where there is a greater than 50% likelihood that a tax benefit will

be sustained, we have recorded the largest amount of tax benefit that may

potentially be realized upon ultimate settlement with a taxing authority that

has full knowledge of all relevant information.

For those income tax positions

where there is 50% or less likelihood that a tax benefit will be sustained, no

tax benefit has been recognized in the financial statements.

The Company has concluded that there are no significant

uncertain tax positions requiring recognition in the Companys financial

The Companys evaluation was performed for the tax years which

remain subject to examination by major tax jurisdictions.

The Company may from

time to time be assessed interest or penalties by major tax jurisdictions,

although any such assessments historically have been minimal and immaterial to

the Companys financial results.

In the event the Company has received an

assessment for interest and/or penalties, it has been classified in the

financial statements as selling, general and administrative expense.

Advertising costs are expensed as incurred and totaled $20,260 and $12,017 during the years ended August 31, 2020 and 2019, respectively.

The Company utilizes the liability method of accounting for income taxes as set forth in ASC 740, Income Taxes .

Under the liability method, deferred taxes are determined based on the temporary differences between the financial statement and tax basis of assets and liabilities using tax rates expected to be in effect during the years in which the basis that give rise to the differences reverse.

A valuation allowance is recorded when it is more likely than not that some of the deferred tax assets will not be realized.

In determining the need for valuation allowances we consider projected future taxable income and the availability of tax planning strategies.

If in the future we determine that we would not be able to realize our recorded deferred tax assets, an increase in the valuation allowance would be recorded, decreasing earnings in the period in which such determination is made.

We assess our income tax positions and record tax benefits for all years subject to examination based upon our evaluation of the facts, circumstances and information available at the reporting date.

For those tax positions where there is a greater than 50% likelihood that a tax benefit will be sustained, we have recorded the largest amount of tax benefit that may potentially be realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information.

For those income tax positions where there is 50% or less likelihood that a tax benefit will be sustained, no tax benefit has been recognized in the financial statements.

The Company has concluded that there are no significant uncertain tax positions requiring recognition in the Company's financial statements.

The Company's evaluation was performed for the tax years which remain subject to examination by major tax jurisdictions.

The Company may from time to time be assessed interest or penalties by major tax jurisdictions, although any such assessments historically have been minimal and immaterial to the Company's financial results.

In the event the Company has received an assessment for interest and/or penalties, it has been classified in the financial statements as selling, general and administrative expense.

Destiny Media Technologies Inc.

NOTES TO CONSOLIDATED FINANCIAL

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2020 and 2019

1 unchanged sentence

Investment tax credits

The Company uses the flow through method to account for

investment tax credits earned on eligible scientific research and development

expenditures.

Under this method, the investment tax credits are recognized as a

reduction to income tax expense.

The Company uses the flow through method to account for investment tax credits earned on eligible scientific research and development expenditures.

Under this method, the investment tax credits are recognized as a reduction to income tax expense.

Stock based compensation

The Company follows the provisions of Financial Accounting

Standards Board (FASB) Accounting Standards Codification Section 718

Compensation - Stock Compensation, which establishes accounting for equity

based compensation awards to be accounted for using the fair value method.

Equity-settled share based payment arrangements are initially measured at fair

value at the date of grant and recorded within shareholders equity.

value at grant date of all share-based payments is recognized as compensation

expense over the period for which benefits of services are expected to be

derived, with a corresponding credit to shareholders equity.

estimates the fair value of stock options granted using the Black-Scholes option

pricing model and estimate the expected forfeiture rate at the date of grant.

When awards are forfeited because non-market based vesting conditions are not

satisfied, the expense previously recognized is proportionately reversed.

The Company follows the provisions of Financial Accounting Standards Board ("FASB") Accounting Standards Codification Section 718 "Compensation - Stock Compensation", which establishes accounting for equity based compensation awards to be accounted for using the fair value method.

Equity-settled share based payment arrangements are initially measured at fair value at the date of grant and recorded within shareholders' equity.

The fair value at grant date of all share-based payments is recognized as compensation expense over the period for which benefits of services are expected to be derived, with a corresponding credit to shareholders' equity.

The Company estimates the fair value of stock options granted using the Black-Scholes option pricing model and estimate the expected forfeiture rate at the date of grant.

When awards are forfeited because non-market based vesting conditions are not satisfied, the expense previously recognized is proportionately reversed.

Lease accounting

In February 2016, the FASB issued ASU 2016-02, Leases , as amended by subsequent standards updates, which requires lessees to recognize right-of-use (ROU) assets and lease liabilities for all leases, with the exception of short-term leases, at the commencement date of each lease.

The Company adopted the new standard effective September 1, 2019 using a modified retrospective approach and did not restate comparative periods.

As a result, the Company recorded $671,911 of ROU assets and operating lease liabilities on September 1, 2019.

There was no cumulative-effect adjustment for the adoption and the adoption did not have a significant impact on the Company's consolidated statements of comprehensive income.

The Company has elected to apply the practical expedient package to not reassess initial direct costs related to leases, whether any expired or existing contracts contained leases and to carry forward historical lease classification.

As a result, all leases identified by the Company will continue to be classified as operating leases.

In addition, the Company elected to not record short-term leases with an initial term of 12 months or less on its consolidated balance sheets.

See Note 5 - Leases for more information.

Destiny Media Technologies Inc.

NOTES TO CONSOLIDATED FINANCIAL

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2020 and 2019

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd.)

Lease accounting (cont'd.)

The Company determines if an arrangement is a lease at contract inception by evaluating if the contract conveys the right to control the use of an identified asset during the period of use.

A ROU asset represents the Company's right to use an identified asset for the lease term and lease liability represents the Company's obligation to make payments as set forth in the lease arrangement.

ROU assets and lease liabilities are included on the Company's consolidated balance sheets beginning September 1, 2019 and are recognized based on the present value of the future minimum lease payments at lease commencement date.

The interest rate used to determine the present value of the future lease payments is the Company's estimated incremental borrowing rate, because the interest rate implicit in the lease is generally not readily determinable.

A ROU asset initially equals the lease liability, adjusted for any lease payments made prior to lease commencement and any lease incentives.

All leases are recorded on the consolidated balance sheets except for leases with an initial term of less than 12 months.

All of the Company's leases are operating leases.

The Company has lease agreements with lease and non-lease components.

The lease component is comprised of minimum lease payments which includes base rent and estimated property taxes and insurance.

Non-lease components primarily include payments for maintenance and are expensed as incurred.

Comprehensive income (loss)

Comprehensive income (loss) includes all changes in equity except those resulting from investments by owners and distributions to owners.

Accumulated other comprehensive income (deficit) consists only of accumulated foreign currency translation adjustments for all years presented.

Destiny Media Technologies Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2020 and 2019

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd.)

Earnings per share

Net income per common share (basic) is calculated by dividing

net income by the weighted average number of common shares outstanding during

Net income per common share (diluted) is calculated by dividing net

income 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.

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.

Net income per common share (basic) is calculated by dividing net income by the weighted average number of common shares outstanding during the period.

Net income per common share (diluted) is calculated by dividing net income 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.

Weighted average common shares outstanding

Diluted weighted average common shares

Diluted weighted average common shares outstanding

At August 31, 2020, the Company had an aggregate of 400,000 (2019:

290,000) stock options outstanding.

Those outstanding options were not

included in the computation of diluted EPS because the effect would have been

anti-dilutive.

Comprehensive income (loss)

Comprehensive income (loss) includes all changes in equity

except those resulting from investments by owners and distributions to owners.

Accumulated other comprehensive income (deficit) consists only of accumulated

foreign currency translation adjustments for all years presented.

Those outstanding options were not included in the computation of diluted EPS because the effect would have been anti-dilutive.

Destiny Media Technologies Inc.

NOTES TO CONSOLIDATED FINANCIAL

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2020 and 2019

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd.)

Fair value measurement

The book value of cash and cash equivalents, short-term

investments, accounts receivable, other receivables, and accounts payable and

accrued liabilities approximate their fair values due to the short-term maturity

of those instruments.

The fair value hierarchy under GAAP is based on three

levels of inputs, of which the first two are considered observable and the last

unobservable, that may be used to measure fair value which are the

Level 1 quoted prices (unadjusted) in active markets for

identical assets and liabilities;

Level 2 observable inputs other than

Level 1, quoted prices for similar assets or liabilities in active markets,

quoted prices for identical or similar assets and liabilities in markets that

are not active, and model-derived prices whose inputs are observable or whose

significant value drivers are observable;

Level 3 assets and

liabilities whose significant value drivers are unobservable by little or no

market activity and that are significant to the fair value of the assets or

The book value of cash and cash equivalents, short-term investments, accounts receivable, other receivables, and accounts payable and accrued liabilities approximate their fair values due to the short-term maturity of those instruments.

The fair value hierarchy under GAAP is based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are the following:

Level 1 - quoted prices (unadjusted) in active markets for identical assets and liabilities;

Level 2 - observable inputs other than Level 1, quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, and model-derived prices whose inputs are observable or whose significant value drivers are observable;

Level 3 - assets and liabilities whose significant value drivers are unobservable by little or no market activity and that are significant to the fair value of the assets or liabilities.

Recently Adopted Accounting Standards

In May 2014, the FASB issued ASU No.

2014-09, Revenue from

Contracts with Customers (ASU 2014-09).

ASU 2014-09 provides a five-step

analysis of transactions to determine when and how revenue is recognized.

premise of ASU 2014-09 is that a company should recognize revenue to depict the

transfer of promised goods or services to customers in an amount that reflects

the consideration to which the entity expects to be entitled in exchange for

those goods or services.

The Company adopted this standard on September 1, 2018

using the modified retrospective method applied to open contracts at the date of

Under this approach, the Company is not required to restate the

prior financial statements presented.

The provisions under this ASU were applied

to all contracts at the date of initial adoption.

In order to comply with the guidance, beginning on September 1,

2018, the Company amended its revenue recognition policy and performed estimates

as outlined below.

The adoption of ASU 2014-09 did not result in any adjustment

to the Companys consolidated balance sheet on the date of adoption.

the Companys Annual Report on Form 10-K for the fiscal year ended August 31,

2018 for a description of the Companys revenue recognition policy prior to

September 1, 2018.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash

Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments

("ASU 2016-15").

ASU 2016-15 reduces the existing diversity in practice in

financial reporting across all industries by clarifying certain existing

principles in ASC 230, Statement of Cash Flows, ("ASC 230") including providing

additional guidance on how and what an entity should consider in determining the

classification of certain cash flows.

In addition, in November 2016, the FASB

issued ASU 2016-18, Statement of Cash Flows (Topic 230), Restricted Cash ("ASU

ASU 2016-18 clarifies certain existing principles in ASC 230,

including providing additional guidance related to transfers between cash and

restricted cash and how entities present, in their statement of cash flows, the

cash receipts and cash payments that directly affect the restricted cash

This amendment was effective for the Company beginning on September 1,

The adoption of ASU 2016-15 and ASU 2016-18 did not have any material

effect on the Companys consolidated financial statements.

In February 2016, the FASB issued ASU No.

2016-02, "Leases (Topic 842)" ("ASU 2016-02").

The amendments in this Update increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements.

The FASB also issued ASU No.

2018-11 "Leases (Topic 842):

Targeted Improvements and ASU 2019-01 "Leases Codification Improvements Codification improvements to Topic 842 (leases)", which provides narrow amendments to clarify how to apply certain aspects of the new lease standard.

ASU 2016-02 was effective for the Company on September 1, 2019.

The Company adopted the modified retrospective approach, effective September 1, 2019, with no restatement of prior year comparatives, which resulted in the recognition of a right of use asset and an offsetting lease liability of $671,911 in respect of the Company's office premises lease.

See note 5 - leases for further details.

Destiny Media Technologies Inc.

NOTES TO CONSOLIDATED FINANCIAL

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2020 and 2019

In June 2018, the FASB issued ASU 2018-07, Compensation-Stock

Compensation (Topic 718), Improvements to Nonemployee Share-based Payments (ASU

This ASU expands the scope of Topic 718 to include share-based

payment transactions for acquiring goods and services from nonemployees.

standard was effective for the Company beginning on September 1, 2018.

guidance is required to be applied retrospectively with the cumulative effect

recognized at the date of initial application.

The adoption of this guidance did

not have any material impact on the Companys consolidated financial statements.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd.)

Accounting Standards Not Yet Effective

In February 2016, the FASB issued ASU No.

2016-02, Leases

(Topic 842) (ASU 2016-02).

The amendments in this Update increase

transparency and comparability among organizations by recognizing lease assets

and lease liabilities on the balance sheet and disclosing key information about

leasing arrangements.

The FASB has also issued ASU No.

2018-11 Leases (Topic

Targeted Improvements and ASU 2019-01 Leases Codification Improvements

Codification improvements to Topic 842 (leases), which provides narrow

amendments to clarify how to apply certain aspects of the new lease standard.

ASU 2016-02 will be effective for the Company beginning on September 1, 2019.

The new standard will require the Company to recognize a lease asset and an

offsetting lease liability of approximately $660,000 in respect of the Companys

office premises lease.

In June 2016, the FASB issued ASU No.

2016-13, Financial

InstrumentsCredit Losses (Topic 326):

Measurement of Credit Losses on Financial

Instruments (ASU 2016-13).

2016-13, "Financial Instruments-Credit Losses (Topic 326):

amends guidance on reporting credit losses for assets held on an amortized cost

basis and available-for-sale debt securities.

For assets held on an amortized

cost basis, Topic 326 eliminates the probable initial recognition threshold in

current GAAP and, instead, requires an entity to reflect its current estimate of

all expected credit losses.

The allowance for credit losses is a valuation

account that is deducted from the amortized cost basis of the financial assets

to present the net amount expected to be collected.

For available-for-sale debt

securities, credit losses should be measured in a manner similar to current

GAAP, however Topic 326 will require that credit losses be presented as an

allowance rather than as a write-down.

ASU 2016-13 affects entities holding

financial assets and net investment in leases that are not accounted for at fair

value through net income.

The amendments affect loans, debt securities, trade

receivables, net investments in leases, off balance sheet credit exposures,

reinsurance receivables, and any other financial assets not excluded from the

scope that have the contractual right to receive cash.

The amendments in this

ASU will be effective for the Company on September 1, 2020.

The Company is in

the process of determining the effect the adoption of this standard will have on

its consolidated financial statements.

Measurement of Credit Losses on Financial Instruments" ("ASU 2016-13").

Financial Instruments-Credit Losses (Topic 326) amends guidance on reporting credit losses for assets held

on an amortized cost basis and available-for-sale debt securities.

For assets held on an amortized cost basis, Topic 326 eliminates the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses.

The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected.

For available-for-sale debt securities, credit losses should be measured in a manner similar to current GAAP, however Topic 326 will require that credit losses be presented as an allowance rather than as a write-down.

ASU 2016-13 affects entities holding financial assets and net investment in leases that are not accounted for at fair value through net income.

The amendments affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash.

The amendments in this ASU will be effective for the Company on September 1, 2020.

The adoption of this standard will not have a material impact on the Company's consolidated financial statements.

In February 2018, the FASB issued ASU No.

2018-02, "Income Statement-Reporting Comprehensive Income (Topic 220):

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income" ("ASU 2018-02"), which provides financial statement preparers with an option to reclassify stranded tax effects within accumulated other comprehensive income to retained earnings in each period in which the effect of the change in the U.S.

federal corporate income tax rate in the Tax Cuts and Jobs Act (or portion thereof) is recorded.

The amendments in this ASU will be effective for the Company on September 1, 2019.

The amendments in this ASU should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S.

federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized.

The adoption of this guidance will not have a material impact on its consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement - Disclosure Framework (Topic 820).

The updated guidance improves the disclosure requirements on fair value measurements.

The amendments in this ASU will be effective for the Company on September 1, 2020.

Early adoption is permitted for any removed or modified disclosures.

The adoption of this guidance will not have a material impact on its consolidated financial statements.

Destiny Media Technologies Inc.

NOTES TO CONSOLIDATED FINANCIAL

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2020 and 2019

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Accounting Standards Not Yet Effective

In February 2018, the FASB issued ASU No.

2018-02, Income

StatementReporting Comprehensive Income (Topic 220):

Reclassification of

Certain Tax Effects from Accumulated Other Comprehensive Income (ASU

2018-02), which provides financial statement preparers with an option to

reclassify stranded tax effects within accumulated other comprehensive income to

retained earnings in each period in which the effect of the change in the U.S.

federal corporate income tax rate in the Tax Cuts and Jobs Act (or portion

thereof) is recorded.

The amendments in this ASU will be effective for the

Company on September 1, 2019.

The amendments in this ASU should be applied

either in the period of adoption or retrospectively to each period (or periods)

in which the effect of the change in the U.S.

federal corporate income tax rate

in the Tax Cuts and Jobs Act is recognized.

The Company does not expect that the

adoption of this guidance will have a material impact on its consolidated

financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value

Measurement - Disclosure Framework (Topic 820).

The updated guidance improves

the disclosure requirements on fair value measurements.

The amendments in this

ASU will be effective for the Company on September 1, 2020.

Early adoption is

permitted for any removed or modified disclosures.

The Company is currently

assessing the timing and impact of adopting the updated provisions to its

consolidated financial statements.

SHORT TERM INVESTMENTS

The Companys short-term investments consists of one-year

Guaranteed Investment Certificates with a major Canadian financial institution

that earn interest at variable interest rates ranging from 2.35% 2.36% (2018:

The Company's short-term investments consists of one-year Guaranteed Investment Certificates with a major Canadian financial institution that earn interest at variable interest rates ranging from 2.15% - 2.17% (2019:

2.35% - 2.36%).

Destiny Media Technologies Inc.

NOTES TO CONSOLIDATED FINANCIAL

August 31, 2019 and 2018

PROPERTY AND EQUIPMENT AND INTANGIBLES

13 unchanged sentences

Patents, trademarks and lists

Depreciation and amortization for the year ended August 31,

2019 was $96,846 (2018:

Depreciation and amortization for the year ended August 31, 2020 was $135,385 (2019:

Destiny Media Technologies Inc.

NOTES TO CONSOLIDATED FINANCIAL

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2020 and 2019

The Company entered into a lease agreement commencing July 1, 2017 and expiring June 30, 2022 consisting of approximately 6,600 square feet.

On adoption of ASC 842, Lease Accounting, the Company recognized right-of-use assets and a corresponding increase in lease liabilities, in the amount of $671,911 which represented the present value of future lease payments using a discount rate of 8% per year.

Property tax and insurance payments paid to the lessor are included in the calculation of future lease payments.

Right of Use Asset Continuity

Balance, September 1

Lease Inducement

Foreign Currency Translation Adjustment

Balance, August 31

The Company has operating lease payments committed as follows:

Total lease payments payable

Less amounts representing interest

Total Operating Lease Liability

Less current portion of operating lease liability

Long term portion of operating lease liability

Operating Lease Liability Continuity

Balance, September 1

Less Lease Payments

Foreign Currency Translation Adjustment

Balance, August 31

During the year ended August 31, 2020 the Company recorded depreciation expense of $213,935 (2019 - $244,992 rent expense) which has been allocated between general and administrative expenses, research and development and sales and marketing on the consolidated statement of comprehensive income.

The total rent commitment, net of the leasehold improvement allowance, is being amortized to rent expense on a straight-line basis over the term of the lease.

Destiny Media Technologies Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2020 and 2019

STOCKHOLDERS' EQUITY

Effective September 13, 2019, the Company effected a reverse

stock split on the basis of 5:1.

As such, the Companys authorized capital was

decreased from 100,000,000 shares of common stock, par value $0.001 to

20,000,000 shares of common stock, par value $0.001 and all shares of common

stock issued and outstanding were decreased on the basis of one new share for

each five old shares.

These consolidated financial statements give retroactive

effect to such reverse stock split and all share and per share amounts have been

adjusted accordingly.

On September 13, 2019, the Company effected a reverse stock split on the basis of 5:1.

As such, the Company's authorized capital was decreased from 100,000,000 shares of common stock, par value $0.001 to 20,000,000 shares of common stock, par value $0.001 and all shares of common stock issued and outstanding were decreased on the basis of one new share for each five old shares.

These consolidated financial statements give retroactive effect to such reverse stock split and all share and per share amounts have been adjusted accordingly.

During the year ended August 31, 2020 the Company completed a Normal Course Issuer Bid ("NCIB"), pursuant to which the Company purchased 550,140 shares of common stock in the capital of the Company.

Purchases pursuant to the NCIB were made from time to time by RBC Dominion Securities Inc.

on behalf of the Company through the facilities of the TSX Venture Exchange at the market price at the time of purchase, subject to daily limits and compliance with the applicable rules of the TSX Venture Exchange and Canadian securities laws.

[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.

The Company is authorized to issue up to 20,000,000 shares of common stock, par value $0.001 per share.

[b] Stock option plans

The Company has a stock option plan, namely the 2015 Stock

Option Plan (the Plan), under which up to 530,000 shares of common stock, has

been reserved for issuance.

A total of 240,000 common shares remain eligible for

issuance under the Plan.

The options generally vest over a range of periods from

the date of grant, some are immediate, and others are 12 or 24 months.

options that do not vest as the result of a grantee leaving the Company are

forfeited and the common shares underlying them are returned to the reserve.

options generally have a contractual term of five years.

The Company has a stock option plan, namely the 2015 Stock Option Plan (the "Plan"), under which up to 530,000 shares of common stock, has been reserved for issuance.

A total of 130,000 common shares remain eligible for issuance under the Plan.

The options generally vest over a range of periods from the date of grant, some are immediate, and others are 12 or 24 months.

Any options that do not vest as the result of a grantee leaving the Company are forfeited and the common shares underlying them are returned to the reserve.

The options generally have a contractual term of five years.

Destiny Media Technologies Inc.

NOTES TO CONSOLIDATED FINANCIAL

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2020 and 2019

2 unchanged sentences

Stock-Based Payment Award Activity

A summary of option activity under the Plan as of August 31,

2019 and 2018, and changes during the years ended are presented below:

A summary of option activity under the Plan as of August 31, 2020 and 2019, and changes during the years ended are presented below:

Exercise Price

Outstanding at September 1, 2017

Outstanding at August 31, 2018

Outstanding at August 31, 2019

Outstanding at August 31, 2020

Exercisable at August 31, 2020

The aggregate intrinsic value is calculated as the difference

between the exercise price of the underlying awards and the quoted price of the

Companys common stock for the options that were in-the-money at August 31,

The following table summarizes information regarding the

non-vested stock purchase options outstanding as of August 31, 2019:

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 at August 31, 2020.

The following table summarizes information regarding the non-vested stock purchase options outstanding as of August 31, 2020:

Number of Options

Non-vested options at September 1, 2017

Non-vested options at August 31, 2018

Non-vested options at August 31, 2019

Non-vested options at August 31, 2020

Destiny Media Technologies Inc.

NOTES TO CONSOLIDATED FINANCIAL

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2020 and 2019

1 unchanged sentence

[b] Stock option plans (cont'd.)

As of August 31, 2019, there was $42,658 of total unrecognized

compensation cost related to non-vested share-based compensation awards.

unrecognized compensation cost is expected to be recognized over a weighted

average period of 1.1 years.

During the year ended August 31, 2019, the total stock-based

compensation expense of $41,675 (2018:

$54,452) is reported in the statement of

comprehensive income as follows:

As of August 31, 2020, there was $67,203 (2019:

$42,658) of total unrecognized compensation cost related to non-vested share-based compensation awards.

The unrecognized compensation cost is expected to be recognized over a weighted average period of 1.41 (2019:

During the year ended August 31, 2019, the total stock-based compensation expense of $48,615 (2019:

$41,675) is reported in the statement of comprehensive income as follows:

Stock-based compensation

4 unchanged sentences

Valuation Assumptions

The fair value of each option award is estimated on the date of

grant using the Black-Scholes option-pricing model based on the following

The fair value of each option award is estimated on the date of grant using the Black-Scholes option- pricing model based on the following assumptions:

Expected term of stock options (years)

3 unchanged sentences

Weighted average grant date fair value

Expected volatilities are based on historical volatility of the

Companys stock.

The Company uses historical data to estimate option exercise

and employee termination within the valuation model.

The expected term of

options granted represents the period of time that options granted are expected

to be outstanding.

The risk-free rate for periods within the contractual life of

the options is based on US Treasury bill rates in effect at the time of grant.

Expected volatilities are based on historical volatility of the Company's stock.

The Company uses historical data to estimate option exercise and employee termination within the valuation model.

The expected term of options granted represents the period of time that options granted are expected to be outstanding.

The risk-free rate for periods within the contractual life of the options is based on US Treasury bill rates in effect at the time of grant.

Destiny Media Technologies Inc.

NOTES TO CONSOLIDATED FINANCIAL

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2020 and 2019

1 unchanged sentence

[c] Employee Stock Purchase Plan

The Companys 2011 Employee Stock Purchase Plan (the Plan)

became effective on February 22, 2011.

Under the Plan, employees of the Company

are able to contribute up to 5% of their annual salary into a pool which is

matched equally by the Company.

Independent directors are able to contribute a

maximum of $12,500 each for a combined maximum annual purchase of $25,000.

maximum annual combined contributions will be $400,000.

All purchases are made

through the Toronto Stock Exchange by a third-party plan agent.

The third-party

plan agent will also be responsible for the administration of the Plan on behalf

of the Company and the participants.

During the year ended August 31, 2019, the Company recognized

compensation expense of $61,629 (2018:

$58,102) in salaries and wages on the

consolidated statement of comprehensive income in respect of the Plan,

representing the Companys employee matching of cash contributions to the plan.

The Company's 2011 Employee Stock Purchase Plan (the "Plan") became effective on February 22, 2011.

Under the Plan, employees of the Company are able to contribute up to 5% of their annual salary into a pool which is matched equally by the Company.

Independent directors are able to 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 Toronto Stock Exchange by a third-party plan agent.

The third-party plan agent will also be responsible for the administration of the Plan on behalf of the Company and the participants.

During the year ended August 31, 2020, the Company recognized compensation expense of $64,480 (2019:

$61,629) in salaries and wages on the consolidated statement of comprehensive income in respect of the Plan, representing the Company's employee matching of cash contributions to the plan.

The shares were purchased on the open market at an average price of $0.74 (2019:

The shares are held in trust by the Company for a period of one year

from the date of purchase.

A summary of common stock warrants outstanding as of August 31,

2019, and changes during the year then ended is presented below:

Outstanding at August 31,

October 20, 2017

Outstanding at August 31, 2018 and August 31,

As at August 31, 2020 355,022 shares are held in trust by the Company.

A summary of common stock warrants outstanding, and changes during the year then ended is presented below:

Outstanding at August 31, 2018, 2019, and 2020

Destiny Media Technologies Inc.

NOTES TO CONSOLIDATED FINANCIAL

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2020 and 2019

The Company is subject to United States federal and state

income taxes at an approximate rate of 21.0% and to Canadian federal and British

Columbia provincial taxes in Canada at an approximate rate of 27.0% .

reconciliation of the provision (recovery) for income taxes at the United States

federal statutory rate compared to the Companys income tax expense is as

The Company is subject to United States federal and state income taxes at an approximate rate of 21.0% and to Canadian federal and British Columbia provincial taxes in Canada at an approximate rate of 27.0%.

The reconciliation of the provision (recovery) for income taxes at the United States federal statutory rate compared to the Company's income tax expense is as follows:

statutory rates

1 unchanged sentence

Stock option compensation

Effect of higher foreign tax rates in

Effect of research tax credits claims filed in respect of

Effect of higher foreign tax rates in Canada

Effect of research tax credits claims filed in respect of prior years

Effect of a change in statutory tax rates

Foreign exchange and other adjustments

Recovery of previously unrecognized tax

valuation allowance

Recovery of previously unrecognized tax assets

Change in valuation allowance

Provision for deferred income taxes

Included in other adjustments and change in valuation allowance

for the year ended August 31, 2019 is $33,000 (2018:

$(74,000)) for the effect

of changes in foreign exchange rates and $(74,000) (2018:

$115,000) in respect

of a change in estimates and provisions.

Deferred income taxes reflect the net tax effects of temporary

differences between the carrying amounts of assets and liabilities for financial

reporting purposes and the amounts used for income tax purposes.

The Company has

recognized a valuation allowance for those deferred tax assets for which

realization is not likely to occur.

Significant components of the Companys deferred tax assets as

of August 31 are as follows:

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

The Company has recognized a valuation allowance for those deferred tax assets for which realization is not likely to occur.

Significant components of the Company's deferred tax assets as of August 31 are as follows:

Deferred tax assets:

1 unchanged sentence

Excess of book over tax depreciation

Carryforwards

Tax Credit Carryforwards

Total deferred tax asset

Valuation allowance

Net deferred tax asset

Destiny Media Technologies Inc.

NOTES TO CONSOLIDATED FINANCIAL

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2020 and 2019

INCOME TAXES (Cont'd)

Net income (loss) before income tax by geographic region is as

Net income (loss) before income tax by geographic region is as follows:

United States

If not utilized to reduce future taxable income, the Companys

net operating loss carryforwards will expire as follows:

If not utilized to reduce future taxable income, the Company’s net operating loss carryforwards will expire as follows:

United States

2021 and thereafter

If not utilized to reduce future taxable payable, the Companys

investment tax credit carryforwards will expire as follows:

If not utilized to reduce future taxable payable, the Company’s investment tax credit carryforwards will expire as follows:

United States

1 unchanged sentence

Destiny Media Technologies Inc.

NOTES TO CONSOLIDATED FINANCIAL

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2020 and 2019

The Company entered into a new lease agreement commencing July

1, 2017 and expiring June 30, 2022 for the same premise consisting of

approximately 6,600 square feet.

The Company has fiscal year payments committed

During the year ended August 31, 2018, the Company became

entitled to a leasehold improvement allowance from its landlord in the amount of

$45,341, in connection with certain office leasehold improvements completed.

This amount was recorded as a deferred leasehold inducement and is being

amortized against rent expense over the remaining term of the lease.

During the year ended August 31, 2019 the Company recorded rent

expense of $244,992 (2018 - $256,058) which has been allocated between general

and administrative expenses, research and development and sales and marketing on

the consolidated statement of comprehensive income.

The total rent commitment,

net of the leasehold improvement allowance, is being amortized to rent expense

on a straight-line basis over the term of the lease.

The Company's property lease agreement commenced on July 1, 2017 and expiring June 30, 2022.

Details of the lease agreement are included in Note 5.

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 Companys financial statements.

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 Companys 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 will defend itself against

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.

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 will defend 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.

Destiny Media Technologies Inc.

NOTES TO CONSOLIDATED FINANCIAL

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2020 and 2019

CONCENTRATIONS AND ECONOMIC DEPENDENCE

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, by product and location of

customer, is as follows:

United States

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, by product and location of customer, is as follows:

North America

Total Play MPE® Revenue

2 unchanged sentences

Total Revenue

Revenue in the above table is based on location of the

customers billing address.

Some of these customers have distribution centers

located around the globe and distribute around the world.

During the year ended

August 31, 2019, the Company generated 41% of total revenue from one customer

[2018 - 42%].

It is in managements opinion that the Company is not exposed

to significant credit risk.

As at August 31, 2019, two customers represented $233,549 (70%)

of the trade receivables balance [2018 one customer represented $102,313

The Company has substantially all its assets in Canada and its

current and planned future operations are, and will be, located in Canada.

Revenue in the above table 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 year ended August 31, 2020, the Company generated 42% of total revenue from one customer [2019 - 41%].

It is in management's opinion that the Company is not exposed to significant credit risk.

As at August 31, 2020, 2 customers represented $275,620 (65%) of the trade receivables balance [2019 - two customers represented $233,549 (70%)].

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

COMPARATIVE FIGURES

Certain comparative figures have been reclassified to conform

to the current period's presentation.

These reclassifications did not affect

prior periods' net earnings.

Destiny Media Technologies Inc.

NOTES TO CONSOLIDATED FINANCIAL

August 31, 2019 and 2018

Certain comparative figures have been reclassified to conform to the current period's presentation.

These reclassifications did not affect prior periods' net earnings.

SUBSEQUENT EVENTS

On September 13, 2019, the Company commenced a Normal Course

Issuer Bid (NCIB), pursuant to which the Company may purchase up to a maximum

of 550,140 shares of common stock in the capital of the Company, representing

approximately 5% of the then-outstanding common stock.

Purchases pursuant to the

NCIB will be made from time to time by RBC Dominion Securities Inc.

the Company through the facilities of the TSX Venture Exchange at the market

price at the time of purchase, subject to daily limits and compliance with the

applicable rules of the TSX Venture Exchange and Canadian securities laws.

Shares purchased will be paid for with cash available from the Company's working

Subsequent to August 31, 2019, an aggregate of 97,100

repurchased shares were returned to the Companys treasury and retired.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

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 8. Financial Statements and Supplementary Data