What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-11-23 compared with 2020-11-18 · 78 added, 80 removed, 565 unchanged (22% of the section changed)

12 unchanged sentences

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Directors of

Destiny Media Technologies Inc.

To the Shareholders and Directors of Destiny Media Technologies Inc.

Opinion on the Consolidated 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, 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.

(the "Company") as of August 31, 2021 and 2020, and the related consolidated statements of comprehensive income, changes in stockholders' equity, and cash flows for each of the years in the two year period ended August 31, 2021, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of August 31, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended August 31, 2021, 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 audits.

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on these financial statements based on our audits.

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.

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We conducted our audits 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.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the 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 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.

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 entity's internal control over financial reporting.

Accordingly, we express no such opinion.

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 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.

Our audits included performing procedures to assess the risks of material misstatement 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 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 financial statements.

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

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

We have determined that there are no critical audit matters to communicate in our auditor's report.

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

"DAVIDSON & COMPANY LLP"

/s/ DAVIDSON & COMPANY LLP

Vancouver, Canada

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Accrued liabilities

Deferred leasehold inducement [note 5]

Deferred revenue

Obligation under capital lease [note 5]

Operating lease liability [note 5]

Total current liabilities

1 unchanged sentence

Total liabilities

Commitments and contingencies [notes 5, 8 and 9]

Commitments and contingencies [note 5, 8 and 9]

Stockholders' equity

27 unchanged sentences

Interest income

Other income (expense)

Income before provision for income taxes

Income tax expense - deferred [note 7]

Foreign currency translation adjustments

Foreign currency translation adjustment

Total comprehensive income

Net income per common share, basic and diluted

Net income per common share, basic

Net income per common share, diluted

Weighted average common shares outstanding:

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

As at August 31,

Years ended August 31,

(Expressed in United States dollars)

stockholders'

comprehensive

stockholders'

Balance, August 31, 2019

10 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

As at August 31,

Years ended August 31,

(Expressed in United States dollars)

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Purchase of property, equipment and intangibles

Development of software

Sales (Purchase) of short-term investments

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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.

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.

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Short-term investments

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.

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

Our investments classified as held-for-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.

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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 Company accounts for revenue in accordance with ASC 606.

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.

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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 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

Intangible Assets

Our software solutions are offered to our customers through software as a service delivery models.

Development costs associated with the certain solutions offered exclusively through a software as a service model are accounted for in accordance with ASC 350-40.

Internal-Use Software.

All other client solution development costs, which represent a significant majority of development costs, are accounted for in accordance with ASC 985-20.

Costs of Software to be Sold, Leased or Marketed.

Under ASC 985-20, software development costs incurred in creating computer software solutions are expensed until technological feasibility has been established upon completion of a detailed program design.

Thereafter, all software development costs incurred through the -software's general release date are capitalized and subsequently recorded at the lower of amortized cost or net realizable value.

Capitalized costs are amortized based on current and expected future revenue for each software solution with minimum annual amortization equal to the straight-line amortization over the estimated economic life of the solution.

We amortize capitalized costs over five years.

Under ASC 350-40, software development costs related to preliminary project activities and post-implementation and maintenance activities are expensed as incurred.

We capitalize direct costs related to application development activities that are probable to result in additional functionality.

Capitalized costs are amortized on a straight-line basis over five years.

We test for impairment whenever events or changes in circumstances that could impact recoverability occur.

Patents, trademarks and lists are stated at cost.

Amortization is taken over the estimated useful lives of the assets and is calculated using the following rates and methods:

Patents, trademarks and lists Straight-line over 3 years

Destiny Media Technologies Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2021 and 2020

Property and equipment

Property and equipment are stated at cost.

3 unchanged sentences

Computer software 50%

Leasehold improvements

Straight-line over lease term

Patents, trademarks and lists

Straight-line over 3 years

Leasehold improvements Straight-line over lease term

Translation of foreign currencies

3 unchanged sentences

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 STATEMENTS

August 31, 2020 and 2019

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd.)

Translation of foreign currencies (cont'd)

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

3 unchanged sentences

Advertising costs are expensed as incurred and totaled $25,921 and $20,260 during the years ended August 31, 2021 and 2020, respectively.

Destiny Media Technologies Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2021 and 2020

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd.)

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

25 unchanged sentences

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.

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Weighted average common shares outstanding

Dilutive impact of outstanding stock options

Diluted weighted average common shares outstanding

1 unchanged sentence

400,000) stock options outstanding.

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

Destiny Media Technologies Inc.

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Recently Adopted Accounting Standards

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 STATEMENTS

August 31, 2020 and 2019

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd.)

Accounting Standards Not Yet Effective

In June 2016, the FASB issued ASU No.

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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.

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.

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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.

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

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

Destiny Media Technologies Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2021 and 2020

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd.)

Recently Adopted Accounting Standards (cont'd.)

In February 2018, the FASB issued ASU No.

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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.

The adoption of this guidance did 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).

2 unchanged sentences

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.

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

Destiny Media Technologies Inc.

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SHORT TERM INVESTMENTS

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%).

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 rate of 0.25% (2020:

variable rates ranging between 2.15% - 2.17%).

PROPERTY AND EQUIPMENT AND INTANGIBLES

5 unchanged sentences

Leasehold improvements

Software under development

Patents, trademarks, and lists

10 unchanged sentences

August 31, 2021 and 2020

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

The Company entered into an office 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.

16 unchanged sentences

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.

During the year ended August 31, 2021 the Company recorded depreciation expense of $224,154 (2020 - $213,935) 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.

3 unchanged sentences

STOCKHOLDERS' EQUITY

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.

Effective January 15, 2021, the Company commenced a Normal Course Issuer Bid ("NCIB"), pursuant to which the Company may purchase up to a maximum of 522,532 common shares, through the TSX Venture Exchange (the "TSX") at the market price at the time of purchase, subject to daily limits and compliance with the applicable rules of the TSX and Canadian securities laws.

During the year ended August 31, 2021, the Company repurchased and cancelled 185,285 common shares for $260,405.

During the year ended August 31, 2020 the Company completed a 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.

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As at August 31, 2021 364,757 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.

5 unchanged sentences

Permanent differences

Stock option compensation

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 assets

Change in valuation allowance

49 unchanged sentences

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%)].

As at August 31, 2021, one customer represented $142,758 (36%) of the trade receivables balance [2020 - two customers represented $275,620 (65%)].

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

2 unchanged sentences

These reclassifications did not affect prior periods' net earnings.

Destiny Media Technologies Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2021 and 2020

SUBSEQUENT EVENTS

1 unchanged sentence

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