What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2022-11-14 compared with 2021-11-23 · 304 added, 386 removed, 257 unchanged (73% of the section changed)

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Audited Consolidated Financial Statements for the Years Ended August 31, 2021 and 2020:

DESTINY MEDIA TECHNOLOGIES, INC.

INDEX TO FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm (PCAOB ID No.

Report of Independent Registered Public Accounting Firm (Davidson & Company LLP)

Consolidated Balance Sheets as at August 31, 2021 and 2020;

Consolidated Balance Sheets as of August 31, 2022 and 2021

Consolidated Statement of Comprehensive Income for the years ended August 31, 2022 and 2021

1 unchanged sentence

Consolidated Statement of Cash Flows for the years ended August 31, 2022 and 2021

Notes to Consolidated Financial Statements.

Consolidated Financial Statements

Destiny Media Technologies Inc.

August 31, 2021 and 2020

(Expressed in United States dollars)

Notes to Consolidated Financial Statements for the years ended August 31, 2022 and 2021

Report of Independent Registered Public Accounting Firm

1 unchanged sentence

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, 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.

We have audited the accompanying consolidated financial statements of Destiny Media Technologies Inc.

(the "Company") and its subsidiaries which comprise the consolidated balance sheet as of August 31, 2022, and the related consolidated statements of income and comprehensive income, cash flows, and stockholders' equity for the year then ended, 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 as at August 31, 2022, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

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.

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 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 financial statements are free of material misstatement, whether due to error or fraud.

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 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.

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 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.

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.

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.

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:

Critical audit matters 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 determined that there are no critical audit matters.

/s/ Smythe LLP

Chartered Professional Accountants

We have served as the Company's auditor since 2022.

/s/ DAVIDSON & COMPANY LLP

Vancouver , Canada

Chartered Professional Accountants

November 14, 2022

Report of Independent Registered Public Accounting Firm

To the Shareholders and Directors 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”) as of August 31, 2021, and the related consolidated statements of comprehensive income, changes in stockholders’ equity, and cash flows for the year 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 the results of its operations and its cash flows for the year ended August 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

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 audit.

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 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 entity’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 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 audit 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 audit provides a reasonable basis for our opinion.

We have served as the Company’s auditor from 2019 to 2022.

/s/ DAVIDSON & COMPANY LLP

Vancouver, Canada Chartered Professional Accountants

November 22, 2021

DESTINY MEDIA TECHNOLOGIES, INC.

Consolidated Balance Sheets

As at August 31,

(Expressed in United States dollars)

Cash and cash equivalents

Short-term investments [note 3]

Accounts receivable, net of allowance for doubtful accounts of $19,743 [2020 - $23,412] [note 10]

Accounts receivable, net of allowance for doubtful accounts of $ 39,518 (2021 - $ 19,743 )

Other receivables

1 unchanged sentence

Total current assets

Property and equipment, net [note 4]

Intangible assets, net [note 4]

Right of use assets [note 5]

Property and equipment, net

Intangible assets, net

Right-of-use assets

LIABILITIES AND STOCKHOLDERS' EQUITY

2 unchanged sentences

Deferred revenue

Operating lease liability [note 5]

Current portion of operating lease liability

Total current liabilities

Operating lease liability, net of current portion [note 5]

Total liabilities

Commitments and contingencies [note 5, 8 and 9]

Commitments and contingencies

Stockholders' equity

Common stock, par value $0.001 [note 6]

20,000,000 shares

Issued and outstanding:

10,265,361 shares [2020 - issued and outstanding 10,450,646 shares]

Additional paid-in capital [ note 6 ]

Common stock, par value $ 0.001 , authorized 20,000,000 shares.

Issued and outstanding - 10,122,261 shares (2021 - 10,265,361 shares)

Additional paid-in capital

Accumulated deficit

2 unchanged sentences

Total liabilities and stockholders' equity

Subsequent Events [note 12]

See accompanying notes

The accompanying notes are an integral part of these consolidated financial statements .

DESTINY MEDIA TECHNOLOGIES, INC.

Consolidated Statements of Comprehensive Income

Years ended August 31,

(Expressed in United States dollars)

Service revenue [note 10]

For the years ended August 31,

Service revenue

Cost of revenue

2 unchanged sentences

Customer support

Third party and transaction costs

Third-party and transactions costs

Operating expenses

2 unchanged sentences

Product development

Depreciation and amortization [note 4]

Depreciation and amortization

Income from operations

Interest income

Income before provision for income taxes

Income tax expense - deferred [note 7]

Foreign currency translation adjustment

Interest and other income

Gain on disposal of assets

Income before income tax

Current income tax expense

Net income for the year

Foreign currency translation adjustments

Total comprehensive income

Net income per common share, basic

Net income per common share, diluted

Net income per common share

Weighted average common shares outstanding:

See accompanying notes

The accompanying notes are an integral part of these consolidated financial statements .

DESTINY MEDIA TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

Years ended August 31,

(Expressed in United States dollars)

Consolidated Statements of Stockholders' Equity

Comprehensive

Income (Loss)

Stockholders'

1 unchanged sentence

Total comprehensive income

Stock-based compensation

Shares repurchased for cancellation

Stock based compensation - Note 6

Balance, August 31, 2021

Total comprehensive income

Stock-based compensation

Stock options repurchased and retired

Shares repurchased for cancellation

Stock based compensation - Note 6

Balance, August 31, 2022

See accompanying notes

The accompanying notes are an integral part of these consolidated financial statements .

DESTINY MEDIA TECHNOLOGIES, INC.

Consolidated Statements of Cash Flows

Years ended August 31,

(Expressed in United States dollars)

For the years ended August 31,

Operating Activities

Items not involving cash:

Adjustments to reconcile net income to net cash provided (used) in operations:

Depreciation and amortization

Stock-based compensation

Deferred leasehold inducement

Unrealized foreign exchange

Allowance for doubtful accounts

Gain on disposal of assets

Impairment expense

Operating lease liability

Unrealized foreign exchange (gain) loss

Changes in non-cash working capital:

5 unchanged sentences

Deferred revenue

Right of use Liability

Net cash provided by operating activities

Investing Activities

Purchase of property, equipment and intangibles

Sale of short-term investments, net

Development of software

Sales (Purchase) of short-term investments

Purchase of property, equipment, and intangibles

Net cash provided by (used in) investing activities

FINANCING ACTIVITY

Financing Activities

Common stock repurchased for cancellation

Net cash used in financing activity

Repurchase of stock options for retirement

Net cash used in financing activities

Effect of foreign exchange rate changes on cash

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

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents, beginning of year

3 unchanged sentences

Income taxes paid

See accompanying notes

The accompanying notes are an integral part of these consolidated financial statements .

DESTINY MEDIA TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2021 and 2020

AUGUST 31, 2022

ORGANIZATION AND BASIS OF PRESENTATION

Destiny Media Technologies Inc.

4 unchanged sentences

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:

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 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.

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

Destiny Media Technologies Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2021 and 2020

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd.)

in the United States, under the symbol "DSY" on the TSX Venture Exchange (the "TSX") and under the symbol "DME" on the Berlin, Frankfurt, Xetra and Stuttgart exchanges in Germany.

Basis of Presentation and Principles of Consolidation

The Company's consolidated financial statements are prepared in accordance with U.S.

generally accepted accounting principles ("GAAP").

The accompanying consolidated financial statements include the consolidated accounts of the Company and its wholly owned subsidiaries:

Destiny Software Productions, Inc.

("DSNY"), MPE Distributions, Inc.

("MPE"), Tonality, Inc.

("Tonality"), and Sonox Digital Inc.

All intercompany transactions and balances have been eliminated on consolidation.

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 the consolidated financial statements in accordance with U.S.

GAAP requires management to make use of certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reported periods.

The Company bases its estimates on historical experience and on various other assumptions that management believes are reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not readily apparent from other sources.

Actual results could differ from those estimates.

Significant estimates are related to the recoverability of long-term assets including property and equipment, intangible assets, amortization expense, and valuation of stock-based compensation.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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.

Short-term investments

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.

Destiny Media Technologies Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2021 and 2020

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd.)

The Company's cash include cash in readily available checking accounts.

The Company's cash equivalents consist of one-year Guaranteed Investment Certificates ("GIC") with a major Canadian financial institution that earn interest at variable interest rates ranging from 0.10 % - 2.36 % and had reached their maturity.

Concentrations of credit risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents.

The Company maintains deposits in federally insured financial institutions in excess of federally insured limits.

The Company has not experienced any losses in such accounts and management believes that the Company is not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held.

Accounts receivable

Trade receivables are amounts due from customers for services rendered in the ordinary course of business.

Accounts receivable are non-interest bearing and are due for settlement in full within 30-60 days, depending on a contract.

Trade receivables are shown net of allowance for bad or doubtful accounts.

Allowance for doubtful accounts

The Company establishes an allowance for doubtful accounts to ensure trade and other receivables are not overstated due to non-collectability.

The Company's allowance is based on a variety of factors, including age of the receivable, significant one-time events, historical experience, and other risk considerations.

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

Property and equipment, net

Property and equipment are recorded at cost, less accumulated depreciation.

Depreciation expense is recognized using the straight-line method over the useful life of the asset.

Furniture and fixtures are depreciated over five years .

Computer hardware is depreciated over 3.3 years.

Computer software is depreciated over two years .

Leasehold improvements are amortized over the lesser of the lease term or the estimated useful lives of the related assets.

Expenditures for repairs and maintenance of assets are charged to expense as incurred.

Upon retirement or sale, the cost and related accumulated depreciation of assets disposed of are removed from the accounts and any resulting gain or loss is included in net income (loss).

Intangible assets, net

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 two 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.

Patents, trademarks and lists are stated at cost.

Amortization is taken over the estimated useful lives of the assets.

Patents, trademarks and lists are amortized on a straight-line basis over 3 years.

Impairment of long-lived assets

The Company reviews long-lived assets, including property and equipment and intangible assets, for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable.

An impairment loss would be recognized when estimated undiscounted future cash flows expected to result from the use of the asset and its eventual disposition are less than the carrying amount.

The impairment loss, if recognized, would be based on the excess of the carrying value of the impaired asset over its respective fair value.

No impairment losses have been recorded for the years ended August 31, 2022 and 2021.

At the inception of a contractual arrangement, the Company determines whether the contract contains a lease by assessing whether there is an identified asset and whether the contract conveys the right to control the use of the identified asset in exchange for consideration over a period of time.

If both criteria are met, the Company records the associated lease liability and corresponding right-of-use asset upon commencement of the lease using the implicit rate or a discount rate based on a credit-adjusted secured borrowing rate commensurate with the term of the lease.

The Company additionally evaluates leases at their inception to determine if they are to be accounted for as an operating lease or a finance lease.

A lease is accounted for as a finance lease if it meets one of the following five criteria:

the lease has a purchase option that is reasonably certain of being exercised, the present value of the future cash flows is substantially all of the fair market value of the underlying asset, the lease term is for a significant portion of the remaining economic life of the underlying asset, the title to the underlying asset transfers at the end of the lease term, or if the underlying asset is of such a specialized nature that it is expected to have no alternative uses to the lessor at the end of the term.

Leases that do not meet the finance lease criteria are accounted for as an operating lease.

Operating lease assets represent a right to use an underlying asset for the lease term and operating lease liabilities represent an obligation to make lease payments arising from the lease.

Operating lease liabilities with a term greater than one year and their corresponding right-of-use assets are recognized on the balance sheet at the commencement date of the lease based on the present value of lease payments over the expected lease term.

Certain adjustments to the right-of-use asset may be required for items such as initial direct costs paid or incentives received.

As the Company's leases do not typically provide an implicit rate, the Company utilizes the appropriate incremental borrowing rate, determined as the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term and in a similar economic environment.

Lease cost is recognized on a straight-line basis over the lease term and variable lease payments are recognized as operating expenses in the period in which the obligation for those payments is incurred.

Variable lease payments primarily include common area maintenance, utilities, real estate taxes, insurance, and other operating costs that are passed on from the lessor in proportion to the space leased by the Company.

The Company has elected the practical expedient to not separate between lease and non-lease components.

Revenue recognition

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

The Company accounts for revenue in accordance with ASC 606.

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

The Company accounts for revenue in accordance with ASC 606, Revenue from Contracts with Customers.

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.

8 unchanged sentences

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.

The Company determines that it has a contract with a customer when the contract is executed, 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.

7 unchanged sentences

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 STATEMENTS

August 31, 2021 and 2020

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd.)

Revenue recognition (cont'd.)

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

12 unchanged sentences

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 STATEMENTS

August 31, 2021 and 2020

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd.)

Revenue recognition (cont'd.)

(4) Allocation of the transaction price to the performance obligations in the contract

2 unchanged sentences

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.

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

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

5 unchanged sentences

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.

2 unchanged sentences

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 STATEMENTS

August 31, 2021 and 2020

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd.)

Revenue recognition (cont'd.)

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

13 unchanged sentences

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 STATEMENTS

August 31, 2021 and 2020

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd.)

Cost of revenue

1 unchanged sentence

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 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 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, 2021, 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, 2021, the Company incurred approximately $92,116 (2020:

$103,073) 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 STATEMENTS

August 31, 2021 and 2020

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd.)

Allowance for doubtful accounts

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.

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.

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.

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.

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 20%

Computer hardware 30%

Computer software 50%

Leasehold improvements Straight-line over lease term

Translation of foreign currencies

2 unchanged sentences

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).

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

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

Transactions denominated in foreign currencies are translated into the reporting currency 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.

1 unchanged sentence

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

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 .

5 unchanged sentences

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.

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 consolidated financial statements.

The Company has concluded that there are no significant uncertain tax positions requiring recognition in the Company's consolidated 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 STATEMENTS

August 31, 2021 and 2020

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd.)

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.

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

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.

Share-based compensation expense for employees and directors is recognized in the consolidated statements of comprehensive income based on estimated amounts, including the grant date fair value and the expected service period.

For stock options, we estimate the grant date fair value using a Black-Scholes valuation model, which requires the use of multiple subjective inputs including estimated future volatility, expected forfeitures and the expected term of the awards.

We estimate the expected future volatility based on the Company's historical price volatility.

The stock's future volatility may differ from the estimated volatility at the grant date.

Our estimate of the forfeiture rate is based primarily on our historical experience.

The estimated forfeiture rates may differ from actual forfeiture rates which would affect the amount of expense recognized during the period.

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 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 STATEMENTS

August 31, 2021 and 2020

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.

We recognize the value of the awards over the awards' requisite service or performance periods.

The requisite service period is generally the time over which our share-based awards vest.

Segment reporting

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker in making decisions on how to allocate resources and assess performance.

The Company views its operations and manages its business as one operating segment.

Comprehensive income (loss)

1 unchanged sentence

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, 2021 and 2020

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd.)

Earnings per share

3 unchanged sentences

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

Dilutive impact of outstanding stock options

Diluted weighted average common shares outstanding

At August 31, 2021, the Company had an aggregate of 410,000 (2020:

400,000) stock options outstanding.

Destiny Media Technologies Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2021 and 2020

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 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.

Fair value measurements

The Company uses the fair value hierarchy to measure the value of its financial instruments.

The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable.

Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources, while unobservable inputs reflect a reporting entity's pricing based upon its own market assumptions.

The basis for fair value measurements for each level within the hierarchy is described below:

Level 1 - Quoted prices for identical assets or liabilities in active markets.

Level 2 - Quoted prices for identical or similar assets and liabilities in markets that are not active;

or other model-derived valuations whose inputs are directly or indirectly observable or whose significant value drivers are observable.

Level 3 - Valuations derived from valuation techniques in which one or more significant inputs to the valuation model are unobservable and for which assumptions are used based on management estimates.

The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk in its assessment of fair value.

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

The fair value of lease obligations is determined using discounted cash flows based on the expected amounts and timing of the cash flows discounted using a market rate of interest adjusted for appropriate credit risk.

Recently Adopted Accounting Standards

In June 2016, the FASB issued ASU No.

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

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 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.

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 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).

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 did not have a material impact on its consolidated financial statements.

Destiny Media Technologies Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2021 and 2020

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 rate of 0.25% (2020:

variable rates ranging between 2.15% - 2.17%).

PROPERTY AND EQUIPMENT AND INTANGIBLES

In December 2019, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, No.

2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes , or ASU 2019-12, which simplifies the accounting for income taxes.

ASU 2019-12 is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2020 on a prospective basis, and early adoption is permitted.

The Company adopted this guidance effective September 1, 2021, and the adoption did not have a material impact on the Company's consolidated financial statements.

Recently Issued Accounting Pronouncements

The Company assesses the adoption impacts of recently issued accounting standards by FASB or other standard setting bodies on the Company's consolidated financial statements as well as material updates to previous assessments.

There were no new material accounting standards issued in year of 2022 that impacted the Company.

PROPERTY AND EQUIPMENT, NET

August 31, 2022

Property and Equipment

Net Book Value

Furniture and fixtures

2 unchanged sentences

Leasehold improvements

Software under development

Patents, trademarks, and lists

Total property and equipment

August 31, 2021

Property and Equipment

Net Book Value

Furniture and fixtures

2 unchanged sentences

Leasehold improvements

Total property and equipment

Depreciation for the year ended August 31, 2022 was $ 128,968 (2021 - $ 90,022 ).

On January 31, 2022, the Company terminated the lease for the office space (Note 5).

Accordingly, leasehold fixtures and fittings were disposed of and a loss of $ 9,035 was recognized in the consolidated statement of comprehensive income for the year ended August 31, 2022.

INTANGIBLE ASSETS, NET

August 31, 2022

Intangible Assets

Net Book Value

Software under development

Patents, trademarks, and lists

Depreciation and amortization for the year ended August 31, 2021 was $105,357 (2020:

Destiny Media Technologies Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2021 and 2020

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

Total intangible assets

August 31, 2021

Intangible Assets

Net Book Value

Software under development

Patents, trademarks, and lists

Total intangible assets

Amortization for the year ended August 31, 2022 was $ 13,694 (2021 - $ 15,335 ).

RIGHT-OF-USE ASSET AND LEASE LIABILITY

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

The Company terminated the lease agreement on January 31, 2022.

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

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

Right-of-Use Assets

Balance, August 31, 2020

Foreign currency translation adjustment

Balance, August 31, 2021

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, 2022

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.

Destiny Media Technologies Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2021 and 2020

Operating Lease Liabilities

Balance, August 31, 2020

Lease interest expense

Foreign currency translation adjustment

Balance, August 31, 2021

Lease interest expense

Foreign currency translation adjustment

Balance, August 31, 2022

During the year ended August 31, 2022 the Company recorded depreciation expense of $ 95,010 (2021 - $ 224,154 ) which has been allocated between general and administrative, sales and marketing, and product development expenses on the consolidated statements of comprehensive income.

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

On January 31, 2022, upon exit of the lease a gain of $ 20,053 was recognized in the consolidated statement of comprehensive income.

As of August 31, 2022, the Company has no outstanding commitments related to the operating lease payments.

STOCKHOLDERS' EQUITY

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.

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.

During the year ended August 31, 2022, the Company did not issue any common stock (2021 - Nil ).

During the year ended August 31, 2022, the Company repurchased and cancelled 143,100 common shares for $ 179,401 (2021 - 185,285 common shares for $ 260,405 ).

[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.

Pursuant to the Company's 2015 Stock Option Plan (the "2015 Plan"), 530,000 shares of common stock have been reserved for issuance.

A total of 420,000 common shares remain eligible for issuance under the 2015 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.

On February 18, 2022 the Company received shareholder approval for the 2022 Stock Option Plan (the "2022 Plan") (together with the 2015 Plan, the "Plans"), whereby 1,000,000 common shares are reserved for issuance.

As of August 31, 2022, 517,000 common shares remain eligible for issuance under the 2022 Plan.

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

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

The options generally have a contractual term of five years.

Destiny Media Technologies Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2021 and 2020

STOCKHOLDERS' EQUITY (cont'd.)

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

Stock-Based Payment Award Activity

A summary of option activity under the Plan as of August 31, 2021 and 2020, and changes during the years ended are presented below:

During the year ended August 31, 2022, the Company granted 561,000 (2021 - 10,000 ) share purchase options to directors, officers, employees, and consultants of the Company.

The weighted-average assumptions used to estimate the fair value of stock options using the Black-Scholes option valuation model were as follows:

Risk-free interest rate

Exercise price

Dividend yield

Forfeiture rate

Expected life (years)

The summary of option activity for the years ended August 31, 2022 and 2021 were as follows:

Weighted Average

Exercise Price

Weighted Average

Contractual Term

Outstanding at August 31, 2020

2 unchanged sentences

Exercisable at August 31, 2022

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, 2021.

The following table summarizes information regarding the non-vested stock purchase options outstanding as of August 31, 2021:

Number of Options

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted price of the Company’s common stock for the options that were in-the-money as of August 31, 2022.

In all cases, the aggregate intrinsic value is nil.

During the year ended August 31, 2022, the Company repurchased 82,500 stock options for $ 11,275 .

The following table summarizes information regarding the non-vested options outstanding as of August 31, 2022 and changes during the period:

Weighted Average

Exercise Price

Non-vested options at August 31, 2020

1 unchanged sentence

Non-vested options at August 31, 2022

Destiny Media Technologies Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2021 and 2020

STOCKHOLDERS' EQUITY (cont'd.)

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

As of August 31, 2021, there was $16,472 (2020:

$67,203) 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 0.78 (2020:

During the year ended August 31, 2021, the total stock-based compensation expense of $51,734 (2020:

$48,615) is reported in the statement of comprehensive income as follows:

As of August 31, 2022, there was $ 179,620 (2021 - $ 16,472 ) of total unrecognized compensation cost related to non-vested stock-based compensation awards.

The unrecognized compensation cost is expected to be recognized over a weighted average period of 1.25 years (2021 - 0.78 years).

During the years ended August 31, 2022 and 2021, the total stock-based compensation expense was reported in the consolidated statement of comprehensive income as follows:

Stock-based compensation

1 unchanged sentence

Sales and marketing

Research and development

Product development

Total stock-based compensation

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 assumptions:

Expected term of stock options (years)

Expected volatility

Risk-free interest rate

Dividend yields

Weighted average grant date fair value

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 STATEMENTS

August 31, 2021 and 2020

STOCKHOLDERS' EQUITY (cont'd.)

[c] Employee Stock Purchase 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 Company's 2011 Employee Stock Purchase Plan (the "ESPP") became effective on February 22, 2011.

Under the ESPP, employees of the Company can contribute up to 5% of their annual salary into a pool which is matched equally by the Company in order to purchase the Company's common shares under certain terms.

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

The maximum annual combined contributions will be $ 400,000 .

All purchases are made through the 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, 2021, the Company recognized compensation expense of $93,759 (2020:

$64,480) 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.

All purchases are made through the TSX by a third-party plan agent.

The third-party plan agent is also responsible for the administration of the ESPP on behalf of the Company and the participants.

During the year ended August 31, 2022, the Company recognized compensation expense of $ 109,637 (2021 - $ 93,759 ) in salaries and wages on the consolidated statement of comprehensive income in respect of the ESPP, representing the Company's employee matching of cash contributions to the ESPP.

The shares were purchased on the open market at an average price of $ 1.24 (2021 - $ 1.06 ).

As at August 31, 2021 364,757 shares are held in trust by the Company.

Destiny Media Technologies Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2021 and 2020

The shares are held in trust by the Company for a period of one year from the date of purchase.

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:

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

statutory rates

3 unchanged sentences

Change in valuation allowance

Provision for deferred income taxes

Provision for income taxes

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.

5 unchanged sentences

Tax credit carryforwards

Total deferred tax asset

Total deferred tax assets

Valuation allowance

Net deferred tax asset

Destiny Media Technologies Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2021 and 2020

INCOME TAXES (Cont'd)

Net deferred tax assets

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

1 unchanged sentence

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

United States

2023 and thereafter

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

United States

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

2031 and thereafter

Destiny Media Technologies Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2021 and 2020

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

United States

COMMITMENTS AND CONTINGENCIES

The Company is subject to claims and legal proceedings that arise in the ordinary course of business.

2 unchanged sentences

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 Company believes the claims are without merit and is defending 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 STATEMENTS

August 31, 2021 and 2020

CONCENTRATIONS AND ECONOMIC DEPENDENCE

Risk and Uncertainties

Starting in late 2019, a novel strain of the coronavirus, or COVID-19, began to rapidly spread around the world.

At this time, there continues to be significant volatility and uncertainty relating to the full extent to which the COVID-19 pandemic and the various responses to it will impact our business, operations, and financial results.

Most countries have at various times instituted quarantines, restrictions on travel, "stay at home" rules, social distancing measures and restrictions on the types of businesses that could continue to operate, as well as guidance in response to the pandemic and the need to contain it.

The spread of COVID-19 has adversely impacted global economic activity and has contributed to significant volatility and negative pressure in financial markets.

The pandemic has resulted, and may continue to result, in a significant disruption of global financial markets, which may reduce our ability to access capital in the future, which could negatively affect our liquidity.

If the COVID-19 pandemic does not continue to slow and the spread of COVID-19 is not contained, our business operations, including those of our customers, could be interrupted.

The duration of any business disruption cannot be reasonably estimated at this time but may materially affect our ability to operate our business and result in additional costs.

It is not possible to reliably measure or quantify the impact COVID-19 has had on the financial results of the Company.

If the COVID-19 pandemic continues for an extended period, it may materially adversely impact business operations and, consequently, future financial results.

CONCENTRATIONS, ECONOMIC DEPENDENCE AND SEGMENTS

The Company operates solely in the digital media software segment and all revenue from its products and services are made in this segment.

Revenue from external customers, by product and location of customer, is as follows:

Revenue from external customers earned during the years ended August 31, 2022 and 2021, by product and location of customer, was as follows:

North America

Total Play MPE® Revenue

United States

Total Clipstream ® Revenue

Total Revenue

Revenue in the above table is based on location of the customer's billing address.

Total Play MPE®

North America

Revenue presented above 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, 2022, the Company generated 41 % of total revenue from one customer (2021 - 41 %).

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

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

As at August 31, 2022, one customer represented $ 283,144 (or 59 %) of the trade receivables balance (2021, one customer represented $ 142,758 (or 36 %)).

Subsequent to the year ended August 31, 2022 this customer paid $ 129,925 of outstanding balance.

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 STATEMENTS

August 31, 2021 and 2020

SUBSEQUENT EVENTS

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

Dismissal of Previous Independent Registered Public Accounting Firm

On August 31, 2022, we dismissed Davidson & Company LLP ("Davidson") as the Company's independent registered public accounting firm.

The reports of Davidson on the Company's consolidated financial statements for the years ended August 31, 2021 and 2020 did not contain an adverse opinion or disclaimer of opinion, and such reports were not qualified or modified as to uncertainty, audit scope, or accounting principle.

During the years ended August 31, 2021 and 2020, and during the subsequent period from September 1, 2021 through August 31, 2022 and up to the date of this Annal Report on Form 10-K, there were (i) no disagreements between the Company and Davidson on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, any of which, if not resolved to Davidson's satisfaction, would have caused Davidson to make reference thereto in its reports, and (ii) no "reportable events" within the meaning of Item 304(a)(1)(v) of Regulation S-K.

Engagement of New Independent Registered Public Accounting Firm

Concurrently therewith, on August 31, 2022, the Company approved the selection of Smythe LLP ("Smythe") as the Company's independent registered public accounting firm for the fiscal year ending August 31, 2022.

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