0001062993-19-001716.txt : 20190415 0001062993-19-001716.hdr.sgml : 20190415 20190415160926 ACCESSION NUMBER: 0001062993-19-001716 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 47 CONFORMED PERIOD OF REPORT: 20190228 FILED AS OF DATE: 20190415 DATE AS OF CHANGE: 20190415 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DESTINY MEDIA TECHNOLOGIES INC CENTRAL INDEX KEY: 0001099369 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 841516745 STATE OF INCORPORATION: NV FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-28259 FILM NUMBER: 19748702 BUSINESS ADDRESS: STREET 1: 1110 - 885 W GEORGIA ST CITY: VANCOUVER STATE: A1 ZIP: V6C 3E8 BUSINESS PHONE: 604-609-7736 MAIL ADDRESS: STREET 1: 1110 - 885 W GEORGIA ST CITY: VANCOUVER STATE: A1 ZIP: V6C 3E8 10-Q 1 form10q.htm FORM 10-Q Destiny Media Technologies Inc. - Form 10-Q - Filed by newsfilecorp.com

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended February 28, 2019

[   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____

Commission File Number 0-28259

DESTINY MEDIA TECHNOLOGIES INC.
(Exact name of registrant as specified in its charter)

NEVADA
84-1516745
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
1110 – 885 West Georgia Street,
Vancouver, British Columbia, Canada
V6C 3E8
(Address of principal executive offices)
(Zip Code)

604-609-7736
(Registrant's telephone number, including area code)

______________________________________________________________
(Former name, former address and former fiscal year, if changes since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
[X]  Yes     [   ] No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
[X] Yes     [   ] No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer              [   ] Accelerated filer                   [   ]
Non-accelerated filer                [   ] Smaller reporting company [X]
Emerging growth company     [   ]  


If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act
[   ] Yes     [   ] No

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)
[   ] Yes     [X] No

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s class of common stock, as of the latest practicable date:

The number of shares outstanding of the registrant’s common stock, par value $0.001, as of April 15, 2019 was 55,013,874.


PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.


 

 

Condensed Consolidated Interim Financial Statements

Destiny Media Technologies Inc.
(Unaudited)
February 28, 2019
(Expressed in United States dollars)

 

 


Destiny Media Technologies Inc.

CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS
(Expressed in United States Dollars)
Unaudited

As at,

    February 28,     August 31,  
    2019     2018  
    $     $  
             
ASSETS            
Current            
Cash and cash equivalents   1,458,931     1,097,434  
Short-term investments [note 3]   1,154,643     1,151,952  
Accounts receivable, net of allowance for
   doubtful accounts of $9,566 [August 31, 2018 – $6,031] [note 9]
  369,001     403,801  
Other receivables   12,161     15,902  
Prepaid expenses   57,250     57,252  
Total current assets   3,051,986     2,726,341  
Deposits   34,040     34,336  
Property and equipment, net [note 4]   192,874     160,273  
Intangible assets, net [note 4]   31,131     41,472  
Total assets   3,310,031     2,962,422  
             
LIABILITIES AND STOCKHOLDERS’ EQUITY            
Current            
Accounts payable   189,983     141,273  
Accrued liabilities   238,142     226,876  
Deferred leasehold inducement   49,941     51,848  
Deferred revenue   10,026     23,286  
Obligation under capital lease       2,363  
Total liabilities   488,092     445,646  
             
Commitments and contingencies [notes 6 and 7]            
Stockholders’ equity            
Common stock, par value $0.001 [note 5]
     
Authorized: 100,000,000 shares
      Issued and outstanding: 55,013,874 shares
      [August 31, 2018 – issued and outstanding 55,013,874 shares]
  55,014     55,014  
Additional paid-in capital [note 5]   9,790,772     9,766,665  
Accumulated deficit   (6,650,352 )   (6,951,261 )
Accumulated other comprehensive loss   (373, 495 )   (353,642 )
Total stockholders’ equity   2,821,939     2,516,776  
Total liabilities and stockholders’ equity   3,310,031     2,962,422  

See accompanying notes


Destiny Media Technologies Inc.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF
COMPREHENSIVE INCOME
(Expressed in United States dollars)
Unaudited

    Three Months     Three Months     Six Months     Six Months  
    Ended     Ended     Ended     Ended  
    February 28,     February 28,     February 28,     February 28,  
    2019     2018     2019     2018  
    $     $     $     $  
                         
Revenue [note 9]   879,364     815,055     1,863,383     1,788,853  
                         
Operating expenses                        
General and administrative   215,666     233,279     397,936     411,860  
Sales and marketing   280,026     211,982     549,383     442,096  
Research and development   289,764     278,639     587,776     583,078  
Depreciation and Amortization   19,711     25,490     40,335     51,187  
    805,167     749,390     1,575,430     1,488,221  
Income from operations   74,197     65,665     287,953     300,632  
Other income                        
Interest income   6,522     1,704     12,921     4,029  
Other income (expense)       7     35     (3,795 )
Net income   80,719     67,376     300,909     300,866  
                         
Other comprehensive income (loss)                        
Foreign currency translation adjustments   29,232     11,107     (19,853 )   (41,009 )
                         
Total comprehensive income   109,951     78,483     281,056     259,857  
                         
Net income per common share, basic and diluted   0.00     0.00     0.01     0.00  
                         
Weighted average common shares outstanding:                        
Basic and diluted   55,013,874     55,013,874     55,013,874     55,013,874  

See accompanying notes


Destiny Media Technologies Inc.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Expressed in United States dollars)
Unaudited

Three months ended February 28, 2019 and 2018

                            Accumulated     Total  
                Additional           other     stockholders’  
    Common stock     paid-in     Accumulated     comprehensive     equity  
    Shares     Amount     capital     Deficit     loss        
    #     $     $     $     $     $  
Balance, November 30, 2018   55,013,874     55,014     9,778,718     (6,731,071 )   (402,727 )   2,699,934  
Total comprehensive income               80,719     29,232     109,951  
Stock based compensation – Note 5           12,054             12,054  
Balance, February 28, 2019   55,013,874     55,014     9,790,772     (6,650,352 )   (373,495 )   2,821,939  
                                     
                                     
                                     
Balance, November 30, 2017   55,013,874     55,014     9,725,603     (7,374,041 )   (319,007 )   2,087,569  
Total comprehensive income               67,376     11,107     78,483  
Stock based compensation – Note 5           14,879             14,879  
Balance, February 28, 2018   55,013,874     55,014     9,740,482     (7,306,665 )   (307,900 )   2,180,931  

See accompanying notes


Destiny Media Technologies Inc.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Expressed in United States dollars)
Unaudited

Six months ended February 28, 2019 and 2018

                            Accumulated     Total  
                Additional           other     stockholders’  
    Common stock     paid-in     Accumulated     comprehensive     equity  
    Shares     Amount     capital     Deficit     loss        
    #     $     $     $     $     $  
Balance, August 31, 2018   55,013,874     55,014     9,766,665     (6,951,261 )   (353,642 )   2,516,776  
Total comprehensive income               300,909     (19,853 )   281,056  
Stock based compensation – Note 5           24,107             24,107  
Balance, February 28, 2019   55,013,874     55,014     9,790,772     (6,650,352 )   (373,495 )   2,821,939  
                                     
                                     
                                     
Balance, August 31, 2017   55,013,874     55,014     9,712,213     (7,607,531 )   (266,891 )   1,892,805  
Total comprehensive income               300,866     (41,009 )   259,857  
Stock based compensation – Note 5           28,269             28,269  
Balance, February 28, 2018   55,013,874     55,014     9,740,482     (7,306,665 )   (307,900 )   2,180,931  

See accompanying notes


Destiny Media Technologies Inc.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF
CASH FLOWS

Six months ended February 28, (Expressed in United States dollars)

    2019     2018  
    $     $  
             
OPERATING ACTIVITIES            
Net income   300,909     300,866  
Items not involving cash:            
   Depreciation and amortization   40,335     51,187  
   Stock-based compensation   24,107     28,269  
   Deferred leasehold inducement   (1,458 )   51,002  
   Unrealized foreign exchange   (12,593 )   (423 )
   Loss on disposal of property and equipment       3,795  
Changes in non-cash working capital:            
   Accounts receivable   30,016     (2,520 )
   Other receivables   4,851     (66,119 )
   Prepaid expenses and deposits   (225 )   839  
   Accounts payable   78,859     13,631  
   Accrued liabilities   (18,106 )   (13,949 )
   Deferred revenue   (13,035 )   (16,164 )
   Short term receivable       65,070  
Net cash provided by operating activities   433,660     415,484  
             
INVESTING ACTIVITY            
Purchase of property, equipment and intangibles   (64,284 )   (105,620 )
Net cash used in investing activity   (64,284 )   (105,620 )
             
Effect of foreign exchange rate changes on cash   (7,879 )   (29,689 )
             
Net increase in cash and cash equivalents during the period   361,497     280,175  
Cash and cash equivalents, beginning of period   1,097,434     1,342,956  
Cash and cash equivalents, end of period   1,458,931     1,623,131  
             
Supplementary disclosure            
Interest paid        
Income taxes paid        

See accompanying notes



Destiny Media Technologies Inc.
 
NOTES TO CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS
 
February 28, 2019

1. ORGANIZATION

Destiny Media Technologies Inc. (the “Company” or “Destiny”) was incorporated in August 1998 under the laws of the State of Colorado and the corporate jurisdiction was changed to Nevada effective October 8, 2014. The Company develops technologies that allow for the distribution over the internet of digital media files in either a streaming or digital download format. The technologies are proprietary. The Company operates out of Vancouver, BC, Canada and serves customers predominantly located in the United States, Europe and Australia.

The Company’s stock is listed for trading under the symbol “DSNY” on the OTCQB U.S. in the United States, under the symbol “DSY” on the TSX Venture Exchange and under the symbol “DME” on the Berlin, Frankfurt, Xetra and Stuttgart exchanges in Germany.

2. BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated interim financial statements have been prepared by management in accordance with accounting principles generally accepted in the United States for interim financial information pursuant to the rules and regulations of the United States Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by United States generally accepted accounting principles for annual financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six months ended February 28, 2019 are not necessarily indicative of the results that may be expected for the year ended August 31, 2019.

The balance sheet at August 31, 2018 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by United States generally accepted accounting principles for annual financial statements.

For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended August 31, 2018.

1



Destiny Media Technologies Inc.
 
NOTES TO CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS
 
February 28, 2019

3. 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 – 2.50% .

4. PROPERTY AND EQUIPMENT AND INTANGIBLES

          Accumulated     Net book  
    Cost     amortization     value  
    $     $     $  
February 28, 2019                  
Property and equipment                  
Furniture and fixtures   133,525     105,067     28,458  
Computer hardware   227,763     194,053     33,710  
Computer software   264,446     204,211     60,235  
Leasehold improvements   161,352     90,881     70,471  
    787,086     594,212     192,874  
                   
                   
Intangibles                  
Patents, trademarks and lists   416,738     385,607     31,131  

          Accumulated     Net book  
    Cost     amortization     value  
August 31, 2018   $     $     $  
Property and equipment                  
Furniture and fixtures   134,130     102,822     31,308  
Computer hardware   226,679     189,724     36,955  
Computer software   213,684     203,420     10,264  
Leasehold improvements   162,754     81,008     81,746  
    737,247     576,974     160,273  
                   
Intangibles                  
Patents, trademarks and lists   412,072     370,600     41,472  

Depreciation and amortization for the three and six months ended February 28, 2019 was $19,711 and $40,335, respectively (2018: $25,490 and $51,187, respectively)

2



Destiny Media Technologies Inc.
 
NOTES TO CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS
 
February 28, 2019

5. STOCKHOLDERS’ EQUITY

[a] Common stock issued and authorized

The Company is authorized to issue up to 100,000,000 shares of common stock, par value $0.001 per share.

During the six months ended February 28, 2019, no shares were issued.

[b] Stock option plans

The Company has two existing stock option plans (the “Plans”), namely the 2006 Stock Option Plan and the 2015 Stock Option Plan, under which up to 7,750,000 shares of the common stock, has been reserved for issuance. A total of 1,459,431 common shares remain eligible for issuance under the Plans. The options generally vest over a range of periods from the date of grant, some are immediate, and others are 12 or 24 months. Any options that do not vest as the result of a grantee leaving the Company are forfeited and the common shares underlying them are returned to the reserve. The options generally have a contractual term of five years.

Stock-Based Payment Award Activity

A summary of option activity under the Plans as of February 28, 2019, and changes during the period then ended is presented below:

                Weighted        
          Weighted     Average     Aggregate  
          Average     Remaining     Intrinsic  
          Exercise Price     Contractual     Value  
Options   Shares     $     Term     $  
Outstanding at August 31, 2018   1,631,250     0.39     3.49      
Granted                
Forfeited                
Expired   (87,500 )   0.40          
Outstanding at February 28, 2019   1,543,750     0.39     3.18      
Exercisable at February 28, 2019   1,279,167     0.39     3.12      

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 February 28, 2019.

3



Destiny Media Technologies Inc.
 
NOTES TO CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS
 
February 28, 2019

5. STOCKHOLDERS’ EQUITY (cont’d.)

The following table summarizes information regarding the non-vested stock purchase options outstanding as of February 28, 2019 and changes during the period then ended:

          Weighted  
          Average  
          Grant Date  
    Number of Options     Fair Value  
          $  
Non-vested options at August 31, 2018   614,584     0.07  
Granted        
Forfeited        
Vested   (350,001 )   0.07  
Non-vested options at February 28, 2019   264,583     0.07  

As of February 28, 2019, there was $18,551 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 0.57 years.

During the three and six months ended February 28, 2019, the total stock-based compensation expense of $12,054 and $24,107, respectively (2018: $14,879 and $28,269 respectively) is reported in the statement of comprehensive income as follows:

    Three Months Ended     Six Months Ended  
    February 28     February 28     February 28     February 28  
    2019     2018     2019     2018  
    $     $     $     $  
Stock-based compensation:                        
         General and administrative   7,150     9,512     14,303     17,534  
         Sales and marketing   2,452     1,787     4,902     3,575  
         Research and development   2,452     3,580     4,902     7,160  
Total stock-based compensation   12,054     14,879     24,107     28,269  

4



Destiny Media Technologies Inc.
 
NOTES TO CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS
 
February 28, 2019

5. 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 Destiny are able to contribute up to 5% of their annual salary into a pool which is matched equally by Destiny in order to purchase Company shares under certain terms. Independent directors are able to contribute a maximum of $12,500 each for a combined maximum annual purchase of $25,000. The maximum annual combined contributions will be $400,000. All purchases are made through the Toronto Stock Exchange by a third-party plan agent. The third-party plan agent is also responsible for the administration of the Plan on behalf of Destiny and the participants.

During the three and six months ended February 28, 2019, the Company recognized compensation expense of $22,650 and $33,333, respectively (2018: $19,355 and $26,481, respectively) in salaries and wages on the consolidated statement of comprehensive income in respect of the Plan, representing the Company’s employee matching of cash contributions to the Plan. The shares were purchased on the open market at an average price of $0.22 (2018: $0.24) . The shares are held in trust by the Company for a period of one year from the date of purchase.

6. COMMITMENTS

The Company entered into a new lease agreement commencing July 1, 2017 and expiring June 30, 2022 for the same premise consisting of approximately 6,550 square feet. The Company has fiscal year payments committed as follows:

    $  
       
2019   125,906  
2020   257,676  
2021   263,121  
2022   224,502  

During the year ended August 31, 2018, the Company became entitled to a leasehold improvement allowance from its landlord in the amount of $45,341, in connection with certain office leasehold improvements completed. This amount was recorded as a deferred leasehold inducement and is being amortized against rent expense over the remaining term of the lease.

During the three and six months ended February 28, 2019 the Company incurred rent expense of $61,550 and $123,133, respectively (2018 - $74,154 and $139,928, respectively) which has been allocated between general and administrative expenses, research and development and sales and marketing on the consolidated statement of comprehensive income. The rent expense during the three and six months ended February 28, 2019 has included the amortization of deferred lease inducements on a straight-line basis over the term of the lease.

5



Destiny Media Technologies Inc.
 
NOTES TO CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS
 
February 28, 2019

7. CONTINGENCIES

The Company is subject to claims and legal proceedings that arise in the ordinary course of business. Such matters are inherently uncertain, and there can be no guarantee that the outcome of any such matter will be decided favorably to the Company or that the resolution of any such matter will not have a material adverse effect upon the Company’s financial statements. The Company does not believe that any of such pending claims and legal proceedings will have a material adverse effect on its consolidated financial statements.

On September 5, 2017, the Company’s former President and Chief Executive Officer filed a Notice of Civil Claim in the Supreme Court of British Columbia against the Company, its subsidiaries, independent directors and current Chief Executive Officer, claiming damages for conspiracy, breach of contract, wrongful dismissal, defamation and aggravated and punitive damages. The Company believes the claims are without merit and 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.

8. NEW ACCOUNTING PRONOUNCEMENTS

Recently Adopted Accounting Standards

ASU No. 2014-09 Revenue from Contracts with Customers

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). ASU 2014-09 provides a five-step analysis of transactions to determine when and how revenue is recognized. The premise of ASU 2014-09 is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company adopted this standard on September 1, 2018 using the modified retrospective method applied to open contracts at the date of transition. Under this approach, the Company is not required to restate the prior financial statements presented. The provisions under this ASU were applied to all contracts at the date of initial adoption.

In order to comply with the guidance, beginning on September 1, 2018, the Company amended its revenue recognition policy and performed estimates as outlined below. The adoption of ASU 2014-09 did not result in any adjustment to the Company’s consolidated balance sheet on the date of adoption. Refer to the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2018 for a description of the Company’s revenue recognition policy prior to September 1, 2018.

6



Destiny Media Technologies Inc.
 
NOTES TO CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS
 
February 28, 2019

8. NEW ACCOUNTING PRONOUNCEMENTS – Continued

Recently Adopted Accounting Standards – Continued

ASU No. 2014-09 Revenue from Contracts with Customers – Continued

Revenue Recognition Policy

The Company’s revenue is derived from software as a service (SaaS) arrangements. The Company accounts for revenue in accordance with ASC 606, which the Company adopted on September 1, 2018 using the modified retrospective method.

The core principle of ASC 606 is to recognize revenue upon the transfer of products or services to customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those products or services. ASC 606 prescribes a five-step model for recognizing revenue from contracts with customers: (1) identify the contract(s) with customers; (2) identify the separate performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the separate performance obligations in the contract; and (5) recognize revenue when (or as) the performance obligations are satisfied.

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

Identification of the contract, or contracts, with the customer

The Company considers the terms and conditions of written contracts and its customary business practices in identifying its contracts under ASC 606. The Company determines that it has a contract with a customer when the contract is approved, the Company can identify each party’s rights regarding the services to be transferred, the Company can identify the payment terms for the services, the Company has determined that the customer has the ability and intent to pay, and the contract has commercial substance. In general, contract terms will be reflected in a written document that is signed by both parties.

Identification of the performance obligation in the contract

Performance obligations are promises in a contract to transfer distinct products or services to a customer, and is the unit of account under ASC 606. A contract’s transaction price is allocated to each distinct performance obligation and revenue is recognized when the performance obligation is satisfied. A product or service is a distinct performance obligation if the customer can both benefit from the product or service either on its own or together with other resources that are readily available to the customer, and it is separately identifiable from other items within the context of the contract. Performance obligations are satisfied by transferring control of the product or service to the customer. Control of the product or service is transferred either at a point in time or over time depending on the performance obligation.

7



Destiny Media Technologies Inc.
 
NOTES TO CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS
 
February 28, 2019

8. NEW ACCOUNTING PRONOUNCEMENTS – Continued

Recently Adopted Accounting Standards – Continued

ASU No. 2014-09 Revenue from Contracts with Customers – Continued

To the extent a contract includes multiple promised services or products, the Company applies judgment to determine whether promised services or products are capable of being distinct and distinct in the context of the contract. If these criteria are not met, the promised services are accounted for as a combined performance obligation.

The Company generates revenue primarily from usage fees for the Company’s digital media distribution service. Usage fees are generally recognized as they are billed based on volume and size of distribution services provided in a given month. The Company’s other performance obligations include maintenance services, email and phone support, and unspecified software updates released when, and if, available. Under the guidance of ASC 606, the Company has concluded that maintenance services and unspecified software upgrades are not distinct in the context of the Company’s contracts because the Company’s service is considered a multi-tenant software environment, and these activities represent a single combined performance obligation in connection with the Company’s digital media distribution service, recognized at a point in time when the service is delivered to the customer.

Support activities are considered a separate performance obligation which is satisfied over time; however, such activities are performed substantially concurrently with the satisfaction of digital media distribution services.

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

Determination of the transaction price

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

8



Destiny Media Technologies Inc.
 
NOTES TO CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS
 
February 28, 2019

8. NEW ACCOUNTING PRONOUNCEMENTS – Continued

Recently Adopted Accounting Standards – Continued

ASU No. 2014-09 Revenue from Contracts with Customers – Continued

Digital media distribution services may be subject to either fixed or variable pricing. Variable consideration is allocated entirely to distinct service periods when it can be tied to a single performance obligation. Variable consideration is estimated and included in the transaction price if, in the Company’s judgment, it is probable that there will not be a significant future reversal of cumulative revenue under the contract. When variable consideration is contingent and cannot be tied to a single performance obligation performed in a particular billing period, the Company estimates contingent variable consideration using the most likely method and recognizes consideration to the extent that the estimate for variable consideration is not constrained pursuant to the guidance provided in ASU 606.

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

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

If the contract contains a single combined performance obligation, the entire transaction price is allocated to the single combined performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on its standalone selling price (“SSP”) in relation to the total fair value of all performance obligations in the arrangement. The majority of the Company’s contracts contain two separate performance obligations that are performed concurrently. The Company allocates consideration to each performance obligation under the guidance of ASC 606 on a relative standalone selling price (SSP) basis. Where SSP is not directly observable, the Company determines the SSP using information that may include market conditions and other observable inputs.

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

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

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

The Company recognizes revenue when the services are delivered to its customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. The Company is principally responsible for the satisfaction of its distinct performance obligations, which are satisfied either at a point in time or over a period of time.

9



Destiny Media Technologies Inc.
 
NOTES TO CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS
 
February 28, 2019

8. NEW ACCOUNTING PRONOUNCEMENTS – Continued

Recently Adopted Accounting Standards – Continued

ASU No. 2014-09 Revenue from Contracts with Customers – Continued

Performance obligations satisfied at a point in time

Media distribution services

Media distribution services comprise the majority of distinct performance obligations that are satisfied at a point in time, and revenue is recognized at the point in which the distribution service has been completed. Consideration for these services is typically billed in the same period that the service has been delivered to the customer.

Performance obligations satisfied over a period of time

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

Revenue from support activities is recognized over an estimated support period since this activity is considered a ‘stand-ready obligation’. This support period is substantially concurrent with the performance of media distribution services, as these services are performed substantially in conjunction with the related distribution. Any support activities provided outside of this billing period are not considered material.

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

Contract Costs

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

Customer acquisition costs are capitalized only if the costs are incrementally incurred to obtain a customer contract and may consist of sales commissions paid to sales personnel or third-party resellers. Generally, the Company does not incur any contract costs outside of the period that the related revenue is recognized.

10



Destiny Media Technologies Inc.
 
NOTES TO CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS
 
February 28, 2019

8. NEW ACCOUNTING PRONOUNCEMENTS – Continued

Recently Adopted Accounting Standards – Continued

ASU No. 2014-09 Revenue from Contracts with Customers – Continued

Contract Modifications

Contract modifications may create new, or change existing, enforceable rights and obligations of the parties to the contract. We generally modify an existing contract using an addendum or signed change order. A contract modification is accounted for as a new contract if it reflects an increase in scope that is regarded as distinct from the original contract and is priced in-line with the standalone selling price for the related product or services obligated. If a contract modification is not considered a new contract, the modification is combined with the original contract and the impact on the revenue recognition profile depends on whether the remaining products and services are distinct from the original contract. If the remaining goods or services are distinct from those in the original contract, all remaining performance obligations will be accounted for on a prospective basis with unrecognized consideration allocated to the remaining performance obligations. If the remaining goods or services are not distinct, the modification will be treated as if it were a part of the existing contract, and the effect that the contract modification has on the transaction price, and on our measure of progress toward satisfaction of the performance obligations, is recognized as an adjustment to revenue (either as an increase in or a reduction of revenue) at the date of the contract modification on a cumulative catch-up basis.

ASU 2016-15 Statement of Cash Flows

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments ("ASU 2016-15"). ASU 2016-15 reduces the existing diversity in practice in financial reporting across all industries by clarifying certain existing principles in ASC 230, Statement of Cash Flows, ("ASC 230") including providing additional guidance on how and what an entity should consider in determining the classification of certain cash flows. In addition, in November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230), Restricted Cash ("ASU 2016-18"). ASU 2016-18 clarifies certain existing principles in ASC 230, including providing additional guidance related to transfers between cash and restricted cash and how entities present, in their statement of cash flows, the cash receipts and cash payments that directly affect the restricted cash accounts. This amendment was effective for the Company beginning on September 1, 2018. The adoption of ASU 2016-15 and ASU 2016-18 did not have any material effect on the Company’s consolidated financial statements.

11



Destiny Media Technologies Inc.
 
NOTES TO CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS
 
February 28, 2019

8. NEW ACCOUNTING PRONOUNCEMENTS – Continued

Accounting Standards Not Yet Effective

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). The amendments in this update increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. ASU 2016-02 will be effective for the Company beginning on September 1, 2019. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.

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 guideline on reporting credit losses for assets held at amortized cost basis and available-for-sale debt securities. For assets held at amortized cost basis, Topic 326 eliminates the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected. For available-for-sale debt securities, credit losses should be measured in a manner similar to current GAAP, however Topic 326 will require that credit losses be presented as an allowance rather than as a write-down. ASU 2016-13 affects entities holding financial assets and net investment in leases that are not accounted for at fair value through net income. The amendments affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. The amendments in this ASU will be effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company is in the process of determining the effect the adoption of this standard will have on its consolidated financial statements.

In February 2018, the FASB issued ASU No. 2018-02, “Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income” (“ASU 2018-02”), which provides financial statement preparers with an option to reclassify stranded tax effects within accumulated other comprehensive income to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act (or portion thereof) is recorded. The amendments in this ASU are effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption of ASU 2018-02 is permitted, including adoption in any interim period for the public business entities for reporting periods for which financial statements have not yet been issued. The amendments in this ASU should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. The Company does not expect that the adoption of this guidance will have a material impact on its consolidated financial statements.

12



Destiny Media Technologies Inc.
 
NOTES TO CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS
 
February 28, 2019

8. NEW ACCOUNTING PRONOUNCEMENTS – Continued

Accounting Standards Not Yet Effective – Continued

In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718), Improvements to Nonemployee Share-based Payments (“ASU 2018-07”). This ASU expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The effective date for the standard is for interim periods in fiscal years beginning after December 15, 2018, with early adoption permitted, but no earlier than the Company’s adoption date of Topic 606. The new guidance is required to be applied retrospectively with the cumulative effect recognized at the date of initial application. The Company will not early adopt this standard and is currently evaluating the effect ASU 2018-07 will have on the 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 updated guidance if effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted for any removed or modified disclosures. The Company is currently assessing the timing and impact of adopting the updated provisions to its consolidated financial statements.

13



Destiny Media Technologies Inc.
 
NOTES TO CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS
 
February 28, 2019

9. CONCENTRATIONS AND ECONOMIC DEPENDENCE

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

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

    Three Months Ended     Six Months Ended  
    February 28     February 28     February 28     February 28  
    2019     2018     2019     2018  
    $     $     $     $  
Play MPE®                        
                         
North America   345,556     306,222     800,780     744,361  
Europe   439,269     421,689     869,265     857,832  
Australasia   73,963     68,329     158,170     141,662  
Total Play MPE®   858,787     796,240     1,828,215     1,743,855  
                         
Clipstream ®                        
                         
North America   20,577     18,815     35,168     44,998  
Total revenue   879,364     815,055     1,863,383     1,788,853  

Revenue in the above table is based on location of the customer’s billing address. Some of these customers have distribution centers located around the globe and distribute around the world. During the six months ended February 28, 2019, the Company generated 41 % of total revenue from one customer [2018 - 43%].

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

As at February 28, 2019, two customers represented $191,289 (52%) of the trade receivables balance [August 31, 2018 – one customer represented $102,313 (25%)].

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

10. 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.

14


Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

FORWARD LOOKING STATEMENTS

The following discussion should be read in conjunction with the accompanying financial statements and notes thereto included within this Quarterly Report on Form 10-Q. In addition to historical information, the information in this discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements involve risks and uncertainties, including statements regarding the Company’s capital needs, business strategy and expectations. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements.

In some cases, you can identify forward-looking statements by terminology such as “may”, “will”, “should”, “expect”, “plan”, “intend”, “anticipate”, “believe”, estimate”, “predict”, “potential” or “continue”, the negative of such terms or other comparable terminology. Actual events or results may differ materially. In evaluating these statements, you should consider various factors described in this Quarterly Report, including the risk factors under “Item 1A. Risk Factors.” of part II, and, from time to time, in other reports the Company files with the Securities and Exchange Commission. These factors may cause the Company’s actual results to differ materially from any forward-looking statement. The Company disclaims any obligation to publicly update these statements, or disclose any difference between its actual results and those reflected in these statements. Such information constitutes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

OVERVIEW AND CORPORATE BACKGROUND

Destiny Media Technologies, Inc. was incorporated in August 1998 under the laws of the State of Colorado and the corporate jurisdiction was changed to Nevada effective October 8, 2014. We carry out our business operations through our wholly owned subsidiary, Destiny Software Productions Inc., a British Columbia company that was incorporated in 1992, MPE Distribution, Inc. a Nevada company that was incorporated in 2007 and Sonox Digital Inc. incorporated under the Canada Business Corporations Act in 2012. The “Company”, “Destiny Media”, “Destiny”, “we” or “us” refers to the consolidated activities of all four companies.

Our principal executive office is located at Suite 1110, 885 West Georgia Street, Vancouver, British Columbia V6C 3E8. Our telephone number is (604) 609-7736 and our facsimile number is (604) 609-0611.

Our common stock trades on TSX Venture Exchange in Canada under the symbol “DSY”, on the OTCQB U.S. (“OTCQB”) under the symbol “DSNY”, and on various German exchanges (Frankfurt, Berlin, Stuttgart and Xetra) under the symbol DME, WKN 935 410.

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

OUR PRODUCTS AND SERVICES

Destiny develops and markets software as a service (SaaS) solutions that solve critical problems in digital distribution and promotion for businesses in the music industry. The core of our business is the Play MPE® promotional music marketing and digital distribution service. Play MPE® is a service for promoting and securely distributing broadcast quality audio, video, images, promotional information and other digital content through the internet. The system is currently used by the recording industry for transferring pre-release broadcast quality music, radio shows, and music videos to trusted recipients such as radio stations, media reviewers, VIP’s, DJ’s, film and TV personnel, sports stadiums and retailers. The system replaces the physical distribution (mail, courier or hand delivery) of CD’s.

Our customers range from small independent artists, small to large independent record labels (“Indies”), to promoters, to the world’s largest record labels (the “Major Record Labels”) (Universal Music Group, Warner Music Group and Sony Music Entertainment). Our Major Record Label clients have offices around the world and typically represent the world’s largest recording artists. All three Major Record Labels, and thousands of Indies use Play MPE® for promotional distribution.


Play MPE®

Play MPE® is a cloud-based enterprise SaaS service providing tiered, permission based, access allowing our clients to assign varying rights, capabilities and responsibilities to different members of their staff. For example, some customer staff may manage assets (album cover imagery, music videos, the raw music, promotional information and other metadata), while others manage hierarchical permission-based lists of recipients. Larger labels are normally structured into sublabel groups, each with their own labels with varying access (permissions) to various subsets of the master recipient lists.

The release dates for music can be dependent on the territory and, where administrative settings permit, local promotions staff may generate a localized distribution of the song with modified marketing information in the local language. Local staff may select pre-existing assets from the system and combine them together with a local recipient lists to form a “send”. Our customers also choose the level of access for the recipients assigned to the release by designating whether the release can be streamed, downloaded, exported into an unlocked digital format or burned to a CD.

While many clients are set up to manage and upload recipient lists, many rely on the proprietary lists provided within the service. Our staff manages lists of recipients in various formats and geographies and those lists are made available to our customers using the Play MPE® system. The Play MPE® system provides Play MPE® staff with the feedback and resources necessary to manage and maintain this network of recipients, which is not available with physical distribution or by smaller competitors. Customers select lists of recipients within the proprietary network based on music format and geography.

When the release is sent, the “send” appears in the “available tracks” section of a recipient’s account. Recipients can access these tracks through proprietary iPhone, Android, Mac and Windows based players, or through partner sites. Our servers also generate a marketing website (http://daily.plaympe.com) which promotes new music. The system automatically generates charts of the most popular music on the system. These charts can be syndicated to third parties.

All exported songs are marked in real time with Destiny’s watermark technology, which has received three US patents and a number of analogous patents globally. Songs that appear on the internet are scanned by the International Federation of the Phonographic Industry’s (“IFPI”) for our watermark. Headquartered in London, UK, the IFPI is the organization that represents the interests of the recording industry worldwide and one of its missions is to safeguard the rights of record producers. IFPI web crawlers visit torrents, peer to peer networks and websites searching for unauthorized content. When problem files are identified, the IFPI software looks for Destiny’s watermark in the content to identify the originating source.

After the content is released, all activity by the recipient is logged in real time, providing record labels and promotions staff real time detail on which songs are accessed, streamed, downloaded and exported. This contrast with physical distribution where record labels may be unsure whether the courier package went to the correct individual or whether it was ever opened. This information provides invaluable feedback in real time to marketing and promotions staff who can cater their programs appropriately. Recipients receive a custom library of available tracks and are able to repeat the download if music is lost.

In July 2018, we launched version 8 of our release publishing tools for Play MPE®. These new browser-based tools are accessible on any computer without installation and completely replaced the Windows based desktop tools previously used by our customers. This new solution provides for increased usage of Play MPE® through an easier to use, faster, more intuitive and streamlined experience, access to both Mac and PC users, new release creation workflows, and more configuration options. It also allows for easy translation into multiple languages to accelerate international expansion. The new encoder has been fully adopted by our sales department and is being integrated by our customers into their own internal workflows.

We continue to invest in additional development of Play MPE® Version 8 and related tools and applications, including a new entirely browser based Play MPE® recipient player, which should lead to higher usage by our customers and recipients. Subsequent to February 28, 2019, we announced a new integration of Play MPE® with Nielsen’s BDSradio, which provides Nielsen Music users with an instant gateway into Play MPE®’s extensive release catalog and high-quality content directly from the BDSradio platform.


Clipstream®

The Company also has a legacy business, Clipstream®, in the online video industry for which it is pursuing strategic alternatives. The Clipstream® Online Video Platform (OVP) is a self-service system, for encoding, hosting and reporting on video playback which can be embedded in third party websites or emails. Playback is currently through the Company’s proprietary JavaScript codec engine, which is only available on the internet through the Company. The unique software-based approach to rendering video, is protected by over two dozen patents claiming initial priority to 2011. This product is marketed in a limited way and has incidental revenues.

RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED FEBRUARY 28, 2019 AND FEBRUARY 28, 2018

Revenue

Total revenue for the three months ended February 28, 2019 increased by 7.9% over the comparable quarter in fiscal 2018, to $879,364 (2018 - $815,055) and increased by 4.2% during the six months ended February 28, 2019 compared to the same period in fiscal 2018, to $1,863,383 (2018 - $1,788,853).

Play MPE® revenue accounted for 98% of the Company’s revenue (2018 - 97%) and increased by 7.9% over the comparable quarter in fiscal 2018, and by 4.8% over the comparable six-month period in fiscal 2018. Removing the effect of foreign exchange fluctuations, our Play MPE® revenue growth was 11.8% for the three months ended February 28, 2019 compared to the same quarter in fiscal 2018, and 7.6% for the six months ended February 28, 2019 compared to the same period in fiscal 2018.

The increase in revenue was derived from all territories in which the Company operates, including the United States, Europe, and Australia, and was largely driven by an increase in non-fixed fee income of 16.3% for the three-month period and 11.0% for the six-month period. In addition, a 14.0% increase in fixed fee income from our largest customer commenced during the current quarter, in January 2019.

Operating Expenses

Overview

As our technologies and products are developed and maintained in-house, the majority of our expenditures are on salaries and wages and associated expenses such as office space, supplies and benefits. Our operations are primarily conducted in Canada and therefore, our costs are primarily incurred in Canadian dollars while our revenues are primarily denominated in Euros and US dollars. Thus, operating expenses and the results of operations are impacted, to the extent they are not hedged, by the rise and fall of the relative values of the Canadian dollar to these currencies. The Company maintains a large portion of its financial reserves in Canadian dollars to mitigate the downside risk of adverse exchange rates on its operation expenditures.

Operating costs during the six months ended February 28, 2019 increased by 5.9% to $1,575,430 (2018 – $1,488,221). This increase is primarily the result of an increase in staffing costs. Salaries and wages increased by 10.4% over the comparative half year period, as a result of additions to our marketing and business development staff, salary adjustments, non-recurring recruitment charges and added skills in UX design and QA review.



General and administrative   28-Feb     28-Feb              
    2019     2018              
    (6 months)     (6 months)   Change     Change  
    $     $     $     %  
       Bad debt   3,576     2,084     1,492     71.6%  
       Office and miscellaneous   100,197     58,263     41,934     72.0%  
       Professional fees   80,368     85,835     (5,467 )   -6.4%  
       Rent   16,816     18,681     (1,865 )   -10.0%  
       Telecommunications   1,628     1,924     (296 )   -15.4%  
       Travel   3,533     9,772     (6,239 )   -63.8%  
       Wages and benefits   191,818     235,302     (43,484 )   -18.5%  
    397,936     411,861     (13,925 )   -3.4%  

Our general and administrative expenses consist of salaries and related personnel costs including overhead, office rent, and general office supplies. General and administrative costs also include professional fees and general travel expenditures. The decrease in wages and benefits is largely a result of general and administrative staffing reductions. The increase in office and miscellaneous costs is primarily due to transitionary costs in respect of administrative software services.

Sales and marketing   28-Feb     28-Feb              
    2019     2018              
    (6 months)   (6 months)   Change     Change  
    $     $     $     %  
       Advertising and marketing   47,227     48,337     (1,110 )   -2.3%  
       Rent   50,405     53,654     (3,249 )   -6.1%  
       Telecommunications   68,121     72,266     (4,145 )   -5.7%  
       Wages and benefits   383,630     267,839     115,791     43.2%  
    549,383     442,096     107,287     24.3%  

Sales and marketing expenses consist of salaries and related personnel costs including overhead, office rent, and telecommunications costs. Sales and marketing also includes advertising and marketing expenses, which consist of promotional materials, online or print advertising, business development tools, and marketing or business development related travel costs including attendance at conference or trade shows, and label visits. The increase in staffing costs relates to the addition of marketing and business development staff, as well as an increase in wages to existing staff.

Research and development   28-Feb     28-Feb              
    2019     2018              
    (6 months)   (6 months)     Change     Change  
    $     $     $     %  
       Rent   55,913     68,599     (12,686 )   -18.5%  
       Research and development   35,947     39,199     (3,252 )   -8.3%  
       Telecommunications   42,486     46,855     (4,369 )   -9.3%  
       Wages and benefits   453,430     428,425     25,005     5.8%  
    587,776     583,078     4,698     0.8%  

Research and development costs consist primarily of salaries and related personnel costs including overhead and consulting fees with respect to product development and deployment. An increase in development staff and related recruitment charges in the current quarter of fiscal 2019 was largely offset by a reduction to Clipstream related staffing costs over the comparable period in fiscal 2018.


Depreciation and Amortization

Depreciation and amortization expense arises from property and equipment, and from patents and trademarks. Amortization decreased to $40,335 for the six months ended February 28, 2019 from $51,187 for the six months ended February 28, 2018, a decrease of 21.2% from an overall reduction in spending on patent and trademark costs.

Other earnings and expenses

Interest income increased to $12,921 for the six months ended February 28, 2019 from $4,029 for the six months ended February 28, 2018, an increase of $8,892. The interest income is derived from the investment of excess cash in one-year Guaranteed Investment Certificates.

Net income

During the six months ended February 28, 2019 we had net income of $300,909 (2018 – $300,866). Overall, an increase in revenue was offset by increased spending on staffing costs, as discussed in detail above.

For the three months period ended February 28, 2019, adjusted EBITDA was $105,239 (2018 –$109,168). Adjusted EBITDA is not defined under generally accepted accounting principles (“GAAP”) and it may not be comparable to similarly titled measures reported by other companies. We used Adjusted EBITDA, along with other GAAP measures, as a measure of profitability because Adjusted EBITDA helps us to compare our performance on a consistent basis by removing from our operating results the impact of our capital structure, the effect of operating in different tax jurisdictions, the impact of our asset base, which can differ depending on the book value of assets, the accounting methods used to compute depreciation and amortization, the existence or timing of asset impairments and the effect of non-cash stock-based compensation expense. We believe Adjusted EBITDA is useful to investors as it is a widely used measure of performance and the adjustments we make to Adjusted EBITDA provide further clarity on our profitability. We remove the effect of non-cash stock-based compensation from our earnings which can vary based on share price, share price volatility and expected life of the equity instruments we grant. In addition, this stock-based compensation expense does not result in cash payments by us. Adjusted EBITDA has limitations as a profitability measure in that it does not include the interest expense on our debts, our provisions for income taxes, the effect of our expenditures for capital assets, the effect of non-cash stock-based compensation expense and the effect of asset impairments. The following is a reconciliation of net income from operations to Adjusted EBITDA over the eight most recently completed fiscal quarters:

    2019 Q2     2019 Q1     2018 Q4     2018 Q3     2018 Q2     2018 Q1     2017 Q4     2017 Q3  
    $     $     $     $     $     $     $     $  
Net Income   80,719     220,190     171,775     183,629     67,376     233,490     86,635     166,223  
Amortization, stock- based compensation and deferred leasehold inducements   31,042     31,942     38,108     42,103     43,496     42,220     40,664     40,998  
Interest income   (6,522 )   (6,434 )   (4,940 )   (1,628 )   (1,704 )   (2,325 )   (2,243 )   (3,437 )
Adjusted EBITDA   105,239     245,698     204,943     224,104     109,168     273,385     125,056     203,784  

LIQUIDITY AND FINANCIAL CONDITION

Our cash and cash equivalents balance increased by $361,497 during the six months ended February 28, 2019. At February 28, 2019, we held $1,458,931 (August 31, 2018 - $1,097,434) in cash and cash equivalents and $1,154,643 (2018 - $1,151,952) in short term investments consisting of one-year Guaranteed Investment Certificates held through a major Canadian financial institution.

At February 28, 2019, we had working capital of $2,563,894, compared to $2,280,695 as at August 31, 2018. The increase in our working capital was primarily due to net income during the period.


CASH FLOWS

Net cash provided by operating activities for the six months ended February 28, 2019 was $433,660, which is comparable to $415,484 for the six months ended February 28, 2018.

Net cash used in investing activities for the six months ended February 28, 2019 was $64,284, compared to $105,620 for the six months ended February 28, 2018. During the six months ended February 28, 2019, we spent approximately $52,000 on the development of new mobile applications for our Play MPE® Version 8 recipient player. Investing activities during the six months ended February 28, 2019 were largely attributable to expenditures on leasehold improvements during that period, related to office renovations associated with a renewal in our office premises.

There were no cash flows from financing activities during the six months ended February 28, 2019 and 2018.

CRITICAL ACCOUNTING POLICIES

We prepare our interim condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, and make estimates and assumptions that affect our reported amounts of assets, liabilities, revenue and expenses, and the related disclosures of contingent liabilities. We base our estimates on historical experience and other assumptions that we believe are reasonable in the circumstances. Actual results may differ from these estimates.

There have been no significant changes in the critical accounting policies and estimates described in our Annual Report on Form 10-K for the year ended August 31, 2018 as filed with the SEC on November 27, 2018 except for those described in Note 8, “Recently Accounting Pronouncements” in the notes to our Interim Condensed Consolidated Financial Statements included in this Form 10-Q.

RECENT ACCOUNTING PRONOUNCEMENTS

Please refer to Note 8 “Recent Accounting Pronouncements” in notes to our Interim Condensed Consolidated Financial Statements included in this Form 10-Q.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Foreign Exchange Risk

Our revenues are primarily in United States dollars and Euros while our operating expenses are primarily in Canadian dollars. Thus, operating expenses and the results of operations are impacted to the extent they are not hedged by the rise and fall of the relative values of Canadian dollar to these currencies. During the six months ended February 28, 2019, as a result of fluctuations in the Euro, and the Australian, Canadian, and US dollars, the Company recognized a negative impact on reported revenues and a positive impact on reported operating expenditures, for an overall positive impact on reported net income.

Item 4.              Controls and Procedures.

Disclosure Controls and Procedures

Disclosure controls and procedures and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time period specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934 is accumulated and communicated to management including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

In connection with this quarterly report, as required by Rule 13a-15 under the Securities Exchange Act of 1934, we have carried out an evaluation of the effectiveness of the design and operation of our company's disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of our company's management, including our company's Chief Executive Officer and Chief Financial Officer. Based upon that evaluation, our company's Chief Executive Officer and Chief Financial Officer concluded that as of February 28, 2019, our disclosure controls and procedures were effective as at the end of the period covered by this report.


Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the quarter ended February 28, 2019 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

On September 5, 2017, the Company’s former President and Chief Executive Officer, Mr. Steve Vestergaard, 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.

Item 1A. Risk Factors.

In addition to the other information set forth in this Form 10-Q, you should carefully consider the factors discussed in “Item 1 – Risk Factors” in our Form 10-K for the fiscal year ended August 31, 2018 filed with the SEC on November 27, 2018. These risks could materially and adversely affect our business, financial condition and results of operations. The risks described in our Form 10-K have not changed materially, however, they are not the only risks we face. Our operations could also be affected by additional factors that are not presently known to us or by factors that we currently consider immaterial to our business.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not Applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.

31.1* Section 302 Certification of Chief Executive Officer
   
31.2* Section 302 Certification of Chief Financial Officer
   
32.1* Section 906 Certification of Chief Executive Officer and Chief Financial Officer
   
101* Interactive Data File

* Filed herewith


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

DESTINY MEDIA TECHNOLOGIES, INC.

By: /s/ Frederick Vandenberg  
  Frederick Vandenberg  
  Chief Executive Officer, President  
  (Principal Executive Officer)  
  Date: April 15, 2019  
     
By: /s/ Sandra Boenisch  
  Sandra Boenisch, CPA, CGA  
  Chief Financial Officer, Treasurer  
(Principal Financing and Accounting Officer)  
  Date: April 15, 2019  



EX-31.1 2 exhibit31-1.htm EXHIBIT 31.1 Destiny Media Technologies Inc. - Exhibit 31.1 - Filed by newsfilecorp.com

Exhibit 31.1

CERTIFICATIONS

I, Frederick Vandenberg, certify that:

(1) I have reviewed this Quarterly Report on Form 10-Q of Destiny Media Technologies Inc.;

(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

(4) The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

  (a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     
  (b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

     
  (c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     
  (d)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

(5) The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's Board of Directors (or persons performing the equivalent functions):

  (a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

     
  (b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: April 15, 2019

/s/ Frederick Vandenberg                                   

Frederick Vandenberg
Chief Executive Officer, President
(Principal Executive Officer)


EX-31.2 3 exhibit31-2.htm EXHIBIT 31.2 Destiny Media Technologies Inc. - Exhibit 31.2 - Filed by newsfilecorp.com

Exhibit 31.2

CERTIFICATIONS

I, Sandra Boenisch, certify that:

(1) I have reviewed this Quarterly Report on Form 10-Q of Destiny Media Technologies Inc.;

(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

(4) The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

  (a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     
  (b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

     
  (c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     
  (d)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

(5) The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's Board of Directors (or persons performing the equivalent functions):

  (a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

     
  (b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: April 15, 2019

/s/ Sandra Boenisch                                        

Sandra Boenisch, CPA, CGA
Chief Financial Officer, Treasurer
(Principal Financial and Accounting Officer)


EX-32.1 4 exhibit32-1.htm EXHIBIT 32.1 Destiny Media Technologies Inc. - Exhibit 32.1 - Filed by newsfilecorp.com

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of Destiny Media Technologies Inc. (the “Company”) on Form 10-Q for the six months ended February 28, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, in the capacities and on the date indicated below, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of our knowledge, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

  By: /s/Frederick Vandenberg
     
  Name: Frederick Vandenberg
     
  Title: Chief Executive Officer. President
    (Principal Executive Officer)
     
  Date: April 15, 2019
     
  By: /s/Sandra Boenisch
     
  Name: Sandra Boenisch, CPA, CGA
     
  Title: Chief Financial Officer, Treasurer
    (Principal Financial and Accounting
    Officer)
     
  Date: April 15, 2019


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us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-08-31 xbrli:shares iso4217:USD iso4217:USDxbrli:shares xbrli:pure 10-Q false 2019-02-28 dsny DESTINY MEDIA TECHNOLOGIES INC 0001099369 --08-31 Non-accelerated Filer 55013874 Yes 2019 Q2 true false false 1097434 1458931 1623131 1342956 1151952 1154643 403801 102313 369001 191289 15902 12161 57252 57250 2726341 3051986 34336 34040 160273 31308 36955 10264 81746 192874 28458 33710 60235 70471 41472 31131 2962422 3310031 141273 189983 226876 238142 51848 49941 23286 10026 2363 445646 488092 55014 55014 9766665 9790772 -6951261 -6650352 -353642 -373495 2516776 2821939 2087569 2180931 55014 55014 9725603 9740482 -7374041 -7306665 -319007 -307900 1892805 55014 9712213 -7607531 -266891 2699934 55014 55014 9778718 9790772 -6731071 -6650352 -402727 -373495 55014 9766665 -6951261 -353642 2962422 3310031 6031 9566 0.001 0.001 100000000 100000000 55013874 55013874 55013874 55013874 815055 421689 68329 796240 306222 18815 1788853 857832 141662 1743855 744361 44998 879364 439269 73963 858787 345556 20577 1863383 869265 158170 1828215 800780 35168 233279 411860 215666 397936 211982 442096 280026 549383 278639 583078 289764 587776 25490 51187 19711 40335 749390 1488221 805167 1575430 65665 300632 74197 287953 1704 4029 6522 12921 7 -3795 35 67376 300866 80719 300909 11107 -41009 29232 -19853 78483 67376 11107 259857 300866 -41009 109951 80719 29232 281056 300909 -19853 0.00 0.00 0.00 0.01 55013874 55013874 55013874 55013874 55013874 55013874 55013874 55013874 55013874 55013874 14879 14879 28269 28269 12054 12054 24107 24107 51002 -1458 423 12593 -3795 2520 -30016 66119 -4851 -839 225 13631 78859 -13949 -18106 -16164 -13035 -65070 415484 433660 105620 64284 -105620 -64284 -29689 -7879 280175 361497 0 0 0 0 <div> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><b><font size="3">1. ORGANIZATION</font></b></p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Destiny Media Technologies Inc. (the &#8220;Company&#8221; or &#8220;Destiny&#8221;) was incorporated in August 1998 under the laws of the State of Colorado and the corporate jurisdiction was changed to Nevada effective October 8, 2014. The Company develops technologies that allow for the distribution over the internet of digital media files in either a streaming or digital download format. The technologies are proprietary. The Company operates out of Vancouver, BC, Canada and serves customers predominantly located in the United States, Europe and Australia.</p> <div align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The Company&#8217;s stock is listed for trading under the symbol &#8220;DSNY&#8221; on the OTCQB U.S. in the United States, under the symbol &#8220;DSY&#8221; on the TSX Venture Exchange and under the symbol &#8220;DME&#8221; on the Berlin, Frankfurt, Xetra and Stuttgart exchanges in Germany.</div> </div> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><b><font size="3">2. BASIS OF PRESENTATION</font></b></p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The accompanying unaudited condensed consolidated interim financial statements have been prepared by management in accordance with accounting principles generally accepted in the United States for interim financial information pursuant to the rules and regulations of the United States Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by United States generally accepted accounting principles for annual financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six months ended February 28, 2019 are not necessarily indicative of the results that may be expected for the year ended August 31, 2019.</p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The balance sheet at August 31, 2018 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by United States generally accepted accounting principles for annual financial statements.</p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended August 31, 2018.</p> <div> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><b><font size="3">3. SHORT TERM INVESTMENTS</font></b></p> <div align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">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 -&#160; 2.50% .</div> </div> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><b><font size="3">4. 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STOCKHOLDERS&#8217; EQUITY</font></b></p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><b>[a] Common stock issued and authorized</b></p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The Company is authorized to issue up to 100,000,000 shares of common stock, par value $0.001 per share.</p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">During the six months ended February 28, 2019, no shares were issued.</p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><b>[b] Stock option plans</b></p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The Company has two existing stock option plans (the &#8220;Plans&#8221;), namely the 2006 Stock Option Plan and the 2015 Stock Option Plan, under which up to 7,750,000 shares of the common stock, has been reserved for issuance. A total of 1,459,431 common shares remain eligible for issuance under the Plans. The options generally vest over a range of periods from the date of grant, some are immediate, and others are 12 or 24 months. Any options that do not vest as the result of a grantee leaving the Company are forfeited and the common shares underlying them are returned to the reserve. The options generally have a contractual term of five years.</p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><i>Stock-Based Payment Award Activity</i></p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">A summary of option activity under the Plans as of February 28, 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align="left" style="border-bottom: #000000 2px solid;" bgcolor="#e6efff" width="3%">&#160;</td> </tr> </table> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">As of February 28, 2019, there was $18,551 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 0.57 years.</p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">During the three and six months ended February 28, 2019, the total stock-based compensation expense of $12,054 and $24,107, respectively (2018: $14,879 and $28,269 respectively) is reported in the statement of comprehensive income as follows:</p> <table style="widows: 2; text-transform: none; text-indent: 0px; width: 100%; border-collapse: collapse; font-family: 'times new roman'; orphans: 2; letter-spacing: normal; font-size: 10pt; word-spacing: 0px; -webkit-text-stroke-width: 0px; 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text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">&#160;</div> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><b>[c] Employee Stock Purchase Plan</b></p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The Company&#8217;s 2011 Employee Stock Purchase Plan (the &#8220;Plan&#8221;) became effective on February 22, 2011. Under the Plan, employees of Destiny are able to contribute up to 5% of their annual salary into a pool which is matched equally by Destiny in order to purchase Company shares under certain terms. Independent directors are able to contribute a maximum of $12,500 each for a combined maximum annual purchase of $25,000. The maximum annual combined contributions will be $400,000. All purchases are made through the Toronto Stock Exchange by a third-party plan agent. The third-party plan agent is also responsible for the administration of the Plan on behalf of Destiny and the participants.</p> <div align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">During the three and six months ended February 28, 2019, the Company recognized compensation expense of $22,650 and $33,333, respectively (2018: $19,355 and $26,481, respectively) in salaries and wages on the consolidated statement of comprehensive income in respect of the Plan, representing the Company&#8217;s employee matching of cash contributions to the Plan. The shares were purchased on the open market at an average price of $0.22 (2018: $0.24) . The shares are held in trust by the Company for a period of one year from the date of purchase.</div> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><b><font size="3">6. COMMITMENTS</font></b></p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The Company entered into a new lease agreement commencing July 1, 2017 and expiring June 30, 2022 for the same premise consisting of approximately 6,550 square feet. 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This amount was recorded as a deferred leasehold inducement and is being amortized against rent expense over the remaining term of the lease.</p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">During the three and six months ended February 28, 2019 the Company incurred rent expense of $61,550 and $123,133, respectively (2018 - $74,154 and $139,928, respectively) which has been allocated between general and administrative expenses, research and development and sales and marketing on the consolidated statement of comprehensive income. The rent expense during the three and six months ended February 28, 2019 has included the amortization of deferred lease inducements on a straight-line basis over the term of the lease.</p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><b><font size="3">7. CONTINGENCIES</font></b></p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The Company is subject to claims and legal proceedings that arise in the ordinary course of business. Such matters are inherently uncertain, and there can be no guarantee that the outcome of any such matter will be decided favorably to the Company or that the resolution of any such matter will not have a material adverse effect upon the Company&#8217;s financial statements. The Company does not believe that any of such pending claims and legal proceedings will have a material adverse effect on its consolidated financial statements.</p> <div align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">On September 5, 2017, the Company&#8217;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 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.</div> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><b><font size="3">8. NEW ACCOUNTING PRONOUNCEMENTS</font></b></p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><b><i>Recently Adopted Accounting Standards</i></b></p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><b><i>ASU No. 2014-09 Revenue from Contracts with Customers</i></b></p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">In May 2014, the FASB issued ASU No. 2014-09,&#160;<i>Revenue from Contracts with Customers&#160;</i>(&#8220;ASU 2014-09&#8221;). ASU 2014-09 provides a five-step analysis of transactions to determine when and how revenue is recognized. The premise of ASU 2014-09 is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company adopted this standard on September 1, 2018 using the modified retrospective method applied to open contracts at the date of transition. Under this approach, the Company is not required to restate the prior financial statements presented. The provisions under this ASU were applied to all contracts at the date of initial adoption.</p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">In order to comply with the guidance, beginning on September 1, 2018, the Company amended its revenue recognition policy and performed estimates as outlined below. The adoption of ASU 2014-09 did not result in any adjustment to the Company&#8217;s consolidated balance sheet on the date of adoption. Refer to the Company&#8217;s Annual Report on Form 10-K for the fiscal year ended August 31, 2018 for a description of the Company&#8217;s revenue recognition policy prior to September 1, 2018.</p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Revenue Recognition Policy</p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The Company&#8217;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.</p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The core principle of ASC 606 is to recognize revenue upon the transfer of products or services to customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those products or services. ASC 606 prescribes a five-step model for recognizing revenue from contracts with customers: (1) identify the contract(s) with customers; (2) identify the separate performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the separate performance obligations in the contract; and (5) recognize revenue when (or as) the performance obligations are satisfied.</p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The Company applies the five-step model to recognize revenue as follows:</p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><i>Identification of the contract, or contracts, with the customer</i></p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">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&#8217;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.</p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><i>Identification of the performance obligation in the contract</i></p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Performance obligations are promises in a contract to transfer distinct products or services to a customer, and is the unit of account under ASC 606. A contract&#8217;s transaction price is allocated to each distinct performance obligation and revenue is recognized when the performance obligation is satisfied. A product or service is a distinct performance obligation if the customer can both benefit from the product or service either on its own or together with other resources that are readily available to the customer, and it is separately identifiable from other items within the context of the contract. Performance obligations are satisfied by transferring control of the product or service to the customer. Control of the product or service is transferred either at a point in time or over time depending on the performance obligation</p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">To the extent a contract includes multiple promised services or products, the Company applies judgment to determine whether promised services or products are capable of being distinct and distinct in the context of the contract. If these criteria are not met, the promised services are accounted for as a combined performance obligation.</p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The Company generates revenue primarily from usage fees for the Company&#8217;s digital media distribution service. Usage fees are generally recognized as they are billed based on volume and size of distribution services provided in a given month. The Company&#8217;s other performance obligations include maintenance services, email and phone support, and unspecified software updates released when, and if, available. Under the guidance of ASC 606, the Company has concluded that maintenance services and unspecified software upgrades are not distinct in the context of the Company&#8217;s contracts because the Company&#8217;s service is considered a multi-tenant software environment, and these activities represent a single combined performance obligation in connection with the Company&#8217;s digital media distribution service, recognized at a point in time when the service is delivered to the customer.</p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Support activities are considered a separate performance obligation which is satisfied over time; however, such activities are performed substantially concurrently with the satisfaction of digital media distribution services.</p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">From time to time, certain of the Company&#8217;s contracts contain additional separate performance obligations, including specific enhancements and upgrades.</p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><i>Determination of the transaction price</i></p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The transaction price is determined based on the consideration to which the Company expects to be entitled in exchange for providing services to the customer.</p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Digital media distribution services may be subject to either fixed or variable pricing. Variable consideration is allocated entirely to distinct service periods when it can be tied to a single performance obligation. Variable consideration is estimated and included in the transaction price if, in the Company&#8217;s judgment, it is probable that there will not be a significant future reversal of cumulative revenue under the contract. When variable consideration is contingent and cannot be tied to a single performance obligation performed in a particular billing period, the Company estimates contingent variable consideration using the most likely method and recognizes consideration to the extent that the estimate for variable consideration is not constrained pursuant to the guidance provided in ASU 606.</p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">A significant financing component generally does not exist under the Company&#8217;s standard contracting and billing practices.</p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><i>Allocation of the transaction price to the performance obligations in the contract</i></p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">If the contract contains a single combined performance obligation, the entire transaction price is allocated to the single combined performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on its standalone selling price (&#8220;SSP&#8221;) in relation to the total fair value of all performance obligations in the arrangement. The majority of the Company&#8217;s contracts contain two separate performance obligations that are performed concurrently. The Company allocates consideration to each performance obligation under the guidance of ASC 606 on a relative standalone selling price (SSP) basis. Where SSP is not directly observable, the Company determines the SSP using information that may include market conditions and other observable inputs.</p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Consideration associated with support activities is estimated using a cost-plus reasonable margin approach, as there is no observable SSP.</p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Consideration associated with specified enhancements and upgrades is estimated using a cost-plus reasonable margin approach, as there is no observable SSP.</p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><i>Recognition of revenue when, or as, the Company satisfies a performance obligation</i></p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The Company recognizes revenue when the services are delivered to its customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. The Company is principally responsible for the satisfaction of its distinct performance obligations, which are satisfied either at a point in time or over a period of time.</p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><b><i>Performance obligations satisfied at a point in time</i></b></p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><i>Media distribution services</i></p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Media distribution services comprise the majority of distinct performance obligations that are satisfied at a point in time, and revenue is recognized at the point in which the distribution service has been completed. Consideration for these services is typically billed in the same period that the service has been delivered to the customer.</p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><b><i>Performance obligations satisfied over a period of time</i></b></p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Customer support activities comprise the majority of distinct performance obligations that are satisfied over a period of time.</p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Revenue from support activities is recognized over an estimated support period since this activity is considered a &#8216;stand-ready obligation&#8217;. This support period is substantially concurrent with the performance of media distribution services, as these services are performed substantially in conjunction with the related distribution. Any support activities provided outside of this billing period are not considered material.</p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Revenue from specified enhancements and upgrades is recognized over an estimated performance period.</p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><b><i>Contract Costs</i></b></p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Contract costs consists of two components, customer acquisition costs and costs to fulfill a contract.</p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Customer acquisition costs are capitalized only if the costs are incrementally incurred to obtain a customer contract and may consist of sales commissions paid to sales personnel or third-party resellers. Generally, the Company does not incur any contract costs outside of the period that the related revenue is recognized.</p> <div align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><b><i>Contract Modifications</i></b></div> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Contract modifications may create new, or change existing, enforceable rights and obligations of the parties to the contract. We generally modify an existing contract using an addendum or signed change order. A contract modification is accounted for as a new contract if it reflects an increase in scope that is regarded as distinct from the original contract and is priced in-line with the standalone selling price for the related product or services obligated. If a contract modification is not considered a new contract, the modification is combined with the original contract and the impact on the revenue recognition profile depends on whether the remaining products and services are distinct from the original contract. If the remaining goods or services are distinct from those in the original contract, all remaining performance obligations will be accounted for on a prospective basis with unrecognized consideration allocated to the remaining performance obligations. If the remaining goods or services are not distinct, the modification will be treated as if it were a part of the existing contract, and the effect that the contract modification has on the transaction price, and on our measure of progress toward satisfaction of the performance obligations, is recognized as an adjustment to revenue (either as an increase in or a reduction of revenue) at the date of the contract modification on a cumulative catch-up basis.</p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><b><i>ASU 2016-15 Statement of Cash Flows</i></b></p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments ("ASU 2016-15"). ASU 2016-15 reduces the existing diversity in practice in financial reporting across all industries by clarifying certain existing principles in ASC 230, Statement of Cash Flows, ("ASC 230") including providing additional guidance on how and what an entity should consider in determining the classification of certain cash flows. In addition, in November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230), Restricted Cash ("ASU 2016-18"). ASU 2016-18 clarifies certain existing principles in ASC 230, including providing additional guidance related to transfers between cash and restricted cash and how entities present, in their statement of cash flows, the cash receipts and cash payments that directly affect the restricted cash accounts. This amendment was effective for the Company beginning on September 1, 2018. The adoption of ASU 2016-15 and ASU 2016-18 did not have any material effect on the Company&#8217;s consolidated financial statements.</p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><b><i>Accounting Standards Not Yet Effective</i></b></p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">In February 2016, the FASB issued ASU No. 2016-02, &#8220;Leases (Topic 842)&#8221; (&#8220;ASU 2016-02&#8221;). 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. ASU 2016-02 will be effective for the Company beginning on September 1, 2019. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.</p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">In June 2016, the FASB issued ASU No. 2016-13, &#8220;Financial Instruments&#8212;Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments&#8221; (&#8220;ASU 2016-13&#8221;). Financial Instruments&#8212;Credit Losses (Topic 326) amends guideline on reporting credit losses for assets held at amortized cost basis and available-for-sale debt securities. For assets held at amortized cost basis, Topic 326 eliminates the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected. For available-for-sale debt securities, credit losses should be measured in a manner similar to current GAAP, however Topic 326 will require that credit losses be presented as an allowance rather than as a write-down. ASU 2016-13 affects entities holding financial assets and net investment in leases that are not accounted for at fair value through net income. The amendments affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. The amendments in this ASU will be effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company is in the process of determining the effect the adoption of this standard will have on its consolidated financial statements.</p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">In February 2018, the FASB issued ASU No. 2018-02, &#8220;Income Statement&#8212;Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income&#8221; (&#8220;ASU 2018-02&#8221;), 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 are effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption of ASU 2018-02 is permitted, including adoption in any interim period for the public business entities for reporting periods for which financial statements have not yet been issued. The amendments in this ASU should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. The Company does not expect that the adoption of this guidance will have a material impact on its consolidated financial statements.</p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718), Improvements to Nonemployee Share-based Payments (&#8220;ASU 2018-07&#8221;). This ASU expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The effective date for the standard is for interim periods in fiscal years beginning after December 15, 2018, with early adoption permitted, but no earlier than the Company&#8217;s adoption date of Topic 606. The new guidance is required to be applied retrospectively with the cumulative effect recognized at the date of initial application. The Company will not early adopt this standard and is currently evaluating the effect ASU 2018-07 will have on the consolidated financial statements.</p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">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 updated guidance if effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted for any removed or modified disclosures. The Company is currently assessing the timing and impact of adopting the updated provisions to its consolidated financial statements.</p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><b><font size="3">9. CONCENTRATIONS AND ECONOMIC DEPENDENCE</font></b></p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The Company operates solely in the digital media software segment and all revenue from its products and services are made in this segment.</p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; 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text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Revenue in the above table is based on location of the customer&#8217;s billing address. Some of these customers have distribution centers located around the globe and distribute around the world. During the six months ended February 28, 2019, the Company generated 41 % of total revenue from one customer [2018 - 43%].</p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">It is in management&#8217;s opinion that the Company is not exposed to significant credit risk.</p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">As at February 28, 2019, two customers represented $191,289 (52%) of the trade receivables balance [August 31, 2018 &#8211; one customer represented $102,313 (25%)].</p> <div align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The Company has substantially all its assets in Canada and its current and planned future operations are, and will be, located in Canada.</div> <div> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><b><font size="3">10. COMPARATIVE FIGURES</font></b></p> <div align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Certain comparative figures have been reclassified to conform to the current period's presentation. These reclassifications did not affect prior periods' net earnings.</div> </div> <div> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><b><font size="3">BASIS OF PRESENTATION</font></b></p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The accompanying unaudited condensed consolidated interim financial statements have been prepared by management in accordance with accounting principles generally accepted in the United States for interim financial information pursuant to the rules and regulations of the United States Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by United States generally accepted accounting principles for annual financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six months ended February 28, 2019 are not necessarily indicative of the results that may be expected for the year ended August 31, 2019.</p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The balance sheet at August 31, 2018 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by United States generally accepted accounting principles for annual financial statements.</p> <div align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended August 31, 2018.</div> </div> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><b><font size="3">NEW ACCOUNTING PRONOUNCEMENTS</font></b></p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><b><i>Recently Adopted Accounting Standards</i></b></p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><b><i>ASU No. 2014-09 Revenue from Contracts with Customers</i></b></p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">In May 2014, the FASB issued ASU No. 2014-09,&#160;<i>Revenue from Contracts with Customers&#160;</i>(&#8220;ASU 2014-09&#8221;). ASU 2014-09 provides a five-step analysis of transactions to determine when and how revenue is recognized. The premise of ASU 2014-09 is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company adopted this standard on September 1, 2018 using the modified retrospective method applied to open contracts at the date of transition. Under this approach, the Company is not required to restate the prior financial statements presented. The provisions under this ASU were applied to all contracts at the date of initial adoption.</p> <div align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">In order to comply with the guidance, beginning on September 1, 2018, the Company amended its revenue recognition policy and performed estimates as outlined below. The adoption of ASU 2014-09 did not result in any adjustment to the Company&#8217;s consolidated balance sheet on the date of adoption. Refer to the Company&#8217;s Annual Report on Form 10-K for the fiscal year ended August 31, 2018 for a description of the Company&#8217;s revenue recognition policy prior to September 1, 2018.</div> <div align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">&#160;</div> <div align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Revenue Recognition Policy</div> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The Company&#8217;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.</p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The core principle of ASC 606 is to recognize revenue upon the transfer of products or services to customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those products or services. ASC 606 prescribes a five-step model for recognizing revenue from contracts with customers: (1) identify the contract(s) with customers; (2) identify the separate performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the separate performance obligations in the contract; and (5) recognize revenue when (or as) the performance obligations are satisfied.</p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The Company applies the five-step model to recognize revenue as follows:</p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><i>Identification of the contract, or contracts, with the customer</i></p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">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&#8217;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.</p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><i>Identification of the performance obligation in the contract</i></p> <div align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Performance obligations are promises in a contract to transfer distinct products or services to a customer, and is the unit of account under ASC 606. A contract&#8217;s transaction price is allocated to each distinct performance obligation and revenue is recognized when the performance obligation is satisfied. A product or service is a distinct performance obligation if the customer can both benefit from the product or service either on its own or together with other resources that are readily available to the customer, and it is separately identifiable from other items within the context of the contract. Performance obligations are satisfied by transferring control of the product or service to the customer. Control of the product or service is transferred either at a point in time or over time depending on the performance obligation.</div> <div align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">&#160;</div> <div align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">To the extent a contract includes multiple promised services or products, the Company applies judgment to determine whether promised services or products are capable of being distinct and distinct in the context of the contract. If these criteria are not met, the promised services are accounted for as a combined performance obligation.</div> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The Company generates revenue primarily from usage fees for the Company&#8217;s digital media distribution service. Usage fees are generally recognized as they are billed based on volume and size of distribution services provided in a given month. The Company&#8217;s other performance obligations include maintenance services, email and phone support, and unspecified software updates released when, and if, available. Under the guidance of ASC 606, the Company has concluded that maintenance services and unspecified software upgrades are not distinct in the context of the Company&#8217;s contracts because the Company&#8217;s service is considered a multi-tenant software environment, and these activities represent a single combined performance obligation in connection with the Company&#8217;s digital media distribution service, recognized at a point in time when the service is delivered to the customer.</p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Support activities are considered a separate performance obligation which is satisfied over time; however, such activities are performed substantially concurrently with the satisfaction of digital media distribution services.</p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">From time to time, certain of the Company&#8217;s contracts contain additional separate performance obligations, including specific enhancements and upgrades.</p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><i>Determination of the transaction price</i></p> <div align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The transaction price is determined based on the consideration to which the Company expects to be entitled in exchange for providing services to the customer.</div> <div align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"></p> Digital media distribution services may be subject to either fixed or variable pricing. Variable consideration is allocated entirely to distinct service periods when it can be tied to a single performance obligation. Variable consideration is estimated and included in the transaction price if, in the Company&#8217;s judgment, it is probable that there will not be a significant future reversal of cumulative revenue under the contract. When variable consideration is contingent and cannot be tied to a single performance obligation performed in a particular billing period, the Company estimates contingent variable consideration using the most likely method and recognizes consideration to the extent that the estimate for variable consideration is not constrained pursuant to the guidance provided in ASU 606.</div> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">A significant financing component generally does not exist under the Company&#8217;s standard contracting and billing practices.</p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><i>Allocation of the transaction price to the performance obligations in the contract</i></p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">If the contract contains a single combined performance obligation, the entire transaction price is allocated to the single combined performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on its standalone selling price (&#8220;SSP&#8221;) in relation to the total fair value of all performance obligations in the arrangement. The majority of the Company&#8217;s contracts contain two separate performance obligations that are performed concurrently. The Company allocates consideration to each performance obligation under the guidance of ASC 606 on a relative standalone selling price (SSP) basis. Where SSP is not directly observable, the Company determines the SSP using information that may include market conditions and other observable inputs.</p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Consideration associated with support activities is estimated using a cost-plus reasonable margin approach, as there is no observable SSP.</p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Consideration associated with specified enhancements and upgrades is estimated using a cost-plus reasonable margin approach, as there is no observable SSP.</p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><i>Recognition of revenue when, or as, the Company satisfies a performance obligation</i></p> <div align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The Company recognizes revenue when the services are delivered to its customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. The Company is principally responsible for the satisfaction of its distinct performance obligations, which are satisfied either at a point in time or over a period of time.</div> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><b><i>Performance obligations satisfied at a point in time</i></b></p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><i>Media distribution services</i></p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Media distribution services comprise the majority of distinct performance obligations that are satisfied at a point in time, and revenue is recognized at the point in which the distribution service has been completed. Consideration for these services is typically billed in the same period that the service has been delivered to the customer.</p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><b><i>Performance obligations satisfied over a period of time</i></b></p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Customer support activities comprise the majority of distinct performance obligations that are satisfied over a period of time.</p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Revenue from support activities is recognized over an estimated support period since this activity is considered a &#8216;stand-ready obligation&#8217;. This support period is substantially concurrent with the performance of media distribution services, as these services are performed substantially in conjunction with the related distribution. Any support activities provided outside of this billing period are not considered material.</p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Revenue from specified enhancements and upgrades is recognized over an estimated performance period.</p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><b><i>Contract Costs</i></b></p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Contract costs consists of two components, customer acquisition costs and costs to fulfill a contract.</p> <div align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Customer acquisition costs are capitalized only if the costs are incrementally incurred to obtain a customer contract and may consist of sales commissions paid to sales personnel or third-party resellers. Generally, the Company does not incur any contract costs outside of the period that the related revenue is recognized.</div> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><b><i>Contract Modifications</i></b></p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Contract modifications may create new, or change existing, enforceable rights and obligations of the parties to the contract. We generally modify an existing contract using an addendum or signed change order. A contract modification is accounted for as a new contract if it reflects an increase in scope that is regarded as distinct from the original contract and is priced in-line with the standalone selling price for the related product or services obligated. If a contract modification is not considered a new contract, the modification is combined with the original contract and the impact on the revenue recognition profile depends on whether the remaining products and services are distinct from the original contract. If the remaining goods or services are distinct from those in the original contract, all remaining performance obligations will be accounted for on a prospective basis with unrecognized consideration allocated to the remaining performance obligations. If the remaining goods or services are not distinct, the modification will be treated as if it were a part of the existing contract, and the effect that the contract modification has on the transaction price, and on our measure of progress toward satisfaction of the performance obligations, is recognized as an adjustment to revenue (either as an increase in or a reduction of revenue) at the date of the contract modification on a cumulative catch-up basis.</p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><b><i>ASU 2016-15 Statement of Cash Flows</i></b></p> <div align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments ("ASU 2016-15"). ASU 2016-15 reduces the existing diversity in practice in financial reporting across all industries by clarifying certain existing principles in ASC 230, Statement of Cash Flows, ("ASC 230") including providing additional guidance on how and what an entity should consider in determining the classification of certain cash flows. In addition, in November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230), Restricted Cash ("ASU 2016-18"). ASU 2016-18 clarifies certain existing principles in ASC 230, including providing additional guidance related to transfers between cash and restricted cash and how entities present, in their statement of cash flows, the cash receipts and cash payments that directly affect the restricted cash accounts. This amendment was effective for the Company beginning on September 1, 2018. The adoption of ASU 2016-15 and ASU 2016-18 did not have any material effect on the Company&#8217;s consolidated financial statements.</div> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><b><i>Accounting Standards Not Yet Effective</i></b></p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">In February 2016, the FASB issued ASU No. 2016-02, &#8220;Leases (Topic 842)&#8221; (&#8220;ASU 2016-02&#8221;). 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. ASU 2016-02 will be effective for the Company beginning on September 1, 2019. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.</p> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">In June 2016, the FASB issued ASU No. 2016-13, &#8220;Financial Instruments&#8212;Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments&#8221; (&#8220;ASU 2016-13&#8221;). Financial Instruments&#8212;Credit Losses (Topic 326) amends guideline on reporting credit losses for assets held at amortized cost basis and available-for-sale debt securities. For assets held at amortized cost basis, Topic 326 eliminates the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected. For available-for-sale debt securities, credit losses should be measured in a manner similar to current GAAP, however Topic 326 will require that credit losses be presented as an allowance rather than as a write-down. ASU 2016-13 affects entities holding financial assets and net investment in leases that are not accounted for at fair value through net income. The amendments affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. The amendments in this ASU will be effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company is in the process of determining the effect the adoption of this standard will have on its consolidated financial statements.</p> <div align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">In February 2018, the FASB issued ASU No. 2018-02, &#8220;Income Statement&#8212;Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income&#8221; (&#8220;ASU 2018-02&#8221;), 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 are effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption of ASU 2018-02 is permitted, including adoption in any interim period for the public business entities for reporting periods for which financial statements have not yet been issued. The amendments in this ASU should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. The Company does not expect that the adoption of this guidance will have a material impact on its consolidated financial statements.</div> <div align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> <p align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"></p> In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718), Improvements to Nonemployee Share-based Payments (&#8220;ASU 2018-07&#8221;). This ASU expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The effective date for the standard is for interim periods in fiscal years beginning after December 15, 2018, with early adoption permitted, but no earlier than the Company&#8217;s adoption date of Topic 606. The new guidance is required to be applied retrospectively with the cumulative effect recognized at the date of initial application. The Company will not early adopt this standard and is currently evaluating the effect ASU 2018-07 will have on the consolidated financial statements.</div> <div align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">&#160;</div> <div align="justify" style="widows: 2; text-transform: none; font-style: normal; text-indent: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">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 updated guidance if effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted for any removed or modified disclosures. 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Document and Entity Information - shares
6 Months Ended
Feb. 28, 2019
Apr. 15, 2019
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Feb. 28, 2019  
Trading Symbol dsny  
Entity Registrant Name DESTINY MEDIA TECHNOLOGIES INC  
Entity Central Index Key 0001099369  
Current Fiscal Year End Date --08-31  
Entity Filer Category Non-accelerated Filer  
Entity Common Stock, Shares Outstanding   55,013,874
Entity Current Reporting Status Yes  
Document Fiscal Year Focus 2019  
Document Fiscal Period Focus Q2  
Entity Small Business true  
Entity Emerging Growth Company false  
Entity Ex Transition Period false  
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CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS - USD ($)
Feb. 28, 2019
Aug. 31, 2018
Current    
Cash and cash equivalents $ 1,458,931 $ 1,097,434
Short-term investments 1,154,643 1,151,952
Accounts receivable, net of allowance for doubtful accounts of $9,566 [August 31, 2018 - $6,031] [note 9] 369,001 403,801
Other receivables 12,161 15,902
Prepaid expenses 57,250 57,252
Total current assets 3,051,986 2,726,341
Deposits 34,040 34,336
Property and equipment, net 192,874 160,273
Intangible assets, net 31,131 41,472
Total assets 3,310,031 2,962,422
Current    
Accounts payable 189,983 141,273
Accrued liabilities 238,142 226,876
Deferred leasehold inducement 49,941 51,848
Deferred revenue 10,026 23,286
Obligation under capital lease   2,363
Total liabilities 488,092 445,646
Commitments and contingencies
Stockholders’ equity    
Common stock, par value $0.001 Authorized: 100,000,000 shares Issued and outstanding: 55,013,874 shares [August 31, 2018 - issued and outstanding 55,013,874 shares] 55,014 55,014
Additional paid-in capital 9,790,772 9,766,665
Accumulated deficit (6,650,352) (6,951,261)
Accumulated other comprehensive loss (373,495) (353,642)
Total stockholders’ equity 2,821,939 2,516,776
Total liabilities and stockholders’ equity $ 3,310,031 $ 2,962,422
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CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS (Parentheticals) - USD ($)
Feb. 28, 2019
Aug. 31, 2018
Allowance for Doubtful Accounts Receivable, Current $ 9,566 $ 6,031
Common Stock, Par Value Per Share $ 0.001 $ 0.001
Common Stock, Shares Authorized 100,000,000 100,000,000
Common Stock, Shares, Issued 55,013,874 55,013,874
Common Stock, Shares, Outstanding 55,013,874 55,013,874
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CONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE INCOME - USD ($)
3 Months Ended 6 Months Ended
Feb. 28, 2019
Feb. 28, 2018
Feb. 28, 2019
Feb. 28, 2018
Revenue [note 9] $ 879,364 $ 815,055 $ 1,863,383 $ 1,788,853
Operating expenses        
General and administrative 215,666 233,279 397,936 411,860
Sales and marketing 280,026 211,982 549,383 442,096
Research and development 289,764 278,639 587,776 583,078
Depreciation and Amortization 19,711 25,490 40,335 51,187
Total Operating Expenses 805,167 749,390 1,575,430 1,488,221
Income from operations 74,197 65,665 287,953 300,632
Other income        
Interest income 6,522 1,704 12,921 4,029
Other income (expense)   7 35 (3,795)
Net income 80,719 67,376 300,909 300,866
Other comprehensive income (loss)        
Foreign currency translation adjustments 29,232 11,107 (19,853) (41,009)
Total comprehensive income $ 109,951 $ 78,483 $ 281,056 $ 259,857
Net income per common share, basic and diluted (in dollars per share) $ 0.00 $ 0.00 $ 0.01 $ 0.00
Weighted average common shares outstanding:        
Basic and diluted (in shares) 55,013,874 55,013,874 55,013,874 55,013,874
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CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($)
Common stock [Member]
Additional paid-in capital [Member]
Accumulated Deficit [Member]
Accumulated other comprehensive (loss) [Member]
Total
Beginning Balance at Aug. 31, 2017 $ 55,014 $ 9,712,213 $ (7,607,531) $ (266,891) $ 1,892,805
Beginning Balance (Shares) at Aug. 31, 2017 55,013,874        
Total comprehensive income     300,866 (41,009) 259,857
Stock based compensation   28,269     28,269
Ending Balance at Feb. 28, 2018 $ 55,014 9,740,482 (7,306,665) (307,900) 2,180,931
Ending Balance (Shares) at Feb. 28, 2018 55,013,874        
Beginning Balance at Nov. 30, 2017 $ 55,014 9,725,603 (7,374,041) (319,007) 2,087,569
Beginning Balance (Shares) at Nov. 30, 2017 55,013,874        
Total comprehensive income     67,376 11,107 78,483
Stock based compensation   14,879     14,879
Ending Balance at Feb. 28, 2018 $ 55,014 9,740,482 (7,306,665) (307,900) 2,180,931
Ending Balance (Shares) at Feb. 28, 2018 55,013,874        
Beginning Balance at Aug. 31, 2018 $ 55,014 9,766,665 (6,951,261) (353,642) 2,516,776
Beginning Balance (Shares) at Aug. 31, 2018 55,013,874        
Total comprehensive income     300,909 (19,853) 281,056
Stock based compensation   24,107     24,107
Ending Balance at Feb. 28, 2019 $ 55,014 9,790,772 (6,650,352) (373,495) 2,821,939
Ending Balance (Shares) at Feb. 28, 2019 55,013,874        
Beginning Balance at Nov. 30, 2018 $ 55,014 9,778,718 (6,731,071) (402,727) 2,699,934
Beginning Balance (Shares) at Nov. 30, 2018 55,013,874        
Total comprehensive income     80,719 29,232 109,951
Stock based compensation   12,054     12,054
Ending Balance at Feb. 28, 2019 $ 55,014 $ 9,790,772 $ (6,650,352) $ (373,495) $ 2,821,939
Ending Balance (Shares) at Feb. 28, 2019 55,013,874        
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CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS - USD ($)
6 Months Ended
Feb. 28, 2019
Feb. 28, 2018
OPERATING ACTIVITIES    
Net income $ 300,909 $ 300,866
Items not involving cash:    
Depreciation and amortization 40,335 51,187
Stock-based compensation 24,107 28,269
Deferred leasehold inducement (1,458) 51,002
Unrealized foreign exchange (12,593) (423)
Loss on disposal of property and equipment   3,795
Changes in non-cash working capital:    
Accounts receivable 30,016 (2,520)
Other receivables 4,851 (66,119)
Prepaid expenses and deposits (225) 839
Accounts payable 78,859 13,631
Accrued liabilities (18,106) (13,949)
Deferred revenue (13,035) (16,164)
Short term receivable   65,070
Net cash provided by operating activities 433,660 415,484
INVESTING ACTIVITY    
Purchase of property, equipment and intangibles (64,284) (105,620)
Net cash used in investing activity (64,284) (105,620)
Effect of foreign exchange rate changes on cash (7,879) (29,689)
Net increase in cash and cash equivalents during the period 361,497 280,175
Cash and cash equivalents, beginning of period 1,097,434 1,342,956
Cash and cash equivalents, end of period 1,458,931 1,623,131
Supplementary disclosure    
Interest paid 0 0
Income taxes paid $ 0 $ 0
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ORGANIZATION
6 Months Ended
Feb. 28, 2019
ORGANIZATION [Text Block]

1. ORGANIZATION

Destiny Media Technologies Inc. (the “Company” or “Destiny”) was incorporated in August 1998 under the laws of the State of Colorado and the corporate jurisdiction was changed to Nevada effective October 8, 2014. The Company develops technologies that allow for the distribution over the internet of digital media files in either a streaming or digital download format. The technologies are proprietary. The Company operates out of Vancouver, BC, Canada and serves customers predominantly located in the United States, Europe and Australia.

The Company’s stock is listed for trading under the symbol “DSNY” on the OTCQB U.S. in the United States, under the symbol “DSY” on the TSX Venture Exchange and under the symbol “DME” on the Berlin, Frankfurt, Xetra and Stuttgart exchanges in Germany.
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BASIS OF PRESENTATION
6 Months Ended
Feb. 28, 2019
BASIS OF PRESENTATION [Text Block]

2. BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated interim financial statements have been prepared by management in accordance with accounting principles generally accepted in the United States for interim financial information pursuant to the rules and regulations of the United States Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by United States generally accepted accounting principles for annual financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six months ended February 28, 2019 are not necessarily indicative of the results that may be expected for the year ended August 31, 2019.

The balance sheet at August 31, 2018 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by United States generally accepted accounting principles for annual financial statements.

For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended August 31, 2018.

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SHORT TERM INVESTMENTS
6 Months Ended
Feb. 28, 2019
SHORT TERM INVESTMENTS [Text Block]

3. 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 -  2.50% .
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PROPERTY AND EQUIPMENT AND INTANGIBLES
6 Months Ended
Feb. 28, 2019
PROPERTY AND EQUIPMENT AND INTANGIBLES [Text Block]

4. PROPERTY AND EQUIPMENT AND INTANGIBLES

          Accumulated     Net book  
    Cost     amortization     value  
    $     $     $  
February 28, 2019                  
Property and equipment                  
Furniture and fixtures   133,525     105,067     28,458  
Computer hardware   227,763     194,053     33,710  
Computer software   264,446     204,211     60,235  
Leasehold improvements   161,352     90,881     70,471  
    787,086     594,212     192,874  
                   
                   
Intangibles                  
Patents, trademarks and lists   416,738     385,607     31,131  
 
          Accumulated     Net book  
    Cost     amortization     value  
August 31, 2018   $     $     $  
Property and equipment                  
Furniture and fixtures   134,130     102,822     31,308  
Computer hardware   226,679     189,724     36,955  
Computer software   213,684     203,420     10,264  
Leasehold improvements   162,754     81,008     81,746  
    737,247     576,974     160,273  
                   
Intangibles                  
Patents, trademarks and lists   412,072     370,600     41,472  
 
Depreciation and amortization for the three and six months ended February 28, 2019 was $19,711 and $40,335, respectively (2018: $25,490 and $51,187, respectively)
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STOCKHOLDERS EQUITY
6 Months Ended
Feb. 28, 2019
STOCKHOLDERS EQUITY [Text Block]

5. STOCKHOLDERS’ EQUITY

[a] Common stock issued and authorized

The Company is authorized to issue up to 100,000,000 shares of common stock, par value $0.001 per share.

During the six months ended February 28, 2019, no shares were issued.

[b] Stock option plans

The Company has two existing stock option plans (the “Plans”), namely the 2006 Stock Option Plan and the 2015 Stock Option Plan, under which up to 7,750,000 shares of the common stock, has been reserved for issuance. A total of 1,459,431 common shares remain eligible for issuance under the Plans. The options generally vest over a range of periods from the date of grant, some are immediate, and others are 12 or 24 months. Any options that do not vest as the result of a grantee leaving the Company are forfeited and the common shares underlying them are returned to the reserve. The options generally have a contractual term of five years.

Stock-Based Payment Award Activity

A summary of option activity under the Plans as of February 28, 2019, and changes during the period then ended is presented below:

                Weighted        
          Weighted     Average     Aggregate  
          Average     Remaining     Intrinsic  
          Exercise Price     Contractual     Value  
Options   Shares     $     Term     $  
Outstanding at August 31, 2018   1,631,250     0.39     3.49      
Granted                
Forfeited                
Expired   (87,500 )   0.40          
Outstanding at February 28, 2019   1,543,750     0.39     3.18      
Exercisable at February 28, 2019   1,279,167     0.39     3.12      
 
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 February 28, 2019.
 
The following table summarizes information regarding the non-vested stock purchase options outstanding as of February 28, 2019 and changes during the period then ended:
 
          Weighted  
          Average  
          Grant Date  
    Number of Options     Fair Value  
          $  
Non-vested options at August 31, 2018   614,584     0.07  
Granted        
Forfeited        
Vested   (350,001 )   0.07  
Non-vested options at February 28, 2019   264,583     0.07  

As of February 28, 2019, there was $18,551 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 0.57 years.

During the three and six months ended February 28, 2019, the total stock-based compensation expense of $12,054 and $24,107, respectively (2018: $14,879 and $28,269 respectively) is reported in the statement of comprehensive income as follows:

    Three Months Ended     Six Months Ended  
    February 28     February 28     February 28     February 28  
    2019     2018     2019     2018  
    $     $     $     $  
Stock-based compensation:                        
         General and administrative   7,150     9,512     14,303     17,534  
         Sales and marketing   2,452     1,787     4,902     3,575  
         Research and development   2,452     3,580     4,902     7,160  
Total stock-based compensation   12,054     14,879     24,107     28,269  
 

[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 Destiny are able to contribute up to 5% of their annual salary into a pool which is matched equally by Destiny in order to purchase Company shares under certain terms. Independent directors are able to contribute a maximum of $12,500 each for a combined maximum annual purchase of $25,000. The maximum annual combined contributions will be $400,000. All purchases are made through the Toronto Stock Exchange by a third-party plan agent. The third-party plan agent is also responsible for the administration of the Plan on behalf of Destiny and the participants.

During the three and six months ended February 28, 2019, the Company recognized compensation expense of $22,650 and $33,333, respectively (2018: $19,355 and $26,481, respectively) in salaries and wages on the consolidated statement of comprehensive income in respect of the Plan, representing the Company’s employee matching of cash contributions to the Plan. The shares were purchased on the open market at an average price of $0.22 (2018: $0.24) . The shares are held in trust by the Company for a period of one year from the date of purchase.
XML 22 R12.htm IDEA: XBRL DOCUMENT v3.19.1
COMMITMENTS
6 Months Ended
Feb. 28, 2019
COMMITMENTS [Text Block]

6. COMMITMENTS

The Company entered into a new lease agreement commencing July 1, 2017 and expiring June 30, 2022 for the same premise consisting of approximately 6,550 square feet. The Company has fiscal year payments committed as follows:

    $  
       
2019   125,906  
2020   257,676  
2021   263,121  
2022   224,502  

During the year ended August 31, 2018, the Company became entitled to a leasehold improvement allowance from its landlord in the amount of $45,341, in connection with certain office leasehold improvements completed. This amount was recorded as a deferred leasehold inducement and is being amortized against rent expense over the remaining term of the lease.

During the three and six months ended February 28, 2019 the Company incurred rent expense of $61,550 and $123,133, respectively (2018 - $74,154 and $139,928, respectively) which has been allocated between general and administrative expenses, research and development and sales and marketing on the consolidated statement of comprehensive income. The rent expense during the three and six months ended February 28, 2019 has included the amortization of deferred lease inducements on a straight-line basis over the term of the lease.

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CONTINGENCIES
6 Months Ended
Feb. 28, 2019
CONTINGENCIES [Text Block]

7. CONTINGENCIES

The Company is subject to claims and legal proceedings that arise in the ordinary course of business. Such matters are inherently uncertain, and there can be no guarantee that the outcome of any such matter will be decided favorably to the Company or that the resolution of any such matter will not have a material adverse effect upon the Company’s financial statements. The Company does not believe that any of such pending claims and legal proceedings will have a material adverse effect on its consolidated financial statements.

On September 5, 2017, the Company’s former President and Chief Executive Officer filed a Notice of Civil Claim in the Supreme Court of British Columbia against the Company, its subsidiaries, independent directors and current Chief Executive Officer, claiming damages for conspiracy, breach of contract, wrongful dismissal, defamation and aggravated and punitive damages. The Company believes the claims are without merit and 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.
XML 24 R14.htm IDEA: XBRL DOCUMENT v3.19.1
NEW ACCOUNTING PRONOUNCEMENTS
6 Months Ended
Feb. 28, 2019
NEW ACCOUNTING PRONOUNCEMENTS [Text Block]

8. NEW ACCOUNTING PRONOUNCEMENTS

Recently Adopted Accounting Standards

ASU No. 2014-09 Revenue from Contracts with Customers

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). ASU 2014-09 provides a five-step analysis of transactions to determine when and how revenue is recognized. The premise of ASU 2014-09 is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company adopted this standard on September 1, 2018 using the modified retrospective method applied to open contracts at the date of transition. Under this approach, the Company is not required to restate the prior financial statements presented. The provisions under this ASU were applied to all contracts at the date of initial adoption.

In order to comply with the guidance, beginning on September 1, 2018, the Company amended its revenue recognition policy and performed estimates as outlined below. The adoption of ASU 2014-09 did not result in any adjustment to the Company’s consolidated balance sheet on the date of adoption. Refer to the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2018 for a description of the Company’s revenue recognition policy prior to September 1, 2018.

Revenue Recognition Policy

The Company’s revenue is derived from software as a service (SaaS) arrangements. The Company accounts for revenue in accordance with ASC 606, which the Company adopted on September 1, 2018 using the modified retrospective method.

The core principle of ASC 606 is to recognize revenue upon the transfer of products or services to customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those products or services. ASC 606 prescribes a five-step model for recognizing revenue from contracts with customers: (1) identify the contract(s) with customers; (2) identify the separate performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the separate performance obligations in the contract; and (5) recognize revenue when (or as) the performance obligations are satisfied.

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

Identification of the contract, or contracts, with the customer

The Company considers the terms and conditions of written contracts and its customary business practices in identifying its contracts under ASC 606. The Company determines that it has a contract with a customer when the contract is approved, the Company can identify each party’s rights regarding the services to be transferred, the Company can identify the payment terms for the services, the Company has determined that the customer has the ability and intent to pay, and the contract has commercial substance. In general, contract terms will be reflected in a written document that is signed by both parties.

Identification of the performance obligation in the contract

Performance obligations are promises in a contract to transfer distinct products or services to a customer, and is the unit of account under ASC 606. A contract’s transaction price is allocated to each distinct performance obligation and revenue is recognized when the performance obligation is satisfied. A product or service is a distinct performance obligation if the customer can both benefit from the product or service either on its own or together with other resources that are readily available to the customer, and it is separately identifiable from other items within the context of the contract. Performance obligations are satisfied by transferring control of the product or service to the customer. Control of the product or service is transferred either at a point in time or over time depending on the performance obligation

To the extent a contract includes multiple promised services or products, the Company applies judgment to determine whether promised services or products are capable of being distinct and distinct in the context of the contract. If these criteria are not met, the promised services are accounted for as a combined performance obligation.

The Company generates revenue primarily from usage fees for the Company’s digital media distribution service. Usage fees are generally recognized as they are billed based on volume and size of distribution services provided in a given month. The Company’s other performance obligations include maintenance services, email and phone support, and unspecified software updates released when, and if, available. Under the guidance of ASC 606, the Company has concluded that maintenance services and unspecified software upgrades are not distinct in the context of the Company’s contracts because the Company’s service is considered a multi-tenant software environment, and these activities represent a single combined performance obligation in connection with the Company’s digital media distribution service, recognized at a point in time when the service is delivered to the customer.

Support activities are considered a separate performance obligation which is satisfied over time; however, such activities are performed substantially concurrently with the satisfaction of digital media distribution services.

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

Determination of the transaction price

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

Digital media distribution services may be subject to either fixed or variable pricing. Variable consideration is allocated entirely to distinct service periods when it can be tied to a single performance obligation. Variable consideration is estimated and included in the transaction price if, in the Company’s judgment, it is probable that there will not be a significant future reversal of cumulative revenue under the contract. When variable consideration is contingent and cannot be tied to a single performance obligation performed in a particular billing period, the Company estimates contingent variable consideration using the most likely method and recognizes consideration to the extent that the estimate for variable consideration is not constrained pursuant to the guidance provided in ASU 606.

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

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

If the contract contains a single combined performance obligation, the entire transaction price is allocated to the single combined performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on its standalone selling price (“SSP”) in relation to the total fair value of all performance obligations in the arrangement. The majority of the Company’s contracts contain two separate performance obligations that are performed concurrently. The Company allocates consideration to each performance obligation under the guidance of ASC 606 on a relative standalone selling price (SSP) basis. Where SSP is not directly observable, the Company determines the SSP using information that may include market conditions and other observable inputs.

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

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

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

The Company recognizes revenue when the services are delivered to its customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. The Company is principally responsible for the satisfaction of its distinct performance obligations, which are satisfied either at a point in time or over a period of time.

Performance obligations satisfied at a point in time

Media distribution services

Media distribution services comprise the majority of distinct performance obligations that are satisfied at a point in time, and revenue is recognized at the point in which the distribution service has been completed. Consideration for these services is typically billed in the same period that the service has been delivered to the customer.

Performance obligations satisfied over a period of time

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

Revenue from support activities is recognized over an estimated support period since this activity is considered a ‘stand-ready obligation’. This support period is substantially concurrent with the performance of media distribution services, as these services are performed substantially in conjunction with the related distribution. Any support activities provided outside of this billing period are not considered material.

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

Contract Costs

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

Customer acquisition costs are capitalized only if the costs are incrementally incurred to obtain a customer contract and may consist of sales commissions paid to sales personnel or third-party resellers. Generally, the Company does not incur any contract costs outside of the period that the related revenue is recognized.

Contract Modifications

Contract modifications may create new, or change existing, enforceable rights and obligations of the parties to the contract. We generally modify an existing contract using an addendum or signed change order. A contract modification is accounted for as a new contract if it reflects an increase in scope that is regarded as distinct from the original contract and is priced in-line with the standalone selling price for the related product or services obligated. If a contract modification is not considered a new contract, the modification is combined with the original contract and the impact on the revenue recognition profile depends on whether the remaining products and services are distinct from the original contract. If the remaining goods or services are distinct from those in the original contract, all remaining performance obligations will be accounted for on a prospective basis with unrecognized consideration allocated to the remaining performance obligations. If the remaining goods or services are not distinct, the modification will be treated as if it were a part of the existing contract, and the effect that the contract modification has on the transaction price, and on our measure of progress toward satisfaction of the performance obligations, is recognized as an adjustment to revenue (either as an increase in or a reduction of revenue) at the date of the contract modification on a cumulative catch-up basis.

ASU 2016-15 Statement of Cash Flows

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments ("ASU 2016-15"). ASU 2016-15 reduces the existing diversity in practice in financial reporting across all industries by clarifying certain existing principles in ASC 230, Statement of Cash Flows, ("ASC 230") including providing additional guidance on how and what an entity should consider in determining the classification of certain cash flows. In addition, in November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230), Restricted Cash ("ASU 2016-18"). ASU 2016-18 clarifies certain existing principles in ASC 230, including providing additional guidance related to transfers between cash and restricted cash and how entities present, in their statement of cash flows, the cash receipts and cash payments that directly affect the restricted cash accounts. This amendment was effective for the Company beginning on September 1, 2018. The adoption of ASU 2016-15 and ASU 2016-18 did not have any material effect on the Company’s consolidated financial statements.

Accounting Standards Not Yet Effective

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). The amendments in this update increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. ASU 2016-02 will be effective for the Company beginning on September 1, 2019. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.

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 guideline on reporting credit losses for assets held at amortized cost basis and available-for-sale debt securities. For assets held at amortized cost basis, Topic 326 eliminates the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected. For available-for-sale debt securities, credit losses should be measured in a manner similar to current GAAP, however Topic 326 will require that credit losses be presented as an allowance rather than as a write-down. ASU 2016-13 affects entities holding financial assets and net investment in leases that are not accounted for at fair value through net income. The amendments affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. The amendments in this ASU will be effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company is in the process of determining the effect the adoption of this standard will have on its consolidated financial statements.

In February 2018, the FASB issued ASU No. 2018-02, “Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income” (“ASU 2018-02”), which provides financial statement preparers with an option to reclassify stranded tax effects within accumulated other comprehensive income to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act (or portion thereof) is recorded. The amendments in this ASU are effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption of ASU 2018-02 is permitted, including adoption in any interim period for the public business entities for reporting periods for which financial statements have not yet been issued. The amendments in this ASU should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. The Company does not expect that the adoption of this guidance will have a material impact on its consolidated financial statements.

In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718), Improvements to Nonemployee Share-based Payments (“ASU 2018-07”). This ASU expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The effective date for the standard is for interim periods in fiscal years beginning after December 15, 2018, with early adoption permitted, but no earlier than the Company’s adoption date of Topic 606. The new guidance is required to be applied retrospectively with the cumulative effect recognized at the date of initial application. The Company will not early adopt this standard and is currently evaluating the effect ASU 2018-07 will have on the 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 updated guidance if effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted for any removed or modified disclosures. The Company is currently assessing the timing and impact of adopting the updated provisions to its consolidated financial statements.

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CONCENTRATIONS AND ECONOMIC DEPENDENCE
6 Months Ended
Feb. 28, 2019
CONCENTRATIONS AND ECONOMIC DEPENDENCE [Text Block]

9. CONCENTRATIONS AND ECONOMIC DEPENDENCE

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

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

    Three Months Ended     Six Months Ended  
    February 28     February 28     February 28     February 28  
    2019     2018     2019     2018  
    $     $     $     $  
Play MPE®                        
                         
North America   345,556     306,222     800,780     744,361  
Europe   439,269     421,689     869,265     857,832  
Australasia   73,963     68,329     158,170     141,662  
Total Play MPE®   858,787     796,240     1,828,215     1,743,855  
                         
Clipstream ®                        
                         
North America   20,577     18,815     35,168     44,998  
Total revenue   879,364     815,055     1,863,383     1,788,853  

Revenue in the above table is based on location of the customer’s billing address. Some of these customers have distribution centers located around the globe and distribute around the world. During the six months ended February 28, 2019, the Company generated 41 % of total revenue from one customer [2018 - 43%].

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

As at February 28, 2019, two customers represented $191,289 (52%) of the trade receivables balance [August 31, 2018 – one customer represented $102,313 (25%)].

The Company has substantially all its assets in Canada and its current and planned future operations are, and will be, located in Canada.
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COMPARATIVE FIGURES
6 Months Ended
Feb. 28, 2019
COMPARATIVE FIGURES [Text Block]

10. 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.
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Summary of Significant Accounting Policies (Policies)
6 Months Ended
Feb. 28, 2019
Basis of presentation [Policy Text Block]

BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated interim financial statements have been prepared by management in accordance with accounting principles generally accepted in the United States for interim financial information pursuant to the rules and regulations of the United States Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by United States generally accepted accounting principles for annual financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six months ended February 28, 2019 are not necessarily indicative of the results that may be expected for the year ended August 31, 2019.

The balance sheet at August 31, 2018 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by United States generally accepted accounting principles for annual financial statements.

For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended August 31, 2018.
Recently Adopted Accounting Standards [Policy Text Block]

NEW ACCOUNTING PRONOUNCEMENTS

Recently Adopted Accounting Standards

ASU No. 2014-09 Revenue from Contracts with Customers

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). ASU 2014-09 provides a five-step analysis of transactions to determine when and how revenue is recognized. The premise of ASU 2014-09 is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company adopted this standard on September 1, 2018 using the modified retrospective method applied to open contracts at the date of transition. Under this approach, the Company is not required to restate the prior financial statements presented. The provisions under this ASU were applied to all contracts at the date of initial adoption.

In order to comply with the guidance, beginning on September 1, 2018, the Company amended its revenue recognition policy and performed estimates as outlined below. The adoption of ASU 2014-09 did not result in any adjustment to the Company’s consolidated balance sheet on the date of adoption. Refer to the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2018 for a description of the Company’s revenue recognition policy prior to September 1, 2018.
 
Revenue Recognition Policy

The Company’s revenue is derived from software as a service (SaaS) arrangements. The Company accounts for revenue in accordance with ASC 606, which the Company adopted on September 1, 2018 using the modified retrospective method.

The core principle of ASC 606 is to recognize revenue upon the transfer of products or services to customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those products or services. ASC 606 prescribes a five-step model for recognizing revenue from contracts with customers: (1) identify the contract(s) with customers; (2) identify the separate performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the separate performance obligations in the contract; and (5) recognize revenue when (or as) the performance obligations are satisfied.

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

Identification of the contract, or contracts, with the customer

The Company considers the terms and conditions of written contracts and its customary business practices in identifying its contracts under ASC 606. The Company determines that it has a contract with a customer when the contract is approved, the Company can identify each party’s rights regarding the services to be transferred, the Company can identify the payment terms for the services, the Company has determined that the customer has the ability and intent to pay, and the contract has commercial substance. In general, contract terms will be reflected in a written document that is signed by both parties.

Identification of the performance obligation in the contract

Performance obligations are promises in a contract to transfer distinct products or services to a customer, and is the unit of account under ASC 606. A contract’s transaction price is allocated to each distinct performance obligation and revenue is recognized when the performance obligation is satisfied. A product or service is a distinct performance obligation if the customer can both benefit from the product or service either on its own or together with other resources that are readily available to the customer, and it is separately identifiable from other items within the context of the contract. Performance obligations are satisfied by transferring control of the product or service to the customer. Control of the product or service is transferred either at a point in time or over time depending on the performance obligation.
 
To the extent a contract includes multiple promised services or products, the Company applies judgment to determine whether promised services or products are capable of being distinct and distinct in the context of the contract. If these criteria are not met, the promised services are accounted for as a combined performance obligation.

The Company generates revenue primarily from usage fees for the Company’s digital media distribution service. Usage fees are generally recognized as they are billed based on volume and size of distribution services provided in a given month. The Company’s other performance obligations include maintenance services, email and phone support, and unspecified software updates released when, and if, available. Under the guidance of ASC 606, the Company has concluded that maintenance services and unspecified software upgrades are not distinct in the context of the Company’s contracts because the Company’s service is considered a multi-tenant software environment, and these activities represent a single combined performance obligation in connection with the Company’s digital media distribution service, recognized at a point in time when the service is delivered to the customer.

Support activities are considered a separate performance obligation which is satisfied over time; however, such activities are performed substantially concurrently with the satisfaction of digital media distribution services.

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

Determination of the transaction price

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

Digital media distribution services may be subject to either fixed or variable pricing. Variable consideration is allocated entirely to distinct service periods when it can be tied to a single performance obligation. Variable consideration is estimated and included in the transaction price if, in the Company’s judgment, it is probable that there will not be a significant future reversal of cumulative revenue under the contract. When variable consideration is contingent and cannot be tied to a single performance obligation performed in a particular billing period, the Company estimates contingent variable consideration using the most likely method and recognizes consideration to the extent that the estimate for variable consideration is not constrained pursuant to the guidance provided in ASU 606.

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

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

If the contract contains a single combined performance obligation, the entire transaction price is allocated to the single combined performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on its standalone selling price (“SSP”) in relation to the total fair value of all performance obligations in the arrangement. The majority of the Company’s contracts contain two separate performance obligations that are performed concurrently. The Company allocates consideration to each performance obligation under the guidance of ASC 606 on a relative standalone selling price (SSP) basis. Where SSP is not directly observable, the Company determines the SSP using information that may include market conditions and other observable inputs.

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

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

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

The Company recognizes revenue when the services are delivered to its customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. The Company is principally responsible for the satisfaction of its distinct performance obligations, which are satisfied either at a point in time or over a period of time.

Performance obligations satisfied at a point in time

Media distribution services

Media distribution services comprise the majority of distinct performance obligations that are satisfied at a point in time, and revenue is recognized at the point in which the distribution service has been completed. Consideration for these services is typically billed in the same period that the service has been delivered to the customer.

Performance obligations satisfied over a period of time

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

Revenue from support activities is recognized over an estimated support period since this activity is considered a ‘stand-ready obligation’. This support period is substantially concurrent with the performance of media distribution services, as these services are performed substantially in conjunction with the related distribution. Any support activities provided outside of this billing period are not considered material.

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

Contract Costs

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

Customer acquisition costs are capitalized only if the costs are incrementally incurred to obtain a customer contract and may consist of sales commissions paid to sales personnel or third-party resellers. Generally, the Company does not incur any contract costs outside of the period that the related revenue is recognized.

Contract Modifications

Contract modifications may create new, or change existing, enforceable rights and obligations of the parties to the contract. We generally modify an existing contract using an addendum or signed change order. A contract modification is accounted for as a new contract if it reflects an increase in scope that is regarded as distinct from the original contract and is priced in-line with the standalone selling price for the related product or services obligated. If a contract modification is not considered a new contract, the modification is combined with the original contract and the impact on the revenue recognition profile depends on whether the remaining products and services are distinct from the original contract. If the remaining goods or services are distinct from those in the original contract, all remaining performance obligations will be accounted for on a prospective basis with unrecognized consideration allocated to the remaining performance obligations. If the remaining goods or services are not distinct, the modification will be treated as if it were a part of the existing contract, and the effect that the contract modification has on the transaction price, and on our measure of progress toward satisfaction of the performance obligations, is recognized as an adjustment to revenue (either as an increase in or a reduction of revenue) at the date of the contract modification on a cumulative catch-up basis.

ASU 2016-15 Statement of Cash Flows

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments ("ASU 2016-15"). ASU 2016-15 reduces the existing diversity in practice in financial reporting across all industries by clarifying certain existing principles in ASC 230, Statement of Cash Flows, ("ASC 230") including providing additional guidance on how and what an entity should consider in determining the classification of certain cash flows. In addition, in November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230), Restricted Cash ("ASU 2016-18"). ASU 2016-18 clarifies certain existing principles in ASC 230, including providing additional guidance related to transfers between cash and restricted cash and how entities present, in their statement of cash flows, the cash receipts and cash payments that directly affect the restricted cash accounts. This amendment was effective for the Company beginning on September 1, 2018. The adoption of ASU 2016-15 and ASU 2016-18 did not have any material effect on the Company’s consolidated financial statements.

Accounting Standards Not Yet Effective

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). The amendments in this update increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. ASU 2016-02 will be effective for the Company beginning on September 1, 2019. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.

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 guideline on reporting credit losses for assets held at amortized cost basis and available-for-sale debt securities. For assets held at amortized cost basis, Topic 326 eliminates the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected. For available-for-sale debt securities, credit losses should be measured in a manner similar to current GAAP, however Topic 326 will require that credit losses be presented as an allowance rather than as a write-down. ASU 2016-13 affects entities holding financial assets and net investment in leases that are not accounted for at fair value through net income. The amendments affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. The amendments in this ASU will be effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company is in the process of determining the effect the adoption of this standard will have on its consolidated financial statements.

In February 2018, the FASB issued ASU No. 2018-02, “Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income” (“ASU 2018-02”), which provides financial statement preparers with an option to reclassify stranded tax effects within accumulated other comprehensive income to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act (or portion thereof) is recorded. The amendments in this ASU are effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption of ASU 2018-02 is permitted, including adoption in any interim period for the public business entities for reporting periods for which financial statements have not yet been issued. The amendments in this ASU should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. The Company does not expect that the adoption of this guidance will have a material impact on its consolidated financial statements.

In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718), Improvements to Nonemployee Share-based Payments (“ASU 2018-07”). This ASU expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The effective date for the standard is for interim periods in fiscal years beginning after December 15, 2018, with early adoption permitted, but no earlier than the Company’s adoption date of Topic 606. The new guidance is required to be applied retrospectively with the cumulative effect recognized at the date of initial application. The Company will not early adopt this standard and is currently evaluating the effect ASU 2018-07 will have on the 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 updated guidance if effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted for any removed or modified disclosures. The Company is currently assessing the timing and impact of adopting the updated provisions to its consolidated financial statements.
XML 28 R18.htm IDEA: XBRL DOCUMENT v3.19.1
PROPERTY AND EQUIPMENT AND INTANGIBLES (Tables)
6 Months Ended
Feb. 28, 2019
Schedule of Property, Plant and Equipment [Table Text Block]
          Accumulated     Net book  
    Cost     amortization     value  
    $     $     $  
February 28, 2019                  
Property and equipment                  
Furniture and fixtures   133,525     105,067     28,458  
Computer hardware   227,763     194,053     33,710  
Computer software   264,446     204,211     60,235  
Leasehold improvements   161,352     90,881     70,471  
    787,086     594,212     192,874  
                   
                   
Intangibles                  
Patents, trademarks and lists   416,738     385,607     31,131  
 
          Accumulated     Net book  
    Cost     amortization     value  
August 31, 2018   $     $     $  
Property and equipment                  
Furniture and fixtures   134,130     102,822     31,308  
Computer hardware   226,679     189,724     36,955  
Computer software   213,684     203,420     10,264  
Leasehold improvements   162,754     81,008     81,746  
    737,247     576,974     160,273  
                   
Intangibles                  
Patents, trademarks and lists   412,072     370,600     41,472  
XML 29 R19.htm IDEA: XBRL DOCUMENT v3.19.1
STOCKHOLDERS EQUITY (Tables)
6 Months Ended
Feb. 28, 2019
Schedule of Stock Option Activity [Table Text Block]
                Weighted        
          Weighted     Average     Aggregate  
          Average     Remaining     Intrinsic  
          Exercise Price     Contractual     Value  
Options   Shares     $     Term     $  
Outstanding at August 31, 2018   1,631,250     0.39     3.49      
Granted                
Forfeited                
Expired   (87,500 )   0.40          
Outstanding at February 28, 2019   1,543,750     0.39     3.18      
Exercisable at February 28, 2019   1,279,167     0.39     3.12      
Schedule of Non-vested Stock Options Activity [Table Text Block]
          Weighted  
          Average  
          Grant Date  
    Number of Options     Fair Value  
          $  
Non-vested options at August 31, 2018   614,584     0.07  
Granted        
Forfeited        
Vested   (350,001 )   0.07  
Non-vested options at February 28, 2019   264,583     0.07  
Schedule of Stock-based Compensation Expense [Table Text Block]
    Three Months Ended     Six Months Ended  
    February 28     February 28     February 28     February 28  
    2019     2018     2019     2018  
    $     $     $     $  
Stock-based compensation:                        
         General and administrative   7,150     9,512     14,303     17,534  
         Sales and marketing   2,452     1,787     4,902     3,575  
         Research and development   2,452     3,580     4,902     7,160  
Total stock-based compensation   12,054     14,879     24,107     28,269  
XML 30 R20.htm IDEA: XBRL DOCUMENT v3.19.1
COMMITMENTS (Tables)
6 Months Ended
Feb. 28, 2019
Schedule of Sub-Lease Payments [Table Text Block]
    $  
       
2019   125,906  
2020   257,676  
2021   263,121  
2022   224,502  
XML 31 R21.htm IDEA: XBRL DOCUMENT v3.19.1
CONCENTRATIONS AND ECONOMIC DEPENDENCE (Tables)
6 Months Ended
Feb. 28, 2019
Schedule of Revenue by Customer [Table Text Block]
    Three Months Ended     Six Months Ended  
    February 28     February 28     February 28     February 28  
    2019     2018     2019     2018  
    $     $     $     $  
Play MPE®                        
                         
North America   345,556     306,222     800,780     744,361  
Europe   439,269     421,689     869,265     857,832  
Australasia   73,963     68,329     158,170     141,662  
Total Play MPE®   858,787     796,240     1,828,215     1,743,855  
                         
Clipstream ®                        
                         
North America   20,577     18,815     35,168     44,998  
Total revenue   879,364     815,055     1,863,383     1,788,853  
XML 32 R22.htm IDEA: XBRL DOCUMENT v3.19.1
SHORT TERM INVESTMENTS (Narrative) (Details)
6 Months Ended
Feb. 28, 2019
Minimum [Member]  
Investment Interest Rate 2.15%
Maximum [Member]  
Investment Interest Rate 2.50%
XML 33 R23.htm IDEA: XBRL DOCUMENT v3.19.1
PROPERTY AND EQUIPMENT AND INTANGIBLES (Narrative) (Details) - USD ($)
3 Months Ended 6 Months Ended
Feb. 28, 2019
Feb. 28, 2018
Feb. 28, 2019
Feb. 28, 2018
Depreciation and amortization $ 19,711 $ 25,490 $ 40,335 $ 51,187
XML 34 R24.htm IDEA: XBRL DOCUMENT v3.19.1
STOCKHOLDERS EQUITY (Narrative) (Details) - USD ($)
3 Months Ended 6 Months Ended
Feb. 28, 2019
Feb. 28, 2018
Feb. 28, 2019
Feb. 28, 2018
Aug. 31, 2018
Aug. 31, 2015
Common Stock, Shares Authorized 100,000,000   100,000,000   100,000,000  
Common Stock, Par or Stated Value Per Share $ 0.001   $ 0.001   $ 0.001  
Common stock reserved for issuance under stock option plan 1,459,431   1,459,431     7,750,000
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized $ 18,551   $ 18,551      
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition     6 months 26 days      
Stock based compensation 12,054 $ 14,879 $ 24,107 $ 28,269    
Defined Contribution Plan, Maximum Annual Contributions Per Employee, Percent     5.00%      
Defined Contribution Plan, Maximum Annual Contributions Per Director, Amount     $ 12,500      
Defined Contribution Plan, Maximum Annual Contributions for Directors, Amount     25,000      
Defined Contribution Plan, Maximum Annual Contributions Amount     400,000      
Employee Stock Ownership Plan (ESOP), Compensation Expense $ 22,650 $ 19,355 $ 33,333 $ 26,481    
Employee Stock Ownership Plan (ESOP), Weighted Average Purchase Price of Shares Purchased     $ 0.22 $ 0.24    
XML 35 R25.htm IDEA: XBRL DOCUMENT v3.19.1
COMMITMENTS (Narrative) (Details) - USD ($)
3 Months Ended 6 Months Ended 12 Months Ended
Feb. 28, 2019
Feb. 28, 2018
Feb. 28, 2019
Feb. 28, 2018
Aug. 31, 2018
Deferred leasehold inducement         $ 45,341
Operating Leases, Rent Expense, Net $ 61,550 $ 74,154 $ 123,133 $ 139,928  
XML 36 R26.htm IDEA: XBRL DOCUMENT v3.19.1
CONCENTRATIONS AND ECONOMIC DEPENDENCE (Narrative) (Details) - USD ($)
6 Months Ended 12 Months Ended
Feb. 28, 2019
Feb. 28, 2018
Aug. 31, 2018
Accounts receivable, net of allowance for doubtful accounts $ 369,001   $ 403,801
Revenue [Member]      
Concentration Risk, Percentage 41.00% 43.00%  
One customer [Member]      
Accounts receivable, net of allowance for doubtful accounts     $ 102,313
Two customers [Member]      
Accounts receivable, net of allowance for doubtful accounts $ 191,289    
Trade receivables [Member]      
Concentration Risk, Percentage 52.00%   25.00%
XML 37 R27.htm IDEA: XBRL DOCUMENT v3.19.1
Schedule of Property, Plant and Equipment (Details) - USD ($)
Feb. 28, 2019
Aug. 31, 2018
Property and equipment, Cost $ 787,086 $ 737,247
Property and equipment, Accumulated amortization 594,212 576,974
Property and equipment, Net book value 192,874 160,273
Furniture and fixtures [Member]    
Property and equipment, Cost 133,525 134,130
Property and equipment, Accumulated amortization 105,067 102,822
Property and equipment, Net book value 28,458 31,308
Computer hardware [Member]    
Property and equipment, Cost 227,763 226,679
Property and equipment, Accumulated amortization 194,053 189,724
Property and equipment, Net book value 33,710 36,955
Computer software [Member]    
Property and equipment, Cost 264,446 213,684
Property and equipment, Accumulated amortization 204,211 203,420
Property and equipment, Net book value 60,235 10,264
Leasehold improvement [Member]    
Property and equipment, Cost 161,352 162,754
Property and equipment, Accumulated amortization 90,881 81,008
Property and equipment, Net book value 70,471 81,746
Patents, trademarks and lists [Member]    
Intangibles, Cost 416,738 412,072
Intangibles, Accumulated amortization 385,607 370,600
Intangibles, Net book value $ 31,131 $ 41,472
XML 38 R28.htm IDEA: XBRL DOCUMENT v3.19.1
Schedule of Stock Option Activity (Details) - USD ($)
6 Months Ended 12 Months Ended
Feb. 28, 2019
Aug. 31, 2018
Shares    
Outstanding Balance 1,631,250  
Granted 0  
Forfeited 0  
Expired (87,500)  
Outstanding Balance 1,543,750 1,631,250
Exercisable 1,279,167  
Weighted Average Exercise Price    
Outstanding Balance $ 0.39  
Granted 0.00  
Forfeited 0.00  
Expired 0.40  
Outstanding Balance 0.39 $ 0.39
Exercisable $ 0.39  
Weighted Average Remaining Contractual Term    
Weighted Average Remaining Contractual Term Outstanding Balance 3 years 2 months 5 days 3 years 5 months 27 days
Weighted Average Remaining Contractual Term Exercisable 3 years 1 month 13 days  
Aggregate Intrinsic Value    
Outstanding Balance $ 0  
Forfeited 0  
Expired 0  
Outstanding Balance 0 $ 0
Exercisable $ 0  
XML 39 R29.htm IDEA: XBRL DOCUMENT v3.19.1
Schedule of Non-vested Stock Options Activity (Details)
6 Months Ended
Feb. 28, 2019
$ / shares
shares
Outstanding Balance | shares 614,584
Weighted Average Grant Date Fair Value | $ / shares $ 0.07
Granted | shares 0
Options Weighted Average Grant Date Fair Value | $ / shares $ 0.00
Forfeited | shares 0
Options, Nonvested Options Forfeited, Weighted Average Grant Date Fair Value | $ / shares $ 0.00
Vested | shares (350,001)
Vested, Weighted Average Grant Date Fair Value | $ / shares $ 0.07
Outstanding Balance | shares 264,583
Weighted Average Grant Date Fair Value | $ / shares $ 0.07
XML 40 R30.htm IDEA: XBRL DOCUMENT v3.19.1
Schedule of Stock-based Compensation Expense (Details) - USD ($)
3 Months Ended 6 Months Ended
Feb. 28, 2019
Feb. 28, 2018
Feb. 28, 2019
Feb. 28, 2018
General and administrative $ 7,150 $ 9,512 $ 14,303 $ 17,534
Sales and marketing 2,452 1,787 4,902 3,575
Research and development 2,452 3,580 4,902 7,160
Total stock-based compensation $ 12,054 $ 14,879 $ 24,107 $ 28,269
XML 41 R31.htm IDEA: XBRL DOCUMENT v3.19.1
Schedule of Sub-Lease Payments (Details)
Feb. 28, 2019
USD ($)
2019 $ 125,906
2020 257,676
2021 263,121
2022 $ 224,502
XML 42 R32.htm IDEA: XBRL DOCUMENT v3.19.1
Schedule of Revenue by Customer (Details) - USD ($)
3 Months Ended 6 Months Ended
Feb. 28, 2019
Feb. 28, 2018
Feb. 28, 2019
Feb. 28, 2018
Revenue $ 879,364 $ 815,055 $ 1,863,383 $ 1,788,853
Play MPE [Member]        
Revenue 858,787 796,240 1,828,215 1,743,855
Play MPE [Member] | North America [Member]        
Revenue 345,556 306,222 800,780 744,361
Play MPE [Member] | Europe [Member]        
Revenue 439,269 421,689 869,265 857,832
Play MPE [Member] | Australia [Member]        
Revenue 73,963 68,329 158,170 141,662
Clipstream [Member] | North America [Member]        
Revenue $ 20,577 $ 18,815 $ 35,168 $ 44,998
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