NOTES TO CONDENSED
CONSOLIDATED INTERIM FINANCIAL STATEMENTS
May 31, 2019
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 Companys stock is listed for trading under the symbol
DSNY on the OTCQB U.S. in the United States, under the symbol DSY on the TSX
Venture Exchange and under the symbol DME on the Berlin, Frankfurt, Xetra and
Stuttgart exchanges in Germany.
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
nine months ended May 31, 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
May 31, 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
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
May 31, 2019
|
|
|
|
|
|
|
|
|
|
Property and equipment
|
|
|
|
|
|
|
|
|
|
Furniture and fixtures
|
|
129,921
|
|
|
103,768
|
|
|
26,153
|
|
Computer hardware
|
|
222,857
|
|
|
191,793
|
|
|
31,064
|
|
Computer software
|
|
283,819
|
|
|
207,760
|
|
|
76,059
|
|
Leasehold
improvements
|
|
156,996
|
|
|
93,571
|
|
|
63,425
|
|
|
|
793,593
|
|
|
596,892
|
|
|
196,701
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangibles
|
|
|
|
|
|
|
|
|
|
Patents,
trademarks and lists
|
|
409,870
|
|
|
382,917
|
|
|
26,953
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 nine months
ended May 31, 2019 was $26,764 and $67,099, respectively (2018: $27,988 and
$79,175, respectively)
2
Destiny Media Technologies Inc.
NOTES TO CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS
May 31, 2019
[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 nine months ended May 31, 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 1,536,515 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 May 31,
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
|
|
(33,334
|
)
|
|
0.40
|
|
|
|
|
|
|
|
Expired
|
|
(131,250
|
)
|
|
0.40
|
|
|
|
|
|
|
|
Outstanding at May 31, 2019
|
|
1,466,666
|
|
|
0.39
|
|
|
3.01
|
|
|
|
|
Exercisable at
May 31, 2019
|
|
1,385,416
|
|
|
0.39
|
|
|
2.99
|
|
|
|
|
The aggregate intrinsic value is calculated as the difference
between the exercise price of the underlying awards and the quoted price of the
Companys common stock for the options that were in-the-money at May 31,
2019.
3
Destiny Media Technologies Inc.
NOTES TO CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS
May 31, 2019
5
.
|
STOCKHOLDERS EQUITY
(contd.)
|
The following table summarizes information regarding the
non-vested stock purchase options outstanding as of May 31, 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
|
|
(33,334
|
)
|
|
0.07
|
|
Vested
|
|
(500,000
|
)
|
|
0.07
|
|
Non-vested options at May 31, 2019
|
|
81,250
|
|
|
0.07
|
|
As of May 31, 2019, there was $5,934 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 0.59 years.
During the three and nine months ended May 31, 2019, the total
stock-based compensation expense of $10,363 and $34,470, respectively (2018:
$13,611 and $41,880 respectively) is reported in the statement of comprehensive
income as follows:
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
May 31
|
|
|
May 31
|
|
|
May 31
|
|
|
May 31
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Stock-based compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
6,983
|
|
|
8,243
|
|
|
21,285
|
|
|
25,777
|
|
Sales and marketing
|
|
1,690
|
|
|
1,788
|
|
|
6,593
|
|
|
5,363
|
|
Research and development
|
|
1,690
|
|
|
3,580
|
|
|
6,592
|
|
|
10,740
|
|
Total
stock-based compensation
|
|
10,363
|
|
|
13,611
|
|
|
34,470
|
|
|
41,880
|
|
Subsequent to May 31, 2019 the Company issued 50,000 stock
purchase options exercisable at $0.21 per share, and 100,000 stock purchase
options exercisable at $0.35 per share, each for a period of five years from the
date of issuance. In addition, subsequent to May 31, 2019, the Company repriced
50,000 stock purchase options exercisable at $0.40 to $0.21 and 100,000 stock
purchase options exercisable at $0.40 to $0.35.
4
Destiny Media Technologies Inc.
NOTES TO CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS
May 31, 2019
5
.
|
STOCKHOLDERS EQUITY
(contd.)
|
[c] Employee Stock Purchase Plan
The Companys 2011 Employee Stock Purchase Plan (the Plan)
became effective on February 22,2011. Under the Plan, employees of 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 nine months ended May 31, 2019, the
Company recognized compensation expense of $20,324 and $53,657, respectively
(2018: $26,545 and $53,026, respectively) in salaries and wages on the
consolidated statement of comprehensive income in respect of the Plan,
representing the Companys employee matching of cash contributions to the Plan.
The shares were purchased on the open market at an average price of $0.23 (2018:
$0.24) . The shares are held in trust by the Company for a period of one year
from the date of purchase.
The Company entered into a new lease agreement commencing July
1, 2017 and expiring June 30, 2022 for the same premise consisting of
approximately 6,618 square feet. The Company has fiscal year payments committed
as follows:
|
$
|
|
|
2019
|
61,865
|
2020
|
250,720
|
2021
|
256,018
|
2022
|
218,442
|
During the year ended August 31, 2018, the Company became
entitled to a leasehold improvement allowance from its landlord in the amount of
$42,788, 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 nine months ended May 31, 2019 the Company
incurred rent expense of $60,507 and $183,640, respectively (2018 - $54,834 and
$194,762, 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 nine months ended May 31, 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
May 31, 2019
The Company is subject to claims and legal proceedings that
arise in the ordinary course of business. Such matters are inherently uncertain,
and there can be no guarantee that the outcome of any such matter will be
decided favorably to the Company or that the resolution of any such matter will
not have a material adverse effect upon the Companys financial statements. 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 Companys former President and Chief
Executive Officer filed a Notice of Civil Claim in the Supreme Court of British
Columbia against the Company, its subsidiaries, independent directors and
current Chief Executive Officer, claiming damages for conspiracy, breach of
contract, wrongful dismissal, defamation and aggravated and punitive damages.
The Company believes the claims are without merit and 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 Companys consolidated balance sheet on the date of adoption. Refer to
the Companys Annual Report on Form 10-K for the fiscal year ended August 31,
2018 for a description of the Companys revenue recognition policy prior to
September 1, 2018.
6
Destiny Media Technologies Inc.
NOTES TO
CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
May 31, 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 Companys revenue is derived from software as a service
(SaaS) arrangements. The Company accounts for revenue in accordance with ASC
606, which the Company adopted on September 1, 2018 using the modified
retrospective method.
The core principle of ASC 606 is to recognize revenue upon the
transfer of products or services to customers in an amount that reflects the
consideration the Company expects to be entitled to in exchange for those
products or services. ASC 606 prescribes a five-step model for recognizing
revenue from contracts with customers: (1) identify the contract(s) with
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 partys rights
regarding the services to be transferred, the Company can identify the payment
terms for the services, the Company has determined that the customer has the
ability and intent to pay, and the contract has commercial substance. 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 contracts transaction price is allocated to each distinct
performance obligation and revenue is recognized when the performance obligation
is satisfied. A product or service is a distinct performance obligation if the
customer can both benefit from the product or service either on its own or
together with other resources that are readily available to the customer, and it
is separately identifiable from other items within the context of the contract.
Performance obligations are satisfied by transferring control of the product or
service to the customer. Control of the product or service is transferred either
at a point in time or over time depending on the performance obligation.
7
Destiny Media Technologies Inc.
NOTES TO CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS
May 31, 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
Companys digital media distribution service. Usage fees are generally
recognized as they are billed based on volume and size of distribution services
provided in a given month. The Companys other performance obligations include
maintenance services, email and phone support, and unspecified software updates
released when, and if, available. Under the guidance of ASC 606, the Company has
concluded that maintenance services and unspecified software upgrades are not
distinct in the context of the Companys contracts because the Companys service
is considered a multi-tenant software environment, and these activities
represent a single combined performance obligation in connection with the
Companys digital media distribution service, recognized at a point in time when
the service is delivered to the customer.
Support activities are considered a separate performance
obligation which is satisfied over time; however, such activities are performed
substantially concurrently with the satisfaction of digital media distribution
services.
From time to time, certain of the Companys 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
May 31, 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 Companys judgment, it is probable that there will not be a significant
future reversal of cumulative revenue under the contract. When variable
consideration is contingent and cannot be tied to a single performance
obligation performed in a particular billing period, the Company estimates
contingent variable consideration using the most likely method and recognizes
consideration to the extent that the estimate for variable consideration is not
constrained pursuant to the guidance provided in ASU 606.
A significant financing component generally does not exist
under the Companys standard contracting and billing practices.
Allocation of the transaction price to the performance
obligations in the contract
If the contract contains a single combined performance
obligation, the entire transaction price is allocated to the single combined
performance obligation. Contracts that contain multiple performance obligations
require an allocation of the transaction price to each performance obligation
based on its standalone selling price (SSP) in relation to the total fair
value of all performance obligations in the arrangement. The majority of the
Companys contracts contain two separate performance obligations that are
performed concurrently. The Company allocates consideration to each performance
obligation under the guidance of ASC 606 on a relative standalone selling price
(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
May 31, 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
May 31, 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 Companys consolidated financial statements.
11
Destiny Media Technologies Inc.
NOTES TO CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS
May 31, 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
InstrumentsCredit Losses (Topic 326): Measurement of Credit Losses on Financial
Instruments (ASU 2016-13). Financial InstrumentsCredit 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
StatementReporting Comprehensive Income (Topic 220): Reclassification of
Certain Tax Effects from Accumulated Other Comprehensive Income (ASU
2018-02), which provides financial statement preparers with an option to
reclassify stranded tax effects within accumulated other comprehensive income to
retained earnings in each period in which the effect of the change in the U.S.
federal corporate income tax rate in the Tax Cuts and Jobs Act (or portion
thereof) is recorded. The amendments in this ASU 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
May 31, 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
Companys 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
May 31, 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
|
|
|
Nine months Ended
|
|
|
|
May 31
|
|
|
May 31
|
|
|
May 31
|
|
|
May 31
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Play MPE®
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
432,427
|
|
|
388,698
|
|
|
1,233,207
|
|
|
1,133,059
|
|
Europe
|
|
457,358
|
|
|
446,992
|
|
|
1,326,623
|
|
|
1,304,824
|
|
Australasia
|
|
73,419
|
|
|
73,920
|
|
|
231,589
|
|
|
215,582
|
|
Total Play MPE®
|
|
963,204
|
|
|
909,610
|
|
|
2,791,419
|
|
|
2,653,465
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Clipstream ®
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
7,231
|
|
|
11,995
|
|
|
42,399
|
|
|
56,993
|
|
Total revenue
|
|
970,435
|
|
|
921,605
|
|
|
2,833,818
|
|
|
2,710,458
|
|
Revenue in the above table is based on location of the
customers billing address. Some of these customers have distribution centers
located around the globe and distribute around the world. During the nine months
ended May 31, 2019, the Company generated 41% of total revenue from one customer
[2018 - 43%].
It is in managements opinion that the Company is not exposed
to significant credit risk.
As at May 31, 2019, two customers represented $178,100 (51%) 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.
Certain comparative figures have been reclassified to conform
to the current period's presentation. These reclassifications did not affect
prior periods' net earnings.
14