UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
(X)QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended November 30, 2000
OR
( ) 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: 0-028259
DESTINY MEDIA TECHNOLOGIES INC.
-------------------------------
(Exact name of registrant as specified in its charter)
Colorado 84-1516745
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(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
555 West Hastings Street, Suite 950, Vancouver, British Columbia Canada V6B 4N4
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(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (604) 609-7736
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 since May 16, 1992 and (2) has been subject to the above filing
requirements for the past 90 days.
Yes X No __
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APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes ___ No ___
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of November 30, 2000. Common Stock, no par value 24,651,000
Shares. ----------
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS.
Attached hereto and incorporated herein by reference.
Interim Consolidated Financial Statements of
DESTINY MEDIA TECHNOLOGIES INC.
(A Development Stage Company)
(Expressed in U.S. Dollars)
November 30, 2000
<PAGE>
<TABLE>
<CAPTION>
DESTINY MEDIA TECHNOLOGIES INC.
(A Development Stage Company)
Interim Consolidated Balance Sheet
(Expressed in U.S. Dollars)
November 30, August 31,
2000 2000
--------------- ----------------
(unaudited)
<S> <C> <C>
Assets
Current asset:
Cash and cash equivalents $ 135,060 $ 97,928
Short-term investments 6,775 7,070
Accounts receivable 21,009 83,495
Prepaids 14,191 24,071
--------------- ---------------
Total current assets 177,035 212,564
Notes receivable 111,133 111,133
Property and equipment, net 114,486 136,233
Intellectual property, net 78,446 98,057
Goodwill, net 137,629 172,036
Other assets, net 7,045 1,392
--------------- ---------------
$ 625,774 $ 731,415
=============== ===============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 176,919 $ 162,400
Related party payable 126,001 101,422
--------------- ---------------
302,920 263,822
Long-term debt 186,803 194,590
Stockholders' equity:
Common stock, authorized 100,000,000 shares, with a par value of $0.001 per
share; with 24,651,000 shares issued
and outstanding (August 31, 2000 - 22,501,000 shares) 24,651 22,501
Additional paid-in capital 2,240,369 1,986,553
Deferred stock compensation (91,417) (87,550)
Deficit accumulated during the development stage (2,023,078) (1,640,229)
Cumulative translation adjustment (14,474) (8,272)
---------------- ----------------
Total stockholders' equity 136,051 273,003
--------------- ---------------
$ 625,774 $ 731,415
=============== ===============
</TABLE>
See accompanying notes to interim consolidated financial statements.
1
<PAGE>
<TABLE>
<CAPTION>
DESTINY MEDIA TECHNOLOGIES INC.
(A Development Stage Company)
Interim Consolidated Statements of Operations
(Expressed in U.S. Dollars)
(Unaudited)
Period from
August 24, 1998
Three months ended Three months ended (inception)
November 30, November 30, to November 30,
2000 1999 2000
------------------ ----------------- --------------
<S> <C> <C> <C>
Sales $ 39,118 $ - $ 124,662
Operating expenses:
Advertising and promotion 2,275 504 157,785
Depreciation and amortization 63,022 2,617 260,390
Bad debt expense 4,330 - 5,044
Bank charges and interest 641 938 5,452
Consulting 11,353 681 53,367
Filings and listings 3,325 - 24,316
Financing 4,495 13,198 8,092
Foreign exchange gain (10,254) - (10,254)
In-process research and development - 33,846 33,846
Management fees 991 13,159 46,020
Marketing 1,849 13,896 185,598
Meals and entertainment 1,859 275 7,989
Office and miscellaneous 3,358 1,096 38,383
Professional fees 55,431 3,613 182,048
Rent 29,391 4,559 98,530
Repairs and maintenance 1,644 204 5,173
Research and development 11 - 8,995
Shareholder relations and transfer agent 14,233 194 138,788
Stock-based compensation 39,599 - 60,945
Subcontracts 10,271 - 80,597
Trademark - 1,456 5,751
Telephone and telecommunications 17,864 3,252 62,601
Travel 14,050 133 68,390
Wages and benefits 155,435 29,299 637,954
----------- ------------ -----------
425,173 122,920 2,165,800
Interest and other income 3,206 1,078 18,060
----------- ------------ -----------
Loss for the period $ (382,849) $ (121,842) $(2,023,078)
=========== ============ ============
Net loss per common share, basic and diluted $ (0.02) $ (0.01) $ (0.12)
============ ============= =============
Weighted average common shares
outstanding, basic and diluted 23,038,912 19,128,264 17,192,455
=========== ============ ===========
</TABLE>
See accompanying notes to interim consolidated financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
DESTINY MEDIA TECHNOLOGIES INC.
(A Development Stage Company)
Interim Consolidated Statement of Stockholders' Equity
(Expressed in U.S. Dollars)
Three months ended November 30, 2000
Period from August 24, 1998 (inception) to November 30, 2000
(Unaudited)
Deficit
accumulated
Common stock Other Deferred during Cumulative Total
-------------------- paid-In stock development translation stockholders'
Shares Amount capital compensation stage adjustment equity
--------- ------ ----------- ------------ ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, August 24, 1998 - $ - $ - $ - $ - $ - $ -
Common stock issued for cash 17,850,000 17,850 41,650 - - - 59,500
Net loss - - - - (59,500) - (59,500)
--------- ------- ----------- ----------- ------------ ---------- ------------
Balance, August 31, 1999 17,850,000 17,850 41,650 - (59,500) - -
Net loss - - - - (1,580,729) - (1,580,729)
Cumulative translation adjustment - - - - - (8,272) (8,272)
------------
Comprehensive loss (1,589,001)
Common stock issued for cash
on private placement 1,000,000 1,000 999,000 - - - 1,000,000
Common stock issued for cash 247,485 247 79,752 - - - 79,999
Common stock issued on
acquisition 1,800,000 1,800 (1,200) - - - 600
Common stock issued for
retirement of debt 1,490,724 1,491 592,745 - - - 594,236
Common stock issued for
services rendered 112,791 113 54,577 - - - 54,690
Deferred stock compensation - - 108,896 (108,896) - - -
Amortization of deferred stock
compensation - - - 21,346 - - 21,346
Return of profit from shareholder
from short-swing profit - - 111,133 - - - 111,133
--------- ------- ----------- ----------- ----------- ---------- -----------
Balance, August 31, 2000 22,501,000 22,501 1,986,553 (87,550) (1,640,229) (8,272) 273,003
Net loss - - - - (382,849) - (382,849)
Cumulative translation
adjustment - - - - - (6,202) (6,202)
-----------
Comprehensive loss (389,051)
Common stock issuable for
services rendered - - 4,000 - - - 4,000
Common stock issued for cash
on private placement(note 4) 2,150,000 2,150 206,350 - - - 208,500
Deferred stock compensation - - 73,500 (73,500) - - -
Adjustment to deferred stock
compensation due to
cancellation - - (30,034) 30,034 - - -
Amortization of deferred stock
compensation - - - 39,599 - - 39,599
--------- ------- ----------- ----------- ----------- ---------- -----------
Balance, November 30, 2000
(Unaudited) 24,651,000 $24,651 $ 2,240,369 $ (91,417) $(2,023,078) $ (14,474) $ 136,051
=========== ======= =========== =========== =========== ========== ===========
</TABLE>
See accompanying notes to interim consolidated financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
DESTINY MEDIA TECHNOLOGIES INC.
(A Development Stage Company)
Interim Consolidated Statement of Cash Flows
(Expressed in U.S. Dollars)
(Unaudited)
Period from
August 24, 1998
Three months ended Three months ended (inception)
November 30, November 30, to November 30,
2000 1999 2000
------------------ ----------------- --------------
<S> <C> <C> <C>
Cash flows from operating activities:
Operations:
Loss for the period $ (382,849) $ (121,842) $(2,023,078)
Items not involving cash:
Depreciation and amortization 63,022 2,617 260,390
Stock-based compensation 39,599 - 60,945
Stock issued for services rendered 4,000 - 58,690
Write-off of acquired research and development - 33,846 33,846
Changes in operating asset and liabilities:
Accounts receivable 59,118 7,525 (23,819)
Prepaid expenses 8,954 (8,182) (6,918)
Accounts payable 18,914 (2,850) 163,977
----------- ---------- -----------
Net cash used in operating activities (189,242) (88,886) (1,475,967)
----------- ---------- -----------
Cash flows from investing activities:
Short-term investments - - (29,770)
Cash acquired on acquisition - 250,719 250,719
Investment in mineral properties - - (17,500)
Proceeds on disposal of mineral properties and
marketable securities to related party - - 40,200
Long-term receivable from related party - - (494,236)
Purchase of other assets (5,726) - (7,118)
Purchase of property and equipment (4,171) (8,489) (83,639)
Sale of property and equipment 11,267 (8,489) 11,267
----------- ---------- -----------
Net cash provided by investing activities 1,370 242,230 (330,077)
----------- ---------- -----------
Cash flows from financing activities:
Net proceeds from debt 336 19,282 595,957
Related party payable 24,638 (47,883) 24,638
Net proceeds from issuances of
common stock and subscriptions 208,500 149,662 1,347,999
----------- ---------- -----------
Net cash provided by financing activities 233,474 121,061 1,968,594
----------- ---------- -----------
Net increase in cash and cash equivalents during
the period 45,602 274,405 162,550
Effect of foreign exchange rate changes on cash (8,470) 6,479 (27,490)
Cash and cash equivalents at beginning of period 97,928 - -
----------- ---------- -----------
Cash and cash equivalents at end of period $ 135,060 $ 280,884 $ 135,060
=========== ========== ===========
Supplementary disclosure:
Non-cash transactions:
Stock issued to acquire Destiny
Software Productions Inc., net of cash
acquired $ - $ (250,119) $ (250,119)
Stock issued for retirement of debt - 619,263 619,263
Stock issued for services rendered 4,000 - 58,690
Deferred stock-based compensation 43,466 - 152,362
Note receivable for return of profit from
shareholder from short-swing profit - - 111,133
=========== ========== ===========
</TABLE>
See accompanying notes to interim consolidated financial statements.
4
<PAGE>
DESTINY MEDIA TECHNOLOGIES INC.
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited)
Three months ended November 30, 2000
--------------------------------------------------------------------------------
1. Organization:
Destiny Media Technologies Inc. (the "Company") was incorporated on August
24, 1998 as Euro Industries Ltd. under the laws of the State of Colorado.
On October 12, 1999, the Company's name was changed to Destiny Media
Technologies Inc. The Company develops enabling 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.
2. Continuing operations:
From inception of the business, the Company has incurred cumulative losses
of $2,023,078 and used cash for operating activities of $1,475,967. As a
result, substantial doubt exists about its ability to continue as a going
concern.
These financial statements have been prepared on the going concern basis
under which an entity is considered to be able to realize its assets and
satisfy its liabilities in the ordinary course of business. Operations to
date have been primarily financed by long-term debt and equity
transactions. Although, the Company has raised cash through the issuance of
common shares during the first quarter (note 4), these proceeds are not
sufficient to meet anticipated costs for the remainder of fiscal 2001. As a
result, the Company's future operations are dependent upon the
identification and successful completion of additional long-term or
permanent equity financing, the continued support of creditors and
shareholders, and, ultimately, the achievement of profitable operations.
There can be no assurances that the Company will be successful. If it is
not, the Company will be required to reduce operations or liquidate assets.
The consolidated financial statements do not include any adjustments
relating to the recoverability of assets and classification of assets and
liabilities that might be necessary should the Company be unable to
continue as a going concern.
3. Unaudited interim financial information:
The financial information at November 30, 2000 and for the three month
periods ended November 30, 2000 and 1999 is unaudited.
The accompanying unaudited consolidated financial statements are prepared
in accordance with United States generally accepted accounting principles
but do not include all information and footnotes required by United States
generally accepted accounting principles for annual financial statements.
However, in the opinion of management, all adjustments (which consist only
of normal recurring adjustments) necessary for a fair presentation of the
results of operations for the relevant periods have been made. Results for
the interim periods are not necessarily indicative of the results to be
expected for the year or for any other period. These financial statements
should be read in conjunction with the summary of accounting policies and
the notes to the consolidated financial statements for the fiscal year
ended August 31, 2000.
5
<PAGE>
DESTINY MEDIA TECHNOLOGIES INC.
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited)
Three months ended November 30, 2000
--------------------------------------------------------------------------------
4. Private placement equity financings:
(a) On October 27, 2000, the Company issued 500,000 common shares to an
unrelated individual at a price of $0.10 per share for total proceeds
of $50,000.
(b) On October 27, 2000, the Company issued 550,000 common shares to
unrelated individuals at a price of $0.10 per share for total proceeds
of $55,000.
(c) On November 14, 2000, the Company issued 600,000 common shares to an
unrelated company at a price of $0.10 per share for total proceeds of
$60,000.
(d) On November 27, 2000, the Company issued 500,000 common shares to an
unrelated company at a price of $0.10 per share for total proceeds of
$50,000.
Total costs related to the private placements approximate $6,500.
6
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following information contains certain forward-looking statements that
anticipate future trends or events. These statements are based on certain
assumptions that may prove to be erroneous and are subject to certain risks
including but not limited to the risks of increased competition in the Company's
industry and other risks detailed in the Company's Securities and Exchange
Commission filings. Accordingly, actual results may differ, possibly materially,
from the predictions contained herein.
During the three months ended November 30, 2000, the Company experienced a net
loss of $382,849 as compared to a net loss of $121,842 for the three months
ended November 30, 1999. The increase was due to a significant expansion of
operations which began in the first quarter of Fiscal 2000 and continued through
the end of Fiscal 2000 which ended on August 31, 2000. During the first quarter
of Fiscal 2001, ended November 30, 2000, the Company reduced its staff and
raised additional capital in the amount of $208,500 in an effort to both reduce
expenses and provide additional working capital.
RESULTS OF OPERATIONS:
Reference is made to Item 2, "Management's Discussion and Analysis or Plan of
Operation" included in the Company's annual report on Form 10-KSB for the year
ended August 31, 2000, on file with the Securities and Exchange Commission. The
following discussion and analysis pertains to the Company's results of
operations for the three-month month period ended November 30, 2000, compared to
the results of operations for the three-month period ended November 30, 1999.
THREE MONTHS ENDED November 30, 2000 and 1999:
For the quarter ending November 30, 2000 sales were $39,118 as compared to nil
for the same quarter of the previous year. The modest sales were a result of the
fact that the Company was engaged primarily in research and development of its
software products relating to internet audio applications until the end of the
latest fiscal year which ended on August 31, 2000. Since that time, the Company
has shifted its emphasis to a marketing campaign for these products, although
research and development work also continues.
Operating expenses for the Company were $425,173 for the first quarter up from
$122,920 for the first quarter of last year. Because of the Company's expansion
in operations, increases occurred in almost every category of operating
expenses. The most significant expenses occurred in the categories of wages and
benefits ($155,435); amortization ($63,022); consulting ($11,353); professional
fees ($55,431); rent ($29,391); shareholder relations and transfer agent
($14,233); stock-based compensation ($39,599); subcontracting ($10,271);
telephone and telecommunications ($17,864); and, travel ($14,050) .
The net loss for the quarter was $382,849 which represents a substantial
increase over the first quarter of last year when the net loss was $121,842. The
increase in the net loss was due to significant increases in all categories of
operating expenses over the prior period which resulted from the expansion of
operations described in the preceding paragraph.
The loss per common share (basic and diluted) was $0.02 for the three months
ended November 30, 2000 compared to $0.01 for the three months ended November
30, 1999.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has financed its cash flow requirements through cash
flows generated from financing activities. Cash provided by financing activities
which occurred during the three months ended November 30, 2000 was $233,474.This
resulted in a net increase in cash and cash equivalents of $45,602 at the end of
the three month period. The negative effect of foreign exchange rate changes on
cash of $8,470 during the three month period resulted in a cash and cash
equivalent position of $135,060 at the end of the period.
As of November 30, 2000 the Company had a negative working capital position of
$125,885. At August 31, 2000 the Company had a negative working capital
position of $51,258. The increase in the negative working capital position of
the Company was due to a decrease of $35,529 in current assets (represented
primarily by a decrease of $62,486 in accounts receivable and a decrease of
$9,880 in prepaids) and an increase in current liabilities of $39,098.
The Company has no external sources of liquidity in the form of credit lines
from banks.
Management believes that its available cash and receivables will be sufficient
to fund the Company's working capital requirements through May 31, 2001 and that
additional capital will have to be raised either through equity financings or
the assumption of debt at that time. As yet, no investment banking agreements
have been reached and there is no guarantee that the Company will be able to
raise the capital necessary to continue its operations after May 31, 2001.
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISKS:
The Company does not have any derivative financial instruments as of November
30, 2000. However, the Company is exposed to interest rate risk.
The Company's interest income and expense are most sensitive to changes in the
general level of U.S. and Canadian interest rates. In this regard, changes in
U.S. and Canadian interest rates affect the interest earned on the Company's
cash equivalents as well as interest paid on debt.
FOREIGN CURRENCY RISK
The Company operates primarily in Canada. The Company's business and financial
condition is, therefore, sensitive to currency exchange rates or any other
restrictions imposed on its currency.
Part II - OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2. Changes in Securities - None
Item 3. Default Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Securities Holders - None
Item 5. Other Information - None
Item 6.(a) None
Item 6.(b) Reports on Form 8-K - None
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.
(Registrant)
Dated: January 19, 2001 /s/ Steve Vestergaard, President and Director
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