<PAGE>

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

(Mark  One)
[X]     Annual Report Pursuant To Section 13 Or 15(D) Of The Securities Exchange
        Act  Of  1934

        For  the  fiscal  year  ended  August  31,  2002

[  ]    Transition  Report Under Section 13 Or 15(D) Of The Securities Exchange
        Act  Of  1934

        For  the  transition  period  from  _____  to  _____

COMMISSION  FILE  NUMBER  000-28259


                         DESTINY MEDIA TECHNOLOGIES INC.
                         -------------------------------
                 (Name of small business issuer in its charter)


COLORADO                                     84-1516745
----------------------------------           ------------------
(State  or other jurisdiction                (I.R.S. Employer
of incorporation or organization)            Identification No.)


1055  West  Hastings  Street,  Suite  1040
Vancouver,  British  Columbia,  Canada        V6E  2E9
--------------------------------------------  -----------
(Address  of  principal  executive  offices)  (Zip  Code)


604-609-7736
---------------------------
Issuer's  telephone  number


Securities registered under Section 12(b) of the Exchange Act:  NOT APPLIABLE
                                                                -------------
Securities registered under Section 12(g) of the Exchange Act:  COMMON STOCK,
                                                                -------------
                                                                PAR VALUE $0.001
                                                                ----------------
                                                                PER SHARE
                                                                ---------

Check  whether  the issuer (1) filed all reports required to be filed by Section
13  or  15(d) of the Exchange Act during the past 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. Yes [X] No [ ]

Check  if there is no disclosure of delinquent filers in response to Item 405 of
Regulation  S-B  is  not  contained  in  this  form,  and  no disclosure will be
contained,  to  the  best  of  registrant's  knowledge,  in  definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or  any  amendment  to  this  Form  10-KSB.  [  ]

State  issuer's  revenues  for  its  most  recent  fiscal  year:  $769,326
                                                                  --------

State the aggregate market value of the voting and non-voting common equity held
by  non-affiliates computed by reference to the price at which the common equity
was  sold,  or  the  average  bid and asked price of such common equity, as of a
specified  date  within  the  past 60 days. (See definition of affiliate in Rule
12b-2  of  the  Exchange  Act.)  $2,274,286  as  of  November  22,  2002
                                 ---------------------------------------

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.  30,555,903 Shares of Common Stock as
                                            ------------------------------------
                                            of October  31,  2002
                                            ---------------------

Transitional  Small  Business  Disclosure  Format  (check  one):
Yes [ ] No [X]



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                         DESTINY MEDIA TECHNOLOGIES INC.
                                   FORM 10-KSB

                                      INDEX

                                                                            PAGE
PART  I

Item  1.     Description  Of  Business.                                      3

Item  2.     Description  Of  Property.                                     19

Item  3.     Legal  Proceedings.                                            19

Item  4.     Submission  Of  Matters  To  A  Vote  Of Security Holders.     20


PART  II

Item  5.     Market  For Common Equity And Related Stockholder Matters.     21

Item  6.     Management's Discussion And Analysis Or Plan Of Operation.     23

Item  7.     Financial  Statements.                                         28

Item  8.     Changes  In  And  Disagreements  With Accountants
             On Accounting And Financial  Disclosure.                       28


PART  III

Item  9.     Directors,  Executive  Officers,  Promoters  And
             Control  Persons; Compliance  With  Section  16(A)
             Of  The  Exchange  Act.                                        29

Item  10.     Executive  Compensation.                                      33

Item  11.     Security  Ownership  Of Certain Beneficial
              Owners And Management.                                        36

Item  12.     Certain  Relationships  And  Related  Transactions.           38

Item  13.     Exhibits  And  Reports  On  Form  8-K.                        40

Item  14.     Controls  And  Procedures.                                    41

Signatures                                                                  42

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                                     PART I

FORWARD  LOOKING  STATEMENTS

The  information  in  this Annual Report on Form 10-KSB contains forward-looking
statements  within  the meaning of Section 27A of the Securities Act of 1933, as
amended,  and  Section  21E  of the Securities Exchange Act of 1934, as amended.
These  forward-looking  statements  involve  risks  and uncertainties, including
statements  regarding  Destiny  Media'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, including the
risks  outlined  below,  and,  from time to time, in other reports Destiny Media
files  with  the  SEC. These factors may cause Destiny Media's actual results to
differ  materially  from  any forward-looking statement. Destiny Media disclaims
any  obligation  to publicly update these statements, or disclose any difference
between  its  actual  results  and  those  reflected  in  these  statements. The
information  constitutes  forward-looking  statements  within the meaning of the
Private  Securities  Litigation  Reform  Act  of  1995.

CURRENCY

All dollar amounts in this annual report on Form 10KSB are presented in United
States Dollars unless otherwise indicated.



ITEM  1.     DESCRIPTION  OF  BUSINESS.

OVERVIEW

Destiny  Media  Technologies  Inc.  (the  "Company",  "Destiny  Media"  or "we")
develops and markets audio and video streaming and digital distribution software
products  for the Internet.  Our software products are based on proprietary Java
based enabling technologies and other consumer friendly tools and processes that
enable end users to receive high-quality digital audio and video streaming media
through  the  Internet.

We  have  developed  four  distinct  software  products  that  incorporate  our
proprietary  streaming  and  digital  technology:

Clipstream(TM)                Our  Clipstream(TM)  family  of  software products
                              enables  our  customers to deliver audio and video
                              streaming media via the Internet without requiring
                              the  viewer  to  install software media players or
                              requiring  the  customer  to  deploy  server
                              technology.

RadioDestiny Broadcaster(TM)  Our  RadioDestiny Broadcaster(TM) software enables
                              our customers to broadcast a professional Internet
                              radio  station  from  the  customer's  personal
                              computer.

Destiny  Media  Player(TM)    Our  Destiny  Media  Player(TM) software enables a
                              customer  to  listen  to  MP3  music  files and to
                              listen  to RadioDestiny(TM) Internet broadcasts on
                              their  personal  computer.


MPE(TM)                       Our  MPE(TM)  software  is  audio  and video media
                              distribution  software  that  enables  artists and
                              other  media  rights  owners  to  distribute their
                              media through Internet and to receive payment from
                              customers  who  elect  to  purchase  after  a free
                              preview  of  the  media.

We have finished development of all our software products.  Our primary business
focus  is  currently  on  marketing  and  achieving  sales of our Clipstream(TM)
product  line.  The  Clipstream(TM)  product  line  currently  represents
approximately  95% of revenues.   We plan to expand our revenue base by bundling
our


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Destiny  Media  Player(TM)  and  the  RadioDestiny  Broadcaster(TM) products for
marketing  under the "Pirate Radio" brand name. We plan to sell the Pirate Radio
product  suite  in  retail  stores  and  from  our  website  at
http://www.pirateradio.com.  We currently are not marketing our MPE(TM) software
and  we  currently  do  not  have  any  plans to re-launch our MPE(TM) software.

We  are  a publicly traded company.  Our common stock trades on the OTC Bulletin
board  under  the  symbol "DSNY" and on the Berlin exchange in Germany under the
symbol  "DME".

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


CORPORATE  BACKGROUND

We  were  incorporated  in  August 1998 under the laws of the State of Colorado.

We  carry  out  our  business  operations  through  our wholly owned subsidiary,
Destiny  Software Productions, Inc. ("Destiny Software").  Destiny Software is a
British  Columbia  company  that  was  incorporated  in  1992.

Our  principal  executive  office is located at #1040-1055 West Hastings Street,
Vancouver, British Columbia V6E-2E9.  Our telephone number is (604) 609-7736 and
our  facsimile  number  is  (604)  609-0611.


BUSINESS  DEVELOMENT

We  commenced  our  software  business in 1999 when we acquired Destiny Software
from  Mr.  Steven  Vestergaard,  our  president  and  chief  executive  officer.

Mr.  Vestergaard  started the Destiny Software business as a private partnership
in  January  1991.  The business was sold to Destiny Software in 1992. From 1992
until  1995, Destiny Software was involved solely in the development and sale of
computer games. Twelve games were developed during this period and were marketed
under  the  brand  names of outside publishers, including MGM, Sony / Psygnosis,
QQP  and  Microleague.

In  December  1995,  Destiny  Software's  first  Internet  radio  prototype  was
developed.  This  product  was released in April 1996 under the brand name Radio
Destiny(TM).  Destiny  Software found that many users had difficulty downloading
and  installing  player  and  server  software.  As  a  consequence  of  this
observation, Destiny Software developed an instant audio play technology branded
as  Clipstream(TM)  that enables web site owners to upload audio and video media
content  to  a standard web server using the Clipstream(TM) software and to have
the  media  content  play back on 93% of Internet browsers without requiring any
action  on  the  part  of  web  visitors.

After  we  acquired  Destiny  Software  in  1999, Destiny Software developed our
MPE(TM)  media  distribution  software  and  the  Destiny  Media Player(TM) as a
mechanism for securely selling and playing back digital music and internet radio
streams  via  the  Internet.  However,  the advent of free file sharing networks
made  it  difficult  for  content  owners to sell music over the Internet.  As a
result,  we  were  only  able  to  generate minimal revenues from these software
products  using  a  business  model based on receiving a portion of music sales.

In  the  fall  of 2001, we determined to refocus our business efforts on selling
and  developing  our  Clipstream(TM)  software  products.  As  a  result of this
determination, we stopped supporting the MPE(TM) security system and the Destiny
Media  Player(TM)  and  reduced  our  staff.  Since this time, our revenues have
grown on a quarterly basis and we have established strong name brand recognition
with  customers



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in  various  market  sectors.  Many  of  our customers have renewed their annual
licenses  and  increased  their  investment  in  Clipstream(TM).

In  our  fourth quarter of our 2002 fiscal year, we relocated to a new office to
provide space for expanding sales and marketing personnel.  We installed a fiber
link to the internet backbone to this location, providing the ability to support
customers  with  extremely  high  bandwidth  hosting  capabilities.


OUR  PRODUCTS

Clipstream(TM)  Suite

We  have  developed  a suite of five distinct software products that incorporate
our  Clipstream(TM)  technology  and are marketed under our Clipstream(TM) brand
name:

1.     Clipstream  Audio(TM)

2.     Clipstream  Video(TM)

3.     Clipstream  Live(TM)

4.     Clipstream  Audiomail(TM).

5.     Clipstream  IVR  Server

Each  of  our  Clipstream(TM)  products  is  fully developed and is commercially
available through our web site at: http://www.clipstream.com. Our Clipstream(TM)
products  have  been  commercially  available  commencing  in  1999.

Our  Clipstream(TM)  products  enable  users  to  experience  audio  and  video
programming  via  the  Internet  without  the  hassle  or  expense of installing
software  media  players  or  requiring  server  technology.  We  use
patent-pending  compression,  decompression  and reproduction processes that are
embodied  in  small  software application programs that we have developed called
applets.  These  applets  are  based  on  the Java platform and are coupled with
standard,  widely  available and implemented Internet viewing hardware, software
and  protocols  to  enable our customers to deliver high quality streaming audio
and  video to users.  In addition, we use a quick and intuitive creation process
that  simplifies  the  process  of  delivering  streaming  media.

Our  Clipstream(TM)  software enables audio and video streaming content to start
playing  as soon as it is clicked on by a user.  This is different from the most
common  way  to access audio and video streaming content which is typically by a
software  program  called  a  player  on  the  user's  personal  computer.  A
player-based  solution  can  be  cumbersome  for the computer user as it must be
downloaded  and  installed  before  the  content  can  be accessed.  Even if the
software is preinstalled on the computer, the user may still be required to fill
out  various  forms  before  the  content  can  be  accessed.  This can create a
substantial  impediment  to  many  users  obtaining  and viewing audio and video
streaming  media  and  means that a substantial number of computer users are not
able  to  access  player-based content that is delivered on a website or e-mail.
Our  Clipstream(TM) software uses technology called JAVA(TM) which was developed
by  Sun  Microsystems(TM).  For  93%  of computer users, the content streams the
first  time  without  requiring  any  action  on  the  part  of  the  user.

Our  Clipstream(TM)  software  can be incorporated into any web delivery method,
including  web  pages,  e-mails,  banner  advertisements  and  other  Internet
applications,  in  order  to  deliver  streaming  media  to users.   Because our
technology is Java based, our software applications will work on most Java based

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computers,  set  top boxes and wireless devices which have enough CPU and memory
to  play  back  the  content.   In addition, our Clipstream(TM) software enables
streaming  media  to be delivered to users regardless of the operating system of
the  user's  computer.

Our  Clipstream(TM) software products incorporate the following features that we
believe  give  our  products  advantages  over  products offered by competitors:

1.   Web  pages,  e-mails, banner advertisements and other Internet applications
     that incorporate our Clipstream(TM) software enable users to play the media
     instantly  without  the  requirement  of  an  additional  media  program.

2.   Our  customers are able to achieve up to a 90% reduction on bandwidth costs
     for  streaming  delivered  using  our  products  versus competing streaming
     solutions.

3.   The Clipstream(TM) software enables streaming through firewalls and proxies
     that  may  block  competing  streaming  solutions.

4.   The Clipstream(TM) software is compatible with Flash(TM), databases as well
     as  non-personal computer devices such as PDA's, wireless and set top boxes
     that  support  JAVA.

5.   The  look  and  feel  can  be  tightly  integrated into a web page and most
     aspects  of  the  engine  can  be  accessed  via  Javascript.

6.   Our  customers  do  not  require  a  server  to  deliver pre-recorded media
     content.  Customers  can  simply  use our encoder software to convert their
     media  content  into  our  Clipstream(TM) format and upload it to their web
     site  with  the  accompanying  applet.

7.   We  have  developed  our  Clipstream(TM)  software  to  be  as scaleable as
     possible.  A  video or audio clip encoded in Clipstream(TM) is treated like
     any  other  element  in  the  web page. It can be served by a standard http
     server,  cache  or  proxy  and  can  pass  seamlessly  through  a firewall.

8.   Corporate  environments using our Clipstream(TM) software have an advantage
     over  player-based solutions as management information systems staff do not
     have  to  ensure  that  players  are correctly installed on each machine in
     their  corporate  network  in  order  for  users to receive audio and video
     streaming  media.

The  features  and  functionality  of  our  Clipstream(TM) software products are
described  below:

Clipstream  Video(TM)    Our  Clipstream Video(TM) product enables our customers
                         to  deliver  streaming of video media via the Internet.
                         This  product  enables  web  marketers, advertisers and
                         webmasters  to  deliver compelling video media to their
                         viewers  without the need for special servers, software
                         or  programming  knowledge.  The  Clipstream  Video(TM)
                         product  also  eliminates the requirement of a customer
                         to  develop  multi-streaming  formats  to  reach  the
                         customer's  targeted  audience.

Clipstream Audio(TM)     Our Clipstream Audio(TM) software enables our customers
                         to  deliver  streaming of audio media via the Internet.
                         This  product  enables  web  marketers, advertisers and
                         webmasters  to  deliver compelling audio media to their
                         viewers  without the need for special servers, software
                         or  programming  knowledge.

Clipstream  Live(TM)     The  Clipstream  Live(TM)  system  enables customers to
                         embed  live  video  into  any  web  delivery  method,
                         including  web  pages,  e-mails,  advertisements  and
                         specific  web  applications.  Our  Clipstream  Live(TM)
                         software  enables  a  customer  to


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                         provide quality streaming of live video using a digital
                         video  camera  connected  to a personal computer with a
                         constant  Internet  connection.  Incoming  video  is
                         captured by our software operating on the server and is
                         converted  into  a  real-time video stream that enables
                         live  broadcasts.

Clipstream Audiomail(TM) The Clipstream AudioMail(TM) system allows customers to
                         create  a streaming audio message using their telephone
                         and  to  broadcast this audio message. Once recorded, a
                         customer is able to broadcast their audio message using
                         e-mail  or  can  incorporate the audio message directly
                         into  a web site. Once broadcast, the AudioMail message
                         can  be played by any Java-enabled e-mail client or web
                         browser.  The  Clipstream  AudioMail(TM)  system  is
                         marketed  as both a personal and an enterprise software
                         solution.

Clipstream  IVR Server   The  Clipstream  IVR Server enables customers to record
                         an  audio message via telephone and up-load the message
                         to  an  e-mail  or to broadcast the message to multiple
                         users via e-mail. The Clipstream IVR Server is designed
                         to:  (i)  record audio messages via a telephone capture
                         card  using pre-recorded audio prompts; (ii) encode the
                         recorded  audio  in the Clipstream format; (iii) output
                         the  Clipstream  audio files to a specified folder on a
                         network  accessible  drive;  and  (iv)  instigate  an
                         application  when  new  audio  files  have  been saved.

We  plan  to  focus  future development of the Clipstream(TM) products on better
supporting  alternative  ways  of  accessing  the  Internet, other than personal
computers.  In  particular,  the  Japanese market is quite mature and we believe
there are opportunities to better support Clipstream(TM) on the iMode and jPhone
platforms.

RadioDestiny  Broadcaster(TM)
http://www.radiodestiny.com

The  RadioDestiny  Broadcaster(TM)  software  enables  customers  to broadcast a
professional  Internet radio station from the customer's personal computer.  The
customer  may  broadcast  live  or from a playlist created by the customer.  The
only  hardware  required is a personal computer equipped with a sound card and a
reliable  Internet connection.  When broadcasting in the live mode, the customer
simply  puts  their  audio signal into the input of their sound card, configures
the  options  and  clicks  'start broadcast' on the RadioDestiny Broadcaster(TM)
software.  When  broadcasting  in script mode, the customer pre-records a set of
audio  files,  and  then specifies a schedule for play back.  The customer could
spend  a couple of hours setting up the broadcasting schedule for the week, then
the  RadioDestiny  Broadcaster(TM)  software will broadcast the content 24 hours
per  day, 7 days per week.  When deployed, the customer's Internet radio station
is  automatically added to the directory of stations at our RadioDestiny(TM) web
portal.  Listeners can receive a RadioDestiny(TM) Internet radio broadcast using
our  Destiny  Media  Player(TM).   The RadioDestiny Broadcaster(TM) software has
been  designed  to  be  consumer  friendly  and  is  easy  to  use.

Our  Radio  Destiny(TM)  software  has  been  commercially available since 1996.

We  sell  licenses for our RadioDestiny Broadcaster(TM) software on a commercial
basis  and  a personal use basis.  The primary difference between the commercial
and  personal  licenses  for  the  RadioDestiny  Broadcaster(TM)  is the license
limitations  placed  on  consumer broadcasters restricting use to non-commercial
application.

Destiny  Media  Player(TM)
http://www.radiodestiny.com

Our  Destiny Media Player(TM) software product is a combination MP3/Music player
and  radio  receiver  that can be installed on a user's personal computer.  This
software  features  a  radio mode and an MP3 mode.

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In  the  radio  mode,  a  user is able to listen to radio broadcasts from any of
stations on the RadioDestiny Broadcast Network(TM). The Destiny Media Player(TM)
features  a live directory of stations with direct e-mail and web links to these
broadcasters.  In  the  MP3  mode,  a  user can play MP3 files directly from the
user's  library  of  MP3 files. The Destiny Media Player(TM) automatically scans
the  user's  hard  drive for existing music files and creates an MP3 library for
access  by  the  Destiny  Media  Player(TM).  The  Destiny Media Player(TM) also
features  a  list  of MP3 web sites that allows a user to easily click a link to
access  MP3  sources.  The  Destiny  Media  Player(TM) also supports playback of
streaming  MP3's,  .wav and midi files, as well as music CD's. The Destiny Media
Player(TM)  is a small, yet powerful, application and can be downloaded from the
Internet  and  can  be  installed  by  a  user  within  two  minutes.

Pirate  Radio  (TM)
http://www.pirateradio.com



We  are  in  the  process  of  launching  a  combination  of  the  Radio Destiny
Broadcaster(TM)  and  the  Destiny  Media Player(TM) as a boxed product software
suite  under  the  brand  name  Pirate  Radio(TM).  We determined to launch this
software  suite  due  to  the  fact  that during the last two years, many of our
competitors  in the Internet radio space have ceased operations or changed their
business  focus.  As  a  result,  we  believe  there is new demand for our Radio
Destiny(TM)  product and as a consequence we created the Pirate Radio(TM) suite.
There  are 75,000 registered users of the free beta version of the Radio Destiny
broadcaster, which ceases functioning at the end of 2002, and 550,000 registered
users  of the Destiny Media Player(TM).  We believe the actual installed base of
these  products  to  be  approximately ten times the number of registered users.

We  plan  to  create new software products to support this initiative, including
custom  branded  players,  superior  listing  in  the  real  time  directory  at
http://www.stationdirectory.com,  our  web  site  at
http://www.pirateradionetwork.com  and  access to a broadcast repeater system to
allow  greater  listener  levels.

MPE(TM)
http://www.destinympe.com

Our  MPE(TM)  software  was  developed  as  a  solution to enable artists, media
distribution  companies  and other media rights holders to manage and sell audio
and  video  media  files  on  the Internet.  We developed this software with the
objective  of  providing  a  solution  for  media  rights holders to counter the
wide-spread  distribution of media files on the Internet that occurs without any
payment  to  the  media  rights  holder.  Our  software  enables  a media rights
holder's  audio  or video media to be encoded in our proprietary MPE(TM) format.
The  audio or video media can then be posted anywhere and partially previewed in
full quality.  Consumers are given the opportunity to preview the media and then
complete an electronic purchase transaction.  The encoded MPE(TM) media file can
be unlocked by the customer once the purchase is complete.  The objective of the
MPE(TM)  software  is  to  ensure  broad  distribution  of  digital  files  via
peer-to-peer  systems such as Napster while ensuring that the originating artist
gets  paid.  Currently, the MPE(TM) software is limited to self-extracting music
files.  We  believe  this  software  could  be  modified  to  support  digital
distribution  of  software,  movies,  electronic  books and research reports and
other  digital  file  types.

We  are  exploring opportunities for generating revenues from MPE(TM), including
building  support for other digital formats, such as software, books, videos and
research  reports  and  for licensing the technology to content owners directly.
There  is  no  expectation  of  MPE(TM)  revenues  in  the  near  term.


OUR  TARGETED  MARKETS

Clipstream(TM)

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Our  targeted market for our Clipstream(TM) software products are companies that
are  engaged  in  the  distribution  of  audio and video streaming media via the
Internet  through  any  web  delivery  method,  including  web  pages,  e-mails,
advertisements  and  specific  web applications.   We have specifically targeted
creators  of  audio  and video media, Internet OEM's, web sites and web portals,
Internet  advertisers  and  distance  learning  companies.

We  have  targeted  on-line  service  providers  (OEM's)  such  as greeting card
companies  and  conferencing  companies,  that  want  to  build  incorporate our
Clipstream(TM)  technology  into  their own applications as one of its features.
In  these  arrangements,  we require that the OEM customer provide a "Powered by
Clipstream(TM)"  logo and a link back to our home web site.  In some cases, this
requirement  is waived and we are paid a "white label" fee allowing the acquirer
to  remove  visible  Clipstream(TM) branding and potentially incorporating their
own  branding.

The following are examples of some of the arrangements that we have entered into
with  on-line service providers that have allowed for the broadcast of audio and
video  streaming  media by the on-line service provider using our Clipstream(TM)
software:

1.   We  entered  into  an  agreement  with  the  Championship Auto Racing Teams
     ("CART")  for  the  live  broadcast of the 2002 CART awards banquet held in
     Miami,  Fl.  on  Friday,  November 22. This event was broadcast live on the
     CART.com  web  site  using  Clipstream  Live(TM)  technology. CART has also
     embedded  Clipstream(TM)  directly  inside  their  CART.com newsletters, so
     subscribers  can  receive  video  updates  on  recent  races.

2.   We  entered  into  a  license  agreement with Bell Globe Media Interactive,
     which  owns  Canada's leading suite of Internet properties and reaches more
     than  60%  of  on-line  Canadians,  in  April  2002  for the license of our
     Clipstream(TM)  software  to  deliver interactive marketing campaigns. Bell
     Globe  Media  Interactive  used our Clipstream(TM) software to deliver rich
     media  video  advertisement banners to the users of the www.globeandmail.ca
     and  www.robtv.com  websites.

3.   We  entered  into a two-year licensing agreement with Tribute Entertainment
     Media  Group  in  August  2002.  Under this license agreement, Tribute will
     incorporate  our  Clipstream(TM)  technology  to enable their users to view
     trailers  of  upcoming  Hollywood  motion  pictures  and independent motion
     picture  releases.

4.   We  have entered into a license agreement with Greenfield Online, a leading
     provider  of  on-line  data  collection  services.  Greenfield  Online will
     incorporate  our  Clipstream(TM)  technology  to launch a new media testing
     capability  that enables clients to test video segments with precise target
     audiences  quickly  and  economically.

Common  applications  for  audio  on  web  portal sites include site navigation,
product descriptions, compliance with laws regarding the blind, music previewing
and  online  commentary.  Video  is  often  used for product profiles, corporate
communication,  movie  trailers  and  corporate  presentations.  Because  our
Clipstream(TM)  software  can  be  tightly  integrated into a database driven or
Flash  based  application,  customers  can  use  our  software  to  create  rich
interactive  multimedia  presentations  on  their  web  sites.

Many  larger  companies are using our using Clipstream(TM) products for internal
websites  to  communicate  with  employees  on  corporate  intranets.

We  have  targeted  Internet  advertisers  who are able to use Clipstream(TM) to
embed  thirty  second advertisements from television directly into web pages and
inside  of  e-mails.  We  believe  that  the  advertising  market will become an
increasingly  important  target  market  as  audio  and  video streaming becomes
mainstream.  Because  Clipstream(TM) starts playing instantly without popping up
an  external  window,  we  believe  our  Clipstream(TM)  products  are much more
appropriate  for  playing  advertisements  than  media  player  based solutions.

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We  have had good success in the last year with movie studios that are using our
Clipstream(TM)  software  technology to play movie trailers as advertisements on
large  portal  sites.  We have developed a "send to a friend" e-mail format that
allows popular video advertisements and trailers to be distributed peer to peer.

We  have  targeted  distance learning and corporate training as a growing market
for  our  Clipstream(TM)  products.  We  believe this market segment will become
more  significant  in  the  coming  year.

RadioDestiny  Broadcaster(TM)

The  target market for the commercial version of RadioDestiny Broadcaster(TM) is
existing  commercial radio stations.  For approximately $2,500, commercial radio
stations  can license Clipstream(TM) and use a simple home computer to broadcast
their radio station on the Internet, thereby making their broadcast available to
their  listeners  when  they  travel.  We  believe  our product is a competitive
alternative  to  conventional  solutions  that  can  cost up to $30,000 or more.

PirateRadio(TM)

Our  PirateRadio(TM) software bundle will be marketed to the home Internet radio
enthusiast  that is seeking a means to broadcast their personal radio broadcasts
to  the  world  through  the  Internet.


OUR  REVENUE  MODEL

Clipstream(TM)  Products

We  license  our  Clipstream(TM)  products  to  our  customers and recognize the
revenue  in  accordance with SOP 97-2 as disclosed to the notes of our financial
statements.   In addition, we offer annual maintenance contracts whereby service
revenues  are  recognized  ratably  over  the  term of the maintenance contract.
Other service revenue is recognized at the time services are performed including
all  custom  development  work  performed and integrated services performed.  We
also  offer  "white label" contracts at premium pricing allowing the acquirer to
remove  visible  Clipstream(TM) branding and potentially incorporating their own
branding.

We  charge  a  flat monthly rate to customers who incorporate our Clipstream(TM)
software  technology  into their e-mail campaigns.  The price is a flat rate for
an  unlimited  number  of  impressions  or  e-mails.

Web  advertising  requires  a  fixed  set  up  fee  and  a  license per thousand
impressions  served.

Our  Clipstream  Live(TM)  video  server  system  is  priced at $2995 + $500 per
camera.

We  charge web site portals an annual license fee that is based on the number of
clips  that  are  used.

We  typically  charge  corporate intranets that have licensed our Clipstream(TM)
software  products  a fixed annual fee based on the number of employees who will
have  access  to  the  technology.  Usage  on  the  intranet  is  unlimited.

Currently,  approximately  95%  of  our  total revenues is derived from sales of
licenses  of  our  Clipstream(TM) software technology.   We consciously chose to
focus  on  selling  our Clipstream(TM) software products in January 2001 and the
current  sales  team  is  primarily  dedicated  to  generating  sales  of  our
Clipstream(TM)  software  products.

Radio  Destiny  Broadcaster


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We  charge a license fee of $2,500 for a commercial license for the RadioDestiny
Broadcast(TM)  software  product.  Currently,  approximately  5%  of  our  total
revenues  come  from  the commercial licensing of our RadioDestiny Broadcast(TM)
software.  We  have experienced increased demand for RadioDestiny(TM) during our
last  quarter.  We  believe  this  increased  demand  is  due  to  some  of  our
competitors  having  ceased operations and other competitors having refocused on
other  business  opportunities.  We  expect that the commercial version of Radio
Destiny(TM)  will  generate  increased  revenues in our 2003 fiscal year as a
result  of  this  increased  demand.

Destiny  Media  Player(TM)

We  currently  do  not earn revenues from licensing our Destiny Media Player(TM)
software.  We  anticipate  this  will  change  as  we  commence  marketing  our
PirateRadio  software  suite  that includes the Destiny Media Player(TM) and the
RadioDestiny  Broadcaster(TM).

Pirate  Radio

We  have  targeted  a  retail  price of $29.95 for our Pirate Radio(TM) software
suite  that  includes  both  the  Destiny  Media  Player(TM)  and  a  personal
RadioDestiny  Broadcaster(TM)  license.  We  are targeting the second quarter of
our  2003  fiscal  year for the sales of the Pirate Radio(TM) software suite.
Pirate  Radio(TM)  will be available for online purchase in November 2002 and is
expected  to  be  in  retail  channels  by  February  2003.

MPE(TM)

MPE(TM) became commercially available in 1999.  We sold MPE(TM) in 1999 and 2000
on a revenue share basis where we would receive a portion of music sales.  Sales
were  negligible,  so  we  determined  to  stop selling MPE(TM) in January 2001.
Accordingly,  we  are  currently  not  earning  any  revenues  from  MPE(TM).

We  expect  that with the demise of Napster and other file sharing networks that
the  market for online music may mature in the future.  If the commercial market
for  on-line  music emerges, then we may determine to attempt to market MPE(TM).
We  believe  that  there  is also an opportunity to develop MPE(TM) further as a
technology  for  distributing  and  selling  videos,  software  and  text.


OUR  MARKETING  PLAN

We  generate  the  majority  of  our  software  sales through our employee sales
network  and  our  reseller  network.  We  employ  sales staff in our Vancouver,
British Columbia office to market our software products to our current customers
and  to  our  targeted  potential customers.  In addition, we have established a
network  of  approximately ninety resellers.  We charge our reseller partners an
annual  partner  fee  which buys them varying levels of support and service from
Destiny  Media.  In  general, a higher level of support and a higher partner fee
commitment achieves a higher margin for the partners.  Reseller partners receive
a  direct  commission,  which  varies  and  is  in  line  with standard software
commission  rates.

We  also  market  our  software  products  directly from our dedicated websites.

1.     Clipstream(TM):  http://www.clipstream.com
2.     Radio  Destiny  Broadcaster(TM):  http://www.radiodestiny.com
3.     Destiny  Media  Player(TM):  http://www.radiodestiny.com
4.     MPE(TM):  http://www.destinympe.com

We  undertake  various advertising on the Internet, which include the following:

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1.   We  include  short  advertisements  for  Clipstream(TM) on media clips that
     incorporate  our  Clipstream(TM)  software.

2.   We locate icons on our applets that include links to our Clipstream(TM) web
     site  when  clicked  on  by  a  user.

3.   We  typically  require our Clipstream(TM) customers to add a Clipstream(TM)
     link  on  their web site or e-mail campaign. This ever increasing number of
     incoming  links  to  the  Clipstream(TM)  site  increases the rating in the
     search  engines,  so that Clipstream(TM) is more likely to come up first in
     relevant  searches.

4.   We  advertise  through  Internet search engines where advertisements can be
     tied  to  search  works  relevant  to  our  products.

5.   We  actively creates viral "send to a friend" Clipstream(TM) clips that are
     hosted  on  our  server. We secure content we expect to be passed along and
     encode  it  in  our  format  in  the  form  of  an  email.

We  generally do not undertake advertising campaigns, other than outlined above.

We  do  attend  industry  trade  shows  in  specific  cases  where we perceive a
marketing  opportunity with an adequate return on investment.  These trade shows
are  attended  by  our  sales  staff.  We generally have determined not to spend
significantly  on  trade  booths  in  most  cases  as  we  believe the return on
investment  isn't  sufficiently  compelling  for  our  products.

We  intend  to increase our marketing efforts through the current fiscal year by
increasing  the  number  of our direct sales people and by better supporting and
training  our  reseller  partners.



OUR  BUSINESS  OPERATIONS

Our  head  office  and business operations are carried out in leased premises in
Vancouver, British Columbia, Canada.  We lease 5,734 square feet of office space
and  we  have thirteen full time employees.  Our employees include our president
and  chief  executive officer, our vice-president of operations, our controller,
five  direct sales employees, two support personnel and two software developers.
We  also employ a book keeper, artists and audio and video talent on a part time
basis  as  needed.

We  have  installed  a  fiber  link  to the internet backbone to our head office
location.  This fiber link provides us with the ability to support our customers
with  extremely  high  bandwidth  hosting  capabilities.


COMPETITION

Our  two  principal competitors in the development and distribution of streaming
media  technology   are   RealNetworks  and  Microsoft   Corporation.  Both
RealNetworks and Microsoft are  substantially larger  than we are  and   have
significantly greater financial resources available.  Both Microsoft's
and  RealNetworks  have  increased  their  commitment  to  and  presence  in the
streaming  media  industry.  This  increased  commitment  has  increased  and we
anticipate  will  continue  to  increase the competitive pressure in the overall
market  for  streaming media software.  This increased competition could lead to
increased  pressure  to  decrease  the  price of streaming media software.  This
pressure  on price could force us to reduce the price that we are able to charge
our  customers  for  our  software  products.

In  addition  to  Microsoft and RealNetworks, we face increased competition from
other  companies  that  are  developing  and  marketing  streaming media product
offerings.  These  competitors  include  Hello  Networks(TM), Eye Wonder(TM) and
Oplayo(TM).  As  more companies enter the market with products and


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services  that  compete  with  the  Company's players and tools, the competitive
landscape  could  change  significantly  to  the  detriment  of  the  Company as
consumers are faced with a broader array of products with similar functionality.

The  factors  that  impact  on  our  ability  to  compete in the streaming media
technology  market  include:

     (i)  the  quality  and  reliability  of  our  software;
    (ii)  the  features  of  our  software  for  creating,  editing and adapting
          content;
   (iii)  ease  of  use  and  interactive  user  features  of  our  software;
    (iv)  scalability  and  cost  of  our  software  per  user;
     (v)  our  software  pricing  and  licensing  terms;
    (vi)  the  emergence  of  new and more advanced streaming media formats; and
   (vii)  the compatibility of our software with our customer's existing network
          components  and  software  systems.

We  must continue to innovate and improve the performance of our streaming media
software  products  to  compete  in  the  streaming  media technology market, to
maintain  our  customer  base  and to increase our customer base.  We anticipate
that  consolidation  will  continue  in the streaming media industry and related
industries  such  as computer software, media and communications.  Consequently,
competitors  may  be  acquired  by, receive investments from or enter into other
commercial  relationships  with,  larger,  well-established  and  well-financed
companies.  There  can  be  no  assurance  that  we will be able to establish or
sustain  a  leadership  position  in  this  market segment.  We are committed to
working toward market penetration of our brand, products and services, which, as
a  strategic  response  to  changes  in the competitive environment, may require
pricing,  licensing, service or marketing changes intended to extend our current
brand  and  technology.  Price  concessions or the emergence of other pricing or
distribution  strategies by competitors may reduce the prices that we may charge
our  customers  for our software products.  In addition, many of our current and
potential  competitors  have  greater name recognition, larger overall installed
bases, more employees and significantly greater financial, technical, marketing,
public  relations  and  distribution  resources  than  we do.  These competitive
factors  may have a material adverse effect on our business, financial condition
and  results  of  operations.



TRADEMARKS  AND  INTELLECTUAL  PROPERTY

We have been granted a trademark for Clipstream(TM) in Canada in connection with
our software products. We are pursuing trademark applications for
Clipstream(TM)

in  jurisdictions in the US, Europe and Asia in the upcoming year.
In the UK,  we believe that an unrelated company  called  Clipstream  Online
Video  Management (http://clipstream.co.uk/)  has  been infringing on our
trademark.  In response  to  a  letter  sent  to  them  by  Destiny,
they have filed invalidity proceedings in the UK because they argue that "clip
stream" is a generic phrase. We  believe this proceeding will be unsuccessful
and trademark protection in the UK will ultimately be granted to us.   We are
discussing a negotiated resolution to  this  dispute, although there is no
assurance that a satisfactory settlement will  be  reached.

We  have  filed for patent protection in Europe, Asia, the US and Canada for the
MPE(TM)  distribution  system  and for the Clipstream(TM) audio and video codes.
Patent  protection  is  currently  pending.

We  own  a  database  of  630,000  registered users of Radio Destiny(TM) and the
Destiny  Media  Player(TM).  The  database  includes  contact information, basic
demographics  and  an  email  address.  Usage  of  the  database is protected by
Destiny's  privacy policy and is used only for marketing other Destiny products,
market  research  and  notification  of  product  updates  and  upgrades.

We  own  approximately  30  Internet  URL's  including  streamingaudio.com,
web-clips.com,  audio-clips.com,  and  radio-play.com.


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We  have  developed  a number of games since 1991 through Destiny Software which
have  been  licensed  to  outside  publishers.  In many cases, ownership of this
content  has  been returned to Destiny.  There is no intention to monetize these
products  as  many  of  them  are  for  older  platforms.


GOVERNMENT  REGULATION

We  are  not  currently  subject to direct regulation by any governmental agency
other  than  laws  and  regulations  generally  applicable to businesses.  It is
possible that a number of laws and regulations may be adopted in both the United
States  and  Canada  with particular applicability to the Internet.  Governments
have  and  may  continue  to enact legislation applicable to us in areas such as
content  distribution,  performance and copying, other copyright issues, network
security, encryption, the use of key escrow data, privacy protection, caching of
content  by  server products, electronic authentication or "digital" signatures,
illegal  or  obscene content, access charges and retransmission activities.  The
applicability to the Internet of existing laws governing issues such as property
ownership, content, taxation, defamation and personal privacy is also uncertain.
Export  or  import  restrictions,  new legislation or regulation or governmental
enforcement  of  existing  regulations  may  limit  the  growth of the Internet,
increase  our  costs  of  doing  business  or  increase  its  legal  exposure.


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RISK  FACTORS

We  face  risks  in  executing  our  business  plan and achieving revenues.  The
following  risks  are  material  risks  that  we  face.  We  also face the risks
identified  elsewhere  in  this  Annual Report, including those risks identified
under  Item  1  -  Description of Business, including Competition and Government
Regulation,  and  Item  6  -  Management  Discussion  and  Analysis  or  Plan of
Operations.  If any of these risks occur, our business and our operating results
and  financial  condition  could  be  seriously  harmed.

If  We  Are Unable To Achieve Additional Financing, Then Our Financial Condition
And  Our Ability To Continue Our Business Operations Will Be Adversely Affected.

We  had  a  working  capital  deficit  of  $879,171  as  of August 31, 2002.  In
addition,  we  had  accounts  payable  and  accrued liabilities in the amount of
$516,710  as  of August 31, 2002.  We had a loss from operations of $558,137 for
the  year  ended August 31, 2002.  As a consequence of these factors, we require
additional  financing in order to maintain our existing business operations.  We
are  pursuing  additional  financing, including equity private placements of our
common stock.  We currently do not have any arrangements for financing in place.
There  is  no  assurance that we will be able to achieve additional financing to
fund  the  operating  loss  from  our business operations and to pay our current
liabilities.  If  we  do  not  raise  additional  capital,  then  our  financial
condition  and our ability to continue operations will be adversely affected. If
we  are  successful in completing equity private placements of our common stock,
then  existing  shareholders  will  experience  dilution  of  their interests in
Destiny  Media.

If  We  Are Unable To Increase Our Revenues, Then Our Business And Our Financial
Condition  Will  Suffer.

Our  revenues have increased to $769,326 for the year ended August 31, 2002 from
$345,653  for  the year ended August 31, 2001.  The increase in revenue has been
the result of an increase in sales of our Clipstream(TM) software.  However, our
operating  expenses  still  exceed  our  revenues.  Accordingly,  our ability to
attain  profitability  and  to  decrease our dependence on external financing is
contingent  upon  our  ability  to  increase  our  revenues.  We  are working to
continue the increase in revenues from sales of our Clipstream(TM) software.  In
addition, we are launching our Pirate Radio software bundle to the market in the
second  quarter  of  fiscal 2003.  There is no assurance that we will be able to
continue  to  increase  revenues  from  our  Clipstream(TM) software or that the
Pirate  Radio  software  bundle will generate revenues in excess of the expenses
attributable  to  the  marketing  of  this product.  If we are not successful in
increasing  revenues,  then our ability to achieve profitable operations will be
adversely  affected.

If  Revenues  From  Our  Clipstream(TM)  Software  Decline,  Then  Our Financial
Condition  And  Results  Of  Operations  Will  Be  Adversely  Affected.

Substantially  all  of our revenue is generated from sales of our Clipstream(TM)
streaming  media software.  The market for streaming media software is extremely
competitive  and  includes competitors such as Real Networks and Microsoft.  Due
to this competition, there is a risk that our competitors will gain an increased
market  share  or  may  cause  the  price  that  we  are  able  to  charge  for
Clipstream(TM)  software  to  decrease.  Either of these factors could cause our
revenue  to  decrease with the result that our financial condition and operating
results  would  be  adversely  affected.

If  We  Are  Not  Able  To  Control  Our  Operating Expenses, Then Our Financial
Condition  May  Be  Adversely  Affected.

We have been successful in reducing our operating expenses to $1,327,463 for the
year  ended  August 31, 2002 from $1,885,910 for the year ended August 31, 2001.
Our ability to achieve profitability is conditional upon our ability to maintain
our operating expenses.  While we have been successful in reducing our operating
expenses,  there  is a risk that we will have to increase our operating expenses
in  the  future.  Factors  that  could  cause our operating expenses to increase
include  our  determination  to


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spend  more  on  sales  and  marketing in order to increase product sales or our
determination  that  more  research and development expenditures are required in
order  to  keep our current software products competitive or in order to develop
new  products for the market. To the extent that our operating expenses increase
without  a  corresponding  increase in revenue, our financial condition would be
adversely  impacted.

If  We Are Not Successful In Legal Proceedings Against Us, Then Our Business And
Financial  Condition  Could  Be  Adversely  Affected.

We are currently party to three material legal proceedings, as described in Item
3  of  Part  I  under  the  heading  "Legal  Proceedings".  No amounts have been
recorded  in  our  financial  statements as at August 31, 2002 on the basis that
neither  of these claims is currently determinable.  If we are not successful in
these  legal  proceedings  and  are  forced  to  make payments of damages to the
plaintiffs,  then  our  business  and our financial condition would be adversely
affected.

As  We  Have  A History Of Net Losses, There Is No Assurance That We Will Attain
Profitability.

We  have  had  net  losses  since our inception in 1998.  We have an accumulated
deficit of $3,574,786.  In addition, our loss for the year ended August 31, 2002
was  $377,688.  Our inability to increase our revenues while maintaining reduced
operating  expenses  will  cause  our  history  of  losses  to  continue.

Our  Success  Is  Dependent,  To  A  Large Degree, Upon The Efforts Of Mr. Steve
Vestergaard,  Our  Current  Executive  Officer.

Mr. Vestergaard was the founder of Destiny Software and has been involved in our
business  operations  since  our  inception.  The  loss or unavailability of Mr.
Vestergaard  could  have  an  adverse  effect  on  our  business  operations and
financial condition.  We do not maintain key man life insurance policies for Mr.
Vestergaard  or  for  any  of  our  other employees.  In addition, our continued
success  is dependent upon our ability to attract and retain qualified personnel
in  all  areas  of  our business, especially management positions.  In the event
that we are unable to attract and retain qualified personnel, our business would
be  adversely  affected.

As  There Is Substantial Doubt About Our Ability To Continue As A Going Concern,
An  Investment  In  Our  Common  Stock  Is  Risky.

We have disclosed in the notes to our financial statements that we have incurred
recurring  losses from operations and that we have a working capital deficiency.
Our operations to date have been primarily financed by long term debt and equity
transactions.  As  a  result,  our  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  we will be successful in raising or generating additional cash
for  operations.  If  we  are not successful, then we will be required to reduce
operations  or  liquidate  assets.  Our  auditors  have  made  reference  to  a
substantial  doubt  about  our  ability  to continue as a going concern in their
audit  report  on  our  audited  financial  statements.

Our  Financial  Results  May  Be  Adversely  Impacted  By Currency Fluctuations.

Our  revenues are primarily in United States dollars as most of our revenues are
generated from sales in the United States.  Our operating expenses are primarily
in  Canadian  dollars  due  to  the  fact  that  our  operations  are located in
Vancouver,  British  Columbia, Canada.  An increase in the value of the Canadian
dollar  in  relation  to  the  United  States  dollar  could  have the effect of
increasing  our  loss  from  operations.

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If  Our  Products  Are  Defective  Or  Contain  Errors, We May Become Subject To
Product  Liability  Claims.

As  a  result  of their complexity, our software products may contain undetected
errors or failures when first introduced or as new versions are released.  There
can  be  no  assurance that, despite testing we undertake and testing and use by
current  and potential customers, errors will not be found in new products after
commencement  of  commercial  shipments.  The  occurrence  of  such errors could
result  in  loss  of  or delay in market acceptance of our products, which could
have  a material adverse effect on our business, financial condition and results
of  operations.  Our  products  also  may be vulnerable to break-ins and similar
disruptive  problems  caused by Internet or other users. Such computer break-ins
and other disruptions would jeopardize the security of information stored in and
transmitted  through  the computer systems of our customers, which may result in
significant  liability to us and deter potential customers. The sale and support
of  our  products  may  entail the risk of liability claims. A product liability
claim  brought  against us could have a material adverse effect on our business,
financial  condition  and  results  of  operations.

Our  Ability  to  Manage  Growth.

Should  we  be  successful  in  the  sales and marketing efforts of our software
products,  we will experience significant growth in operations.  If this occurs,
management  anticipates  that  additional expansion will be required in order to
continue  our  product  development.  Any  expansion of our business would place
further demands on our management, operational capacity and financial resources.
We  anticipate  that we will need to recruit qualified personnel in all areas of
its  operations,  including management, sales, marketing, delivery, and software
development.  There  can be no assurance that we will be effective in attracting
and retaining additional qualified personnel, expanding its operational capacity
or  otherwise  managing growth.  In addition, there can be no assurance that our
current  systems,  procedures  or  controls  will  be  adequate  to  support any
expansion  of  our  operations.  The  failure to manage growth effectively could
have  a material adverse effect on our business, financial condition and results
of  operations.

Risk  of  System  Failure  and/or  Security  Risks.

Despite  the  implementation  of  security  measures, our network infrastructure
could be vulnerable to unforeseen computer problems. Although we believe we have
taken  steps  to  mitigate  much  of  the  risk, we may in the future experience
interruptions in service as a result of the accidental or intentional actions of
Internet  users, current and former employees or others.  Unknown security risks
may  result  in liability to us and also may deter new customers from purchasing
our software and services, and individuals from utilizing it. Although we intend
to  continue  to  implement  and  establish  security  measures, there can be no
assurance  that  measures  implemented  by  us  will  not be circumvented in the
future,  which  could  have a material adverse effect on our business, financial
condition  or  results  of  operations.

Lack of Established Market for Products and Services; Dependence on Internet and
Intranets  as  Mediums  of  Commerce  and  Communications.

The  market  for  our  streaming media products and services is new and evolving
rapidly.  It  depends  on  increased  use of the Internet and intranets.  If the
Internet  and  intranets  are  not  adopted  as  methods  for  commerce  and
communications,  or  if the adoption rate slows, the market for our products and
services  may  not  grow,  or  may  develop  more  slowly  than  expected.



The  electronic  commerce  market  is relatively new and evolving.  Sales of our
products  depend  in  large  part on the development of the Internet as a viable
commercial  marketplace.  There  are  now substantially more users and much more
"traffic"  over  the  Internet  than ever before, use of the Internet is growing
faster  than  anticipated,  and the technological infrastructure of the Internet
may  be  unable to support the demands placed on it by continued growth.  Delays
in  development  or  adoption  of  new technological


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standards  and  protocols, or increased government regulation, could also affect
Internet  use. In addition, issues related to use of the Internet and intranets,
such  as security, reliability, cost, ease of use and quality of service, remain
unresolved  and  may  affect  the  amount of business that is conducted over the
Internet  and  intranets.

Product  Delays  and  Errors.

We  have  experienced  development  delays and cost overruns associated with its
product  development.  We may encounter such problems in the future.  Delays and
cost  overruns  could  affect  our  ability to respond to technological changes,
evolving  industry standards, competitive developments or customer requirements.
Our  products  also  may  contain  undetected  errors  that  could cause adverse
publicity,  reduced market acceptance of the products, or lawsuits by customers.

Online  Commerce  Security  Risks.

Online  commerce  and  communications  depend  on  the  ability  to  transmit
confidential  information  securely over public networks.  Any compromise of our
ability to transmit confidential information securely, and costs associated with
the  prevention  or  elimination of such problems, could have a material adverse
effect  on  our  business.

International  Operations.

We  market  and  sell  our  products in the United States, Canada, Europe, Asia,
South  America,  Africa  and  Australia.  As  such, we are subject to the normal
risks  of doing business abroad.  Risks include unexpected changes in regulatory
requirements,  export  and  import  restrictions,  tariffs  and  trade barriers,
difficulties in staffing and managing foreign operations, longer payment cycles,
problems  in collecting accounts receivable, potential adverse tax consequences,
exchange rate fluctuations, increased risks of piracy, limits on the our ability
to  enforce  our  intellectual  property  rights,  discontinuity  of  our
infrastructures,  limitations  on  fund  transfers and other legal and political
risks.  Such  limitations and interruptions could have a material adverse effect
on  our  business.  We  do  not  currently hedge our foreign currency exposures.

Dividend  Policy.

We  do  not presently intend to pay cash dividends in the foreseeable future, as
any  earnings,  are  expected to be retained for use in developing and expanding
its  business.  Our  ability  to  declare  dividends  will  depend on results of
operations,  cash  requirements  and  future  prospects of us and other factors.

The  Lack  of  Assurance  That  we  Will  Be  Able  to  Meet  Our Future Capital
Requirements.

We  currently  have  limited  sources  of  operating  cash  flows to fund future
projects  or corporate overhead.  We have limited financial resources, and there
is  no  assurance  that  additional  funding  will be available.  Our ability to
continue  to  operate  will  be  dependent upon our ability to raise significant
additional  funds  in  the  future.

As  Shares of Our Common Stock are Classified as Penny Stock, Investors May Have
Difficulty  Selling  Their  Shares.

Our common stock is subject to "penny stock" rules as defined in 1934 Securities
and  Exchange  Act  rule  3151-1.  The  Securities  and  Exchange Commission has
adopted  rules  that  regulate  broker-dealer  practices  in  connection  with
transactions  in  penny  stocks.  Our  common  shares are subject to these penny
stock  rules.  Transaction  costs  associated  with purchases and sales of penny
stocks  are  likely  to be higher than those for other securities.  Penny stocks
generally are equity securities with a price of less than  $5.00 (other than

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securities  registered on certain national securities exchanges or quoted on the
NASDAQ  system,  provided that current price and volume information with respect
to  transactions  in  such  securities  is  provided by the exchange or system).

The penny stock rules require a broker-dealer, prior to a transaction in a penny
stock  not  otherwise  exempt  from  the  rules,  to deliver a standardized risk
disclosure  document that provides information about penny stocks and the nature
and  level  of  risks  in  the  penny stock market.  The broker-dealer also must
provide  the customer with current bid and offer quotations for the penny stock,
the  compensation  of  the broker-dealer and its salesperson in the transaction,
and monthly account statements showing the market value of each penny stock held
in  the customer's account.  The bid and offer quotations, and the broker-dealer
and  salesperson  compensation information, must be given to the customer orally
or  in  writing  prior  to  effecting  the  transaction and must be given to the
customer  in  writing  before  or  with  the  customer's  confirmation.

In  addition,  the  penny  stock  rules require that prior to a transaction in a
penny  stock not otherwise exempt from such rules, the broker-dealer must make a
special  written determination that the penny stock is a suitable investment for
the  purchaser and receive the purchaser's written agreement to the transaction.
These  disclosure  requirements  may  have  the  effect of reducing the level of
trading  activity  in  the  secondary market for the common shares in the United
States  and  shareholders  may  find  it  more  difficult  to sell their shares.



ITEM  2.     DESCRIPTION  OF  PROPERTY.

Our  head office is located in leased premises at Suite 1040, 1055 West Hastings
Street,  Vancouver,  British  Columbia,  Canada V6E 2E9.  Our principal business
operations  are  carried  out  from head office.  Our leased premises consist of
approximately  5,734  square feet.  We pay rent of approximately $8,300 Canadian
(equal  to  approximately  $5,240  US)  per month.  The lease is for an eighteen
month term expiring February 28, 2004.  We consider our leased premises adequate
for  our  current  business  purposes.


ITEM  3.     LEGAL  PROCEEDINGS.

Destiny  Software  Productions  Inc,  our wholly-owned subsidiary, has commenced
legal proceedings against Impatica.com Inc. as defendant in the Supreme Court of
British  Columbia,  Canada  for  payment  of  approximately $512,500 in unpaid
technology  licensing  fees.  During  November,  2000  we  agreed to license our
Clipstream(TM)  and  Videoclipstream(TM)  technology to Impatica in return for a
$675,000  license  fee.  The agreement called for payment of that fee in three
installments  against delivery of the technology in three phases. The technology
was  delivered  and  we received the first two payments totaling $162,500, but
Impatica  has  defaulted in paying the last $62,500 in cash and delivering the
200,000 Impatica shares which were to make up the balance of the purchase price.
It is our position that Impatica has repudiated the licensing agreement and that
the  unpaid  license  fees  totaling  $512,500 are a debt owing by Impatica to
Destiny.  The  outstanding  balance  has not been booked as revenue or elsewhere
in our financial statements. The Writ of
Summons was filed in the BC Supreme Court on June 6, 2001. The S.C.B.C. Registry
No.  is  S013166.  The defendant has denied liability to Destiny Software on the
basis that the license agreement was not formalized and that funds were advanced
on  an  alleged "good faith" agreement.  The defendant has filed a counter-claim
against  Destiny  Software  seeking return of the $162,500 advanced to us on the
alleged  "good  faith"  agreement  based  on the defendant's allegation that the
technology  did  not  perform  as  represented.

On April 4, 2002, Sanderson Business Resources Ltd., a private company owned and
operated  by  a  Mr.  Alf Sanderson, our former chief financial officer, filed a
claim  against  us  and  Destiny  Software  Productions  alleging  breach  of an
engagement  agreement.  The  plaintiff  is  seeking  judgment for the sum


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of CDN $23,701.62 for outstanding invoices that are alleged to be owing pursuant
to the engagement agreement. In addition, the plaintiff is claiming judgment for
the  sum  of  CDN $300,000  pursuant  to  a  term  of  the engagement agreement
that allegedly  obligated us to pay a fee CDN $300,000 if the plaintiff secured
an equity placement of CDN $1,500,000. The plaintiff is also seeking an order
that we issue to
the plaintiff 120,000 fully vested stock options exercisable at the price of USD
$0.25,  plus  general  and special damages. We have filed a statement of defence
denying  liability  in  this  proceeding.  We  maintain  that  no equity private
placement  was  ever  secured  by the plaintiff that would require us to pay any
amount  to  the  plaintiff.  We have also filed a counterclaim against Sanderson
Business  Resources  and  Mr. Alf Sanderson, the principal of Sanderson Business
Resources  and  our  former chief financial officer. We claim that Mr. Sanderson
and Sanderson Business Resources breached their contractual and fiduciary duties
to  us,  which breaches included misappropriation of funds and corporate assets,
and  are liable to us for damages. Our policy is to provide for costs related to
contingencies when a loss is probable and the amount reasonably determinable. It
is the opinion of management, based in part on advice of legal counsel, that the
ultimate  resolution of this contingency will not have a material adverse affect
on  our  financial  condition.  The  writ  of  summons  was filed in the British
Columbia  Supreme  Court  on April 4, 2002. The S.C.B.C Registry No. is S021906.

On  April  22, 2002, David Lawrence, our former chief executive officer, filed a
claim  against  us  and Destiny Software Productions for breach of an employment
contract  and  for  negligent  misrepresentations in connection with investments
made  by  Mr.  Lawrence  in our common stock.  Mr. Lawrence is claiming wrongful
dismissal  without  just  cause  and  without reasonable notice, contrary to the
terms  of  the management agreement between us and Mr. Lawrence. Mr. Lawrence is
also  claiming  damages  arising  from  alleged  negligent misrepresentations in
connection  investments  in  the  total  amount of $185,000 made by Mr. Lawrence
completed  by  private  placements in our common stock.   In addition to damages
for wrongful dismissal and damages for negligent misrepresentation, Mr. Lawrence
is  claiming  CDN $61,269.19 Canadian for unpaid salary and expenses, $16,299.83
for
expenses, interest pursuant to the Court Order Interest Act, R.S.B.C. 1996, c.76
and  costs.  We  have filed a statement of defence in this legal proceeding.  We
claim  that Mr. Lawrence breached his contractual duties and fiduciary duties to
us  as an officer and as a consequence he was dismissed for cause.  We have also
denied  that  any  misrepresentations  were made by us to Mr. Lawrence.  We have
also  filed a counterclaim against Mr. Lawrence for damages arising by reason of
Mr.  Lawrence's  breaches  of  his  fiduciary  and contractual duties to us.  No
amounts  have been recorded in our financial statements at August 31, 2002 as it
is  too  early  to  assess  a  probable  outcome. Any adjustments to the amounts
recognized  will be recorded when determinable. It is the opinion of management,
based  in  part  on  advice  of  legal  counsel, the ultimate resolution of this
contingency  will not have a material adverse affect on our financial condition.
The  Writ  of  Summons  was  file in the BC Supreme Court on April 22, 2002. The
S.C.B.C.  Registry  No.  is  S022205.


ITEM  4.     SUBMISSION  OF  MATTERS  TO  A  VOTE  OF  SECURITY  HOLDERS.

No  matters  were submitted to our security holders for a vote during the fourth
quarter  of  our  fiscal  year  ending  August  31,  2002.


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                                     PART II


ITEM  5.     MARKET  FOR  COMMON  EQUITY  AND  RELATED  STOCKHOLDER  MATTERS.

Market  Information

Our  shares  are  currently  trading  on  the OTC Bulletin Board under the stock
symbol  DSNY.  The first day on which the Company's shares were traded under the
stock  symbol DSNY was June 26, 2000. The high and the low trades for our shares
for  each  quarter  of  actual  trading  were:





                      QUARTER              HIGH ($)  LOW ($)
                      3rd Quarter 2000     $1.56     $0.59
                      ----------------     -----     -----
                      4th Quarter 2000     $0.62     $0.14
                      ----------------     -----     -----
                      1st Quarter 2001     $0.62     $0.14
                      ----------------     -----     -----
                      2nd Quarter 2001     $0.31     $0.10
                      ----------------     -----     -----
                      3rd Quarter 2001     $0.17     $0.07
                      ----------------     -----     -----
                      4th Quarter 2001     $0.19     $0.07
                      ----------------     -----     -----
                      1st Quarter 2002     $0.26     $0.11
                      ----------------     -----     -----
                      2nd Quarter 2002     $0.19     $0.12
                      ----------------     -----     -----
                      3rd Quarter 2002     $0.18     $0.08
                      ----------------     -----     -----
                      4th Quarter 2002
                      (to date)            $0.14     $0.07
                      ----------------     -----     -----

The  trades  reflect  inter-dealer  prices,  without retail mark-up, markdown or
commission  and  may  not  represent  actual  transactions.

Holders  of  Common  Stock

As of October 31, 2002, we had 30,555,903 shares of our common stock outstanding
and  there  were  106  registered  shareholders  of  our  common  stock.

Dividends

We have neither declared nor paid any cash dividends on our capital stock and do
not  anticipate  paying  cash  dividends  in the foreseeable future. Our current
policy  is  to  retain  any  earnings  in  order to finance the expansion of our
operations. Our board of directors will determine future declaration and payment
of dividends, if any, in light of the then-current conditions they deem relevant
and  in  accordance  with  applicable  corporate  law.

Recent  Sales  of  Unregistered  Securities

During  our  fiscal  year  ended  August 31, 2002, we completed the sales of the
following  securities that were not registered pursuant to the Securities Act of
1933  (the  "Securities  Act"):

On September 12, 2001, we issued 250,000 shares of our common stock to Mr. David
Lawrence,  our  former chief executive officer.  These shares were issued to Mr.
Lawrence based on an average deemed price of $0.1275 per share as payment to Mr.
Lawrence  of  accrued  but  unpaid management fees in the amount of $31,875. The
shares  were  issued  pursuant  to  Section  4(2)  of  the  Securities  Act.


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On September 12, 2001, we issued 113,605 shares of our common stock to Sanderson
Business  Resources,  a private company owned by Alf Sanderson, our former chief
financial  officer.  These  shares  were issued based on a deemed price of $0.11
per share based on the market price for our common stock as payment to Sanderson
Business  Resources  of  accrued  but  unpaid  consulting  fees in the amount of
$12,497.  The shares were issued pursuant to Section 4(2) of the Securities Act.

On  September  21,  2001,  we  issued  353,930 shares of our common stock to Mr.
Steven  Vestergaard,  our  president  and chief executive officer.  These shares
were  issued  to  Mr.  Vestergaard based on a deemed price of $0.11 per share as
payment  to  Mr.  Vestergaard  of  accrued  but  unpaid  salary in the amount of
$38,932.  This  salary was accrued in our fiscal year ended August 31, 2001. The
shares  were  issued  pursuant  to  Section  4(2)  of  the  Securities  Act.

On  September  21,  2001,  we  issued  271,010 shares of our common stock to Mr.
Edward  Kolic,  a director and our former chief operating officer.  These shares
were  issued  to Mr. Kolic based on a deemed price of $0.11 per share as payment
to Mr. Kolic of accrued but unpaid salary in the amount of $29,811.  This salary
was  accrued  in  our  fiscal year ended August 31, 2001. The shares were issued
pursuant  to  Section  4(2)  of  the  Securities  Act.

On  October  4, 2001, we issued 250,000 shares of our common stock to Mr. Ernest
Anderson,  a  former  consultant.  These  shares  were issued to Mr. Anderson in
consideration  for services to be provided by Mr. Anderson.  These services were
not  provided  and  we  have  taken  the  position  with  Mr.  Anderson  that no
consideration  for  the  shares has been received and the shares are forfeitable
and  are to be returned to us for cancellation.    Mr. Anderson has disputed his
obligation  to  return  the  shares.  The shares were issued pursuant to Section
4(2)  of  the  Securities  Act.

On October 11, 2001, we issued 100,000 units to a private investor at a price of
$0.10  per unit.  Each unit consisted of one share of common stock and one share
purchase warrant.  Each warrant entitled the investor to purchase one additional
share of our common stock at a price of $0.25 per share until May 31, 2002.  The
proceeds  for  the  private  placement  were  received  on  May 25, 2001.  These
securities  were  issued  pursuant  to  Section  4(2)  of  the  1933  Act.

On  November 30, 2001, we issued 125,000 shares of our common stock to Mr. David
Lawrence,  our  former chief executive officer.  These shares were issued to Mr.
Lawrence  based  on a deemed price of $0.12 per share as payment to Mr. Lawrence
of  accrued  but  unpaid  management fees for our first quarter in the amount of
$15,000.  The  deemed price of $0.12 per share was based on the market price for
our  common  stock.  The  shares  were  issued  pursuant  to Section 4(2) of the
Securities  Act.

On July 11, 2002, we completed an offering of 100,000 shares of our common stock
at  a  price  of $0.10 per share to one non-U.S. purchaser for total proceeds of
$10,000.  We  completed the offering pursuant to Rule 903 of Regulation S of the
Securities  Act.  A  finder's  fee  of  $1,000 was paid by us.  The certificates
representing the shares were endorsed with a legend confirming their restrictive
status  pursuant  to  the  Securities  Act.



On  July  11,  2002,  we  issued  140,000 shares of our common stock to Mr. John
Gammack,  one of our consultants.  These shares were issued to Mr. Gammack based
on  a  deemed  price  of  $0.12  per  share  as payment to Mr. Gammack to settle
outstanding accounts payable for services provided during the year.  We recorded
a  loss on debt settlement of $2,800 representing the excess of the market value
of  the common shares at the date of settlement over the carrying value of debt.
The  shares  were  issued  pursuant  to  Section  4(2)  of  the  Securities Act.

On July 17, 2002, we completed an offering of 500,000 shares of our common stock
at  a  price  of $0.10 per share to one non-U.S. purchaser for total proceeds of
$50,000.  We  completed the offering pursuant to Rule 903 of Regulation S of the
Securities  Act.   A  finder's  fee  of $5,000 was paid by us.  The certificates
representing the shares were endorsed with a legend confirming their restrictive
status


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pursuant  to the Securities Act. The certificates representing these shares were
issued subsequent to August 31, 2002 and accordingly the investment was recorded
as  common  stock  issuable  on  our  balance  sheet  as  of  August  31,  2002.


ITEM  6.     MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OR  PLAN  OF  OPERATION.

The following discussion of our financial condition and our subsidiaries and our
results  of  operations  should be read together with the consolidated financial
statements  and  related  notes that are included later in this Annual Report on
Form  10-KSB.  This  discussion contains forward-looking statements that involve
risks  and  uncertainties.  Our  actual results may differ materially from those
anticipated  in these forward-looking statements as a result of various factors,
including  those set forth under "Risk Factors" or in other parts of this Annual
Report  on  Form  10-KSB.


RESULTS  OF  OPERATIONS

Revenue

Our  revenues  increased  to  $769,326  for  the year ended August 31, 2002 from
$345,653  for  the  year  ended  August  31,  2001,  representing an increase of
$423,673  or 123%.   Approximately 95% of our revenues are derived from sales of
our  Clipstream(TM)  software,  with the balance being comprised of sales of our
RadioDestiny  Broadcaster(TM)  software.  For  sales  of  our  Clipstream(TM)
software, our revenues are primarily attributable to revenues from license fees.
Revenues associated with maintenance agreements for our Clipstream(TM) software,
which  include  updates,  upgrades, support and training services, accounted for
approximately  20%  of  our  Clipstream(TM)  revenues.

The  increase in our revenues is primarily attributable to substantial increases
in the sales of our Clipstream(TM) java-based audio and video streaming software
products.  This  increase  in  revenues  was broadly spread across revenues from
advertising,  white labels and OEM's, partner fees, corporate intranets, portals
and  other  licensing  opportunities.  We  believe  the increase in sales of our
Clipstream(TM)  software  products is the result of our assembly of a core sales
group  in  fiscal  2002  combined  with  by  the  market  acceptance  of  our
Clipstream(TM) software products. We believe that market acceptance has been the
result  of  consumer  recognition  of  the Clipstream(TM) brand as an affordable
solution  and  viable  alternative  to  the  products  being  offered  by  our
competitors.

We  were  able to achieve this significant increase in revenues from fiscal 2001
even  though  our sales expense has fallen.  The reason for this is that we were
able  to  achieve higher sales levels from each of our sales representatives and
higher  average  revenues  from  license sales.  In fiscal 2001, we did a lot of
discounting  of  software  prices in order to establish "beach head" accounts in
each  market vertical in order that we could use establish references and market
share.  We  believe  this  pricing  strategy  is  no longer necessary due to our
current  presence  in the market.  Most of our new licensing arrangements are at
higher  sales  prices  than  in  fiscal  2001.


We also experienced increased revenues in fiscal 2002 from customers who renewed
Clipstream(TM)  licenses  originally purchased in fiscal 2001 are renewing their
agreements.   We  believe  that  we  will  continue  to  have  a high level with
opportunities  for  recurring  service revenues which may include video encoding
services,  custom  development,  custom skinning, development of email campaigns
and  hosting.

We  plan to focus our sales and marketing efforts on our Clipstream(TM) software
products during 2003.  Our plan is to continue to work closely with both current
customers and potential customers with the objective of raising market awareness
of  our  products  and  ensuring  greater consumer adoption of our


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products  with  resulting  higher  revenues.  We  also  anticipate  that we will
commence  earning  revenues  from  the PirateRadio(TM) software suite during the
second  quarter  of  fiscal 2003. However, this product suite is unproven in the
market  and  there  is  no  assurance  significant  sales  will  be  achieved.

Operating  Expenses

General  and  Administrative.  Our  general  and administrative expenses consist
primarily  of  salaries  and  related  personnel  costs  including  overhead,
professional  fees,  and  other  general  office  expenditures.  General  and
administrative  costs  decreased  to $456,827 for the year ended August 31, 2002
from  $526,256 for the year ended August 31, 2001, a decrease of $69,429 or 13%.
The  decrease is primarily due the concerted efforts of our management to reduce
all  unnecessary expenditures.  We have encouraged all departments to scrutinize
expenditures  and  pursue  favorable  arrangements  with  key  suppliers  where
possible.

Sales and Marketing.  Sales and marketing expenses consist primarily of salaries
and  related  personnel costs including overhead, sales commissions, advertising
and promotional fees, and travel costs.  Sales and marketing costs were $525,125
for  the  year ended August 31, 2002 from $584,041 for the year ended August 31,
2001,  representing a decrease of $58,916 or 10%.  The decrease is primarily due
to  the  reduction  of  travel  costs incurred and associated expenses including
meals  and  entertainment.  We  elected  to  not  attend  various tradeshows and
instead  focus  our  efforts on direct contact with key personnel of potentially
strategic  customers.  Sales and marketing expenses may increase for 2003 due to
our  continued  focus  on marketing the Clipstream(TM) software products and our
launch  of  the  PrivateRadio(TM)  software  suite.

Research  and  Development.  Research and development costs consist primarily of
salaries  and  related  personnel  costs including overhead, and consulting fees
with  respect  to  product development and deployment.  Research and development
costs decreased to $244,074 for the year ended August 31, 2002 from $519,040 for
the  year  ended  August  31,  2001, representing a decrease of $274,966 or 53%.
Fiscal  2002  marked  a  transitional  year  for  us  as  we  moved from being a
developmental  stage  enterprise to that of an operational and mature company as
we  achieved  significant  increases  in  sales  of  our Clipstream(TM) software
products.  As  a  result  of  this  transition, our expenditures on research and
development  decreased.   While expenditures have decreased, we plan to continue
to  be focused on  the  research and development of streaming media products.
However,  we  have  made  the  determination  to focus our efforts on the sales,
marketing  and distribution of our industry leading Clipstream(TM) technology in
order  to  increase  our  revenues  and  decrease  our  reliance  on  continued
financings.  We have seen our products enjoy mainstream acceptance amongst early
adopters  of  technology  and  have committed ourselves to increasing our market
position  through  focused  efforts  in  sales  and  marketing.  We  anticipate
maintaining  research  and development expenses at current levels through fiscal
2003.

Depreciation  and  amortization.  Depreciation  and  amortization expenses arose
from  fixed  assets,  other  assets,  intellectual  property  and  goodwill.
Depreciation  and  amortization  decreased to $101,437 for the year ended August
31,  2002  from  $256,573  for  the  year  ended  August 31, 2001, a decrease of
$155,136  or  60%.  The  decrease in depreciation and amortization is due to the
lower  average  net  book value of fixed assets as a result of limited additions
made  during  the  fiscal  year.

Other  Expenses  and  Income

Interest expense increased $1,119 from $3,033 for the year ended August 31, 2001
to  $4,152  for  the  year  ended  August  31,  2002.  Interest and other income
decreased  $10,724 from $15,170 for the year ended August 31, 2001 to $4,446 for
the  year ended August 31, 2002.  Loss on debt settlement decreased $25,949 from
$28,749  for  the year ended August 31, 2001 to $2,800 for the year ended August
31,  2002.  This  loss  represents  the excess of the market value of the common
shares,  issued  to  settle various accounts, at the date of settlement over the
carrying  value  of  the  debt.

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Other  Expenses  Incurred

We  recorded  a  gain  of  $182,955 resulting from the disposition of Wonderfall
Productions Inc., a former subsidiary, on August 27, 2002 to an unrelated party.
The gain substantially represents the excess of liabilities assumed by the
purchaser over the carrying value of assets properly recorded in our accounts.
 The cash consideration for the sale was $250.  We  determined  to  dispose of
Wonderfall Productions in order to ensure we were
focusing our management and financial resources on our core business competences
including  the  sales  and  marketing of our Clipstream(TM) java-based audio and
video  technology.

Losses

Our  loss  from  operations  decreased to $558,137 for the year ended August 31,
2002 from $1,540,257 for the year ended August 31, 2001, representing a decrease
of  $982,120  or  64%.  Our loss decreased to $377,688 for the year ended August
31,  2002  from  $1,556,869  for  the year ended August 31, 2001, representing a
decrease  of  $1,179,181  or 76%.  The decreases to our loss from operations and
loss  for  the  year  are  the  result  of  our increased revenues and decreased
operating  costs  and  are  reflective  of  our  transition  from  a  technology
development  company  to  a  technology  sales  and  development  company.

For  our  fiscal  year  ending  August  31,  2003,  our  management  plans  on
concentrating  its  efforts  in  the  following  areas  in  order  to  achieve
profitability:

1.   Continuing  to  increase  sales  of  the  Clipstream(TM)  technology  by
     undertaking  marketing  the "Clipstream(TM)" java based streaming solution.
     Development  has been completed and we are now embarking on a marketing and
     sales  program to fully exploit and maximize revenue from this product. Our
     sales  group includes both inside and outside sales and a network of ninety
     resellers  in  eleven  countries.  License  agreements  and  partnership
     opportunities will be sought with larger content providers, aggregators and
     resellers.

2.   Maintaining  tight  control  over  expenses  as  the  company  expands  its
     operations.

We  will have to raise additional funds to complete our business plan due to our
significant  working capital deficit.  Our goal is to obtain these funds through
an  optimal  mix of internal and external financing opportunities including cash
flows  from  operations, strategic partnerships and equity financings.  There is
no  assurance  that  we  will  achieve  the  required  financing.


LIQUIDITY  AND  FINANCIAL  CONDITION

We  had  cash of $20,997 as at August 31, 2002 compared to cash of $30,443 as at
August  31,  2002.  We had a working capital deficiency of $879,171 as at August
31,  2002  compared to a working capital deficiency of $696,917 as at August 31,
2001.  We  had  a  shareholders'  deficiency  of  $696,202 as at August 31, 2002
compared  to  a  shareholders'  deficiency  of  $526,517  as at August 31, 2001.

Working  Capital  Deficiency

The  increase  in  our  working  capital  deficiency is directly attributable to
increases  in  accounts  payable  and  accrued liabilities, demand loans and the
current  portion  of deferred revenues.  These increases have been offset by the
extinguishment  of  the  current  portion  of  long-term  debt.

Our  accounts payable and accrued liabilities increased to $516,710 as at August
31,  2002 from $388,277 at August 31, 2001, representing an increase of $128,433
or  33%.  The  increase in our accounts payable and accrued liabilities reflects
our  current  inability to finance our operations from current product revenues.

                                  25 of 43

<PAGE>


Our  loans  payable increased to $292,291 as at August 31, 2002 from $100,000 as
at  August  31,  2001.  These  loans  are from three of our shareholders and are
unsecured, non-interest bearing and are due on demand.  We anticipate
conversion of $192,291 of the loans payable into equity at prices based on the
market price of  our  common  stock. However, no firm arrangements have been
made for such a conversion.


Our  current  deferred revenues increased to $229,469 as at August 31, 2002 from
$156,657  as  at  August  31,  2001, representing an increase of $72,812 or 46%.
The increase in deferred revenue is consistent with the increase in our sales of
software  products.  We  recognize deferred revenue in compliance with Statement
of Position No. 97-2 "Software Revenue Recognition", as referred to in the notes
to  our  audited  financial  statements and as discussed below under the heading
"Critical  Accounting  Policies".  Deferred  revenues  reflect  cash received in
advance of meeting the revenue recognition criteria as described in the notes to
the  financial statements.  Deferred revenues result if we complete sales of our
software  products  when  significant post-delivery obligations exist.   In this
case, revenue is deferred until we complete the post-delivery obligations.  Cash
that  we  receive  in  advance  of  meeting  the revenue recognition criteria is
recorded  as  a  deferred  revenue  liability.

Cash  Flows

Net  cash  used in operating activities decreased to $218,272 for the year ended
August  31,  2002  compared  to $419,897, representing a decrease of $201,625 or
48%.  The  cash used in operating activities was off-set by net cash provided by
financing  activities  in  the  amount of $245,241 for the year ended August 31,
2002  compared  to  $394,250  for  the  year  ended  August  31,  2001.

We  have  financed  our  operations to date primarily through the sale of equity
securities  and  borrowings  from  shareholders.  When  possible, we have issued
common  stock  for  services  and debt settlement.  We continued these financing
activities  through  the year ended August 31, 2002 as our revenues to date have
provided  insufficient  funding  for  our  working  capital  requirements.
Accordingly, we anticipate that we will have to continue to rely on funding from
private  placements,  cash  flows  and  other  offerings in order to finance our
future  operating  costs.

We  relied  on  issuances  of  our common stock in order to pay a portion of the
salary  and  consulting  fees  payable to our officers, directors, employees and
consultants  during  the  year  ended August 31, 2002.   We have completed these
share  issuances  due  to  the insufficiency of our cash flows from revenues and
financing  activities  to  pay  for  all  of  our operating costs.   These share
issuances  included  the  following:

1.   We  issued  363,605  common  shares to certain of our officers for services
     rendered  prior  to  August  31,  2001.  A  compensation expense of $44,372
     related  to  these services was fully accrued for as at August 31, 2001. We
     issued  an  additional 125,000 common shares at $15,000 for services during
     the  year  ended  August 31, 2002 for an aggregate total of 488,605 shares.

2.   We issued 624,940 common shares to certain of our officers in settlement of
     $68,743  of  outstanding  accounts  payable  and  accrued  liabilities.

3.   We  issued 140,000 common shares having a market value of $16,800 to settle
     outstanding  accounts payable to one of our consultants. We recorded a loss
     on  the  debt  settlement  of $2,800, representing the excess of the market
     value  of  the  common  shares  at the date of settlement over the carrying
     value  of  the  debt.

In addition, we completed the following issuances of our common stock during the
year  ended  August  31,  2002  in  respect  of  our  financing  activities:

1.   We  issued  100,000 common shares for proceeds of $10,000 received prior to
     August  31,  2001.

                                  26 of 43

<PAGE>


2.   We  issued  100,000 common shares on a private placement at $0.10 per share
     for  proceeds  of  $10,000.

3.   We  received  $50,000  in respect of a private placement at $0.10 per share
     for  proceeds of $50,000. The shares for this private placement were issued
     subsequent  to  August  31,  2002.

Going  Concern

We  have incurred recurring losses from operations and we have a working capital
deficiency.  As a result, substantial doubt exists about its ability to continue
as a going concern.  Our 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 we will
be  successful.  If  it  is  not,  we  will  be required to reduce operations or
liquidate  assets.  Our  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 we be unable to continue
as  a  going concern.  Our auditors have referred to the substantial doubt about
our  ability  to  continue  as  a  going  concern  in  their audit report on our
financial  statements  included  with  this  Annual  Report  on  Form  10-KSB.


CRITICAL  ACCOUNTING  POLICIES

We  prepare  our consolidated financial statements in accordance with accounting
principles  generally  accepted  in  the  United  States, 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.

The following critical accounting policies affect our more significant estimates
and  assumptions  used  in  preparing  our  consolidated  financial  statements.

-     The  consolidated  financial  statements  have  been prepared on the going
concern  basis,  which  assumes  the  realization  of  assets and liquidation of
liabilities in the normal course of operations.  If we were not to continue as a
going  concern,  we  would likely not be able to realize on our assets at values
comparable  to  the  carrying value or the fair value estimates reflected in the
balances  set  out  in the preparation of the consolidated financial statements.
There  can  be no assurances that we will be successful in generating additional
cash  from equity or other sources to be used for  operations.


-     We  recognize revenue when there is persuasive evidence of an arrangement,

delivery  has  occurred,  the  fee  is  fixed  or  determinable,  collection  is
reasonably  assured,  and  there  are  no  substantive  performance  obligations
remaining.  Our  revenue  recognition  policies  are in  conformity with AICPA's
Statement of Position No. 97-2, "Software Revenue Recognition", as amended ("SOP
97-2).  We  generate  revenue  from  software  arrangements  involving  multiple
element  sales  arrangements.  Revenue  is  allocated  to  each  element  of the
arrangement  based  on the relative fair value of the elements and is recognized
as  each  element  is delivered and we have no significant remaining performance
obligations.  If  evidence  of  fair  value for each element does not exist, all
revenue  from  the  arrangement  is recognized over the term of the arrangement.
To-date, evidence of fair value for each element has not been available on sales
arrangements.  Changes in our business priorities or model in the future could
materially impact our reported revenue and cash flow.  Although such changes are
not currently contemplated, they could be required in response to industry or
customer developments.




                                  27 of 43

<PAGE>

ITEM  7.     FINANCIAL  STATEMENTS.

Index to Audited Consolidated Financial Statements for the Year Ended August 31,
2002:

1.   Auditors'  Report;

2.   Consolidated  Balance  Sheets  as  at  August  31,  2002  and  2001;

3.   Consolidated  Statement  of  Operations for the Years ended August 31, 2002
     and  2001;

4.   Consolidated  Statement  of Stockholders' Deficiency and Comprehensive Loss
     for  the  Years  ended  August  31,  2002  and  2001;

5.   Consolidated  Statement  of  Cash Flows for the Years ended August 31, 2002
     and  2001;

6.   Notes  to  Consolidated  Financial  Statements.


ITEM  8.     CHANGES  IN  AND  DISAGREEMENTS  WITH ACCOUNTANTS ON ACCOUNTING AND
             FINANCIAL  DISCLOSURE.

Not  applicable.



                                  28 of 43

<PAGE>









                        Consolidated Financial Statements
                        (Expressed in United States dollars)

                        DESTINY MEDIA TECHNOLOGIES INC.

                        Years ended August 31, 2002 and 2001








<PAGE>

kpmg

          KPMG LLP                                     Telephone  (604) 691-3000
          Chartered Accountants                        Telefax  (604) 691-3031
          Box 10426, 777 Dunsmuir Street               www.kpmg.ca
          Vancouver BC  V7Y 1K3
          Canada



INDEPENDENT  AUDITORS'  REPORT

The  Board  of  Directors  and  Stockholders
Destiny  Media  Technologies  Inc.

We  have  audited  the consolidated balance sheets of Destiny Media Technologies
Inc.  as  of  August  31,  2002  and  2001  and  the  consolidated statements of
operations,  stockholders'  deficiency and comprehensive loss and cash flows for
the  years  then  ended.  These  consolidated  financial  statements  are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion  on  these  consolidated  financial  statements  based  on  our  audits.

We conducted our audits in accordance with auditing standards generally accepted
in  the  United  States  of  America.  Those  standards require that we plan and
perform  the  audit  to  obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test  basis,  evidence  supporting  the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made  by  management,  as well as evaluating the overall
financial  statement  presentation.  We  believe  that  our  audits  provide  a
reasonable  basis  for  our  opinion.

In  our opinion, the consolidated financial statements referred to above present
fairly,  in  all  material  respects,  the  financial  position of Destiny Media
Technologies  Inc.  as  of  August  31,  2002  and  2001  and the results of its
operations  and  its  cash  flows  for  the  years then ended in conformity with
accounting  principles  generally  accepted  in  the  United  States of America.

The  accompanying  consolidated financial statements have been prepared assuming
that  the  Company  will continue as a going concern.  As discussed in note 2 to
the  financial  statements,  the  Company  has  incurred  recurring  losses from
operations  and  has  a  working capital deficiency that raise substantial doubt
about  its ability to continue as a going concern.  Management's plans in regard
to  these matters are also described in note 2.  The financial statements do not
include  any adjustments that might result from the outcome of this uncertainty.

As  discussed  in note 3(o) to the financial statements, the Company changed its
method  of  accounting  for  losses  on  the  extinguishment  of  debt.

/s/ "KPMG LLP"

Chartered Accountants

Vancouver, Canada
October 11, 2002



[[[[      KPMG  LLP,  a Canadian owned limited liability partnership established
          under  the  laws  of  Ontario,  is  the  Canadian  member firm of KPMG
          International,  a  Swiss  nonoperating  association.


<PAGE>

DESTINY MEDIA TECHNOLOGIES INC.
Consolidated Balance Sheets
(Expressed in United States dollars)

August 31, 2002 and 2001


--------------------------------------------------------------------------------
                                                            2002         2001
--------------------------------------------------------------------------------
Assets

Current assets:
  Cash                                                $    20,997   $    30,443
  Short-term investments                                    7,016         7,022
  Accounts receivable, net of allowance for
   doubtful accounts of 19,626 (2001 - $719)               74,824        62,981
  Prepaid expenses                                         56,497        11,946
--------------------------------------------------------------------------------
  Total current assets                                    159,334       112,392

Other assets, net of accumulated amortization
 of 19,717 (2001 - $5,959)                                 34,595        29,862

Note receivable (note 5)                                   99,946        99,946

Equipment (note 6)                                         72,986        94,494

Intellectual property, net of accumulated
 amortization of $156,892 (2001 - $137,293)                     -        19,599

Goodwill, net of accumulated amortization
 of $272,258 (2001 - $240,850)                                  -        34,408
--------------------------------------------------------------------------------

                                                      $   366,861   $   390,701
================================================================================

Liabilities and Stockholders' Deficiency

Current liabilities
  Accounts payable and accrued liabilities            $   516,710   $   388,277
  Related party payable (note 7)                               35         1,352
  Loans payable (note 8)                                  292,291       100,000
  Deferred revenue                                        229,469       156,657
  Current portion of long-term debt (note 9)                    -       163,023
--------------------------------------------------------------------------------
  Total current liabilities                             1,038,505       809,309

Long-term debt (note 9)                                         -        22,320

Deferred revenue                                           24,558        85,589

Stockholders' deficiency:
  Common stock, par value $0.001
    Authorized:  100,000,000 shares
    Issued and outstanding:  28,730,903 shares
     (2001 - 27,177,358)                                   28,382        26,928
    Issued and held in escrow:  250,000 shares
     (note 10(a)(i))
    Issued and contingently returnable:
     100,000 shares (note 10(a)(v))
  Common stock issuable                                    50,000        54,372
  Additional paid-in capital                            2,828,580     2,648,018
  Deferred stock compensation                             (18,093)      (44,931)
  Deficit                                              (3,574,786)   (3,197,098)
  Accumulated other comprehensive loss                    (10,285)      (13,806)
--------------------------------------------------------------------------------
  Total stockholders' deficiency                         (696,202)     (526,517)
--------------------------------------------------------------------------------

Total liabilities and stockholders' deficiency        $   366,861   $   390,701
================================================================================

Continuing operations (note 2)
Commitments and contingencies (notes 12 and 13)
Subsequent events (note 16)


See accompanying notes to consolidated financial statements.


                                                                              1

<PAGE>

DESTINY MEDIA TECHNOLOGIES INC.
Consolidated Statements of Operations
(Expressed in United States dollars)

Years ended August 31, 2002 and 2001


------------------------------------------------------------------------
                                                  2002          2001
------------------------------------------------------------------------


Revenue                                       $   769,326   $   345,653

Operating expenses:
  General and administrative                      456,827       526,256
  Sales and marketing                             525,125       584,041
  Research and development                        244,074       519,040
  Depreciation and amortization                   101,437       256,573
------------------------------------------------------------------------
                                                1,327,463     1,885,910
------------------------------------------------------------------------

Loss from operations                             (558,137)   (1,540,257)

Interest expense                                   (4,152)       (3,033)
Interest and other income                           4,446        15,170
Loss on debt settlement (note 10(a)(iv))           (2,800)      (28,749)

Gain on sale of subsidiary (note 4)               182,955             -
------------------------------------------------------------------------

Loss for the year                             $  (377,688)  $(1,556,869)
========================================================================

Loss per common share, basic and diluted            (0.01)        (0.06)
========================================================================

Weighted average common shares outstanding,
 basic and diluted                             28,087,085    25,068,025
========================================================================




See accompanying notes to consolidated financial statements.


                                                                              2


<PAGE>
<TABLE>



DESTINY  MEDIA  TECHNOLOGIES  INC.
Consolidated  Statements  of  Stockholders'  Deficiency  and  Comprehensive  Loss
(Expressed  in  United  States  dollars)



------------------------------------------------------------------------------------------------
                                       Common stock      Additional                 Deferred
                                  --------------------    paid-in     Shares         stock
                                    Shares     Amount     capital     issuable    compensation
------------------------------------------------------------------------------------------------
                                  <S>          <S>      <S>          <S>         <S>

Balance, August 31, 2000          22,501,000   $22,501  $1,986,553   $       -   $     (87,550)

  Loss for the period                      -         -           -           -               -
  Cumulative translation
   adjustment                              -         -           -           -               -
  Comprehensive loss

  Common stock issued for cash
   on private placements           3,571,200     3,571     370,679      10,000               -
  Common stock issued for
   services rendered                 180,158       181      45,119           -               -
  Common stock issued for
   debt settlement                   675,000       675     179,325           -               -
  Common stock issued for
    services to be rendered
     (note 10(a)(v))                 250,000         -           -           -               -
  Common stock issuable                    -         -           -      44,372               -
  Deferred stock compensation              -         -      29,631           -         (29,631)
  Amortization of deferred
   stock compensation                      -         -           -           -          72,250
  Options issued to non-
  employees for services                   -         -      36,711           -               -
------------------------------------------------------------------------------------------------

Balance, August 31, 2001          27,177,358    26,928   2,648,018      54,372         (44,931)

  Loss for the year                        -         -           -           -               -
  Cumulative translation
   adjustment                              -         -           -           -               -
  Comprehensive loss

  Common stock issued for
   services rendered
   (note 10(a)(ii))                  488,605       489      58,883     (44,372)              -
  Common stock issued for
   debt arising in prior year
   (note 10(a)(iii))                 624,940       625      68,118           -               -
  Common stock issued for
   debt arising in current
   year (note 10(a)(iv))             140,000       140      16,660           -               -
  Common stock issued for
   services to be rendered
   (note 10(a)(i))                   250,000         -           -           -               -
  Cancellation of common stock
   issued for services to be
   rendered (note 10(a)(v))         (150,000)        -           -           -               -
  Common stock issued for
   cash on private placement
   (note 10(b)(i) and (ii))          200,000       200      18,800     (10,000)              -
  Common stock issuable for
   cash on private placement
   (note 10(c))                            -         -      (5,000)     50,000               -
  Deferred stock compensation              -         -      10,450           -         (10,450)
  Cancellation of stock options            -         -      (4,142)          -           4,142
  Amortization of deferred stock
   compensation                            -         -           -           -          33,146
  Options issued to non-
  employees for services                   -         -      16,793           -               -
------------------------------------------------------------------------------------------------

Balance, August 31, 2002          28,730,903   $28,382  $2,828,580   $  50,000   $     (18,093)
================================================================================================


------------------------------------------------------------------------------
                                                                    Total
                                                 Cumulative      stockholders'
                                                 translation       equity
                                    Deficit      adjustment      (deficiency)
------------------------------------------------------------------------------
                                  <S>            <S>             <S>

Balance, August 31, 2000          $(1,640,229)   $    (8,272)    $    273,003

  Loss for the period              (1,556,869)             -       (1,556,869)
  Cumulative translation
   adjustment                               -         (5,534)          (5,534)
                                                                 -------------
  Comprehensive loss                                               (1,289,400)

  Common stock issued for cash
   on private placements                    -              -          384,250
  Common stock issued for
   services rendered                        -              -           45,300
  Common stock issued for
   debt settlement                          -              -          180,000
  Common stock issued for
    services to be rendered
     (note 10(a)(v))                        -              -                -
  Common stock issuable                     -              -           44,372
  Deferred stock compensation               -              -                -
  Amortization of deferred
   stock compensation                       -              -           72,250
  Options issued to non-
  employees for services                    -              -           36,711
------------------------------------------------------------------------------

Balance, August 31, 2001           (3,197,098)       (13,806)        (526,517)


  Loss for the year                  (377,688)             -         (377,688)
  Cumulative translation
   adjustment                               -          3,521            3,521
                                                                 -------------
  Comprehensive loss                                                 (900,684)

  Common stock issued for
   services rendered
   (note 10(a)(ii))                         -              -           15,000
  Common stock issued for
   debt arising in prior year
   (note 10(a)(iii))                        -              -           68,743
  Common stock issued for
   debt arising in current
   year (note 10(a)(iv))                    -              -           16,800
  Common stock issued for


   services to be rendered
   (note 10(a)(i))                          -              -                -
  Cancellation of common stock
   issued for services to be
   rendered (note 10(a)(v))                 -              -                -

  Common stock issued for
   cash on private placement
   (note 10(b)(i) and (ii))                 -              -            9,000
  Common stock issuable for
   cash on private placement
   (note 10(c))                             -              -           45,000
  Deferred stock compensation               -              -                -
  Cancellation of stock options             -              -                -
  Amortization of deferred stock
   compensation                             -              -           33,146
  Options issued to non-
  employees for services                    -              -           16,793
------------------------------------------------------------------------------

Balance, August 31, 2002          $(3,574,786)   $   (10,285)    $   (696,202)
==============================================================================

</TABLE>



See accompanying notes to consolidated financial statements.


                                                                              3

<PAGE>

DESTINY MEDIA TECHNOLOGIES INC.
Consolidated Statements of Cash Flows
(Expressed in United States dollars)

Years ended August 31, 2002 and 2001



--------------------------------------------------------------------------
                                                      2002         2001
--------------------------------------------------------------------------

Cash flows from operating activities:
  Loss for the year                               $(377,688)  $(1,556,869)
  Items not involving cash:
    Depreciation and amortization                   101,437       256,573
    Shares issuable for services                          -        44,372
    Shares issued for services rendered              15,000        45,300
    Shares issued for debt settlement                85,543       180,000
    Stock-based compensation - employees             33,146        72,250
    Stock-based compensation - non-employees         16,793        36,711
    Interest accrued on term deposit                    (84)         (304)
    Interest accrued on note receivable                   -        11,187
    Gain on sale of subsidiary                     (182,955)            -
  Changes in non-cash working capital:
    Accounts receivable                             (12,543)       16,541
    Prepaid expenses                                (44,705)       11,034
    Accounts payable and accrued liabilities        132,883       221,061
    Deferred revenue                                 14,901       242,247
--------------------------------------------------------------------------
  Net cash used in operating activities            (218,272)     (419,897)

Cash flows from investing activities:
  Purchase of equipment                             (20,478)      (10,276)
  Refund on return of equipment                           -        11,280
  Purchase of other assets                          (10,431)      (34,498)
--------------------------------------------------------------------------
  Net cash used in investments                      (30,909)      (33,494)

Cash flows from financing activities:
  Proceeds from loans payable                       192,291             -
  Proceeds on sale of subsidiary                        250             -
  Common stock issuable, net of agent fees           45,000        10,000
  Net proceeds from issuances of common
   stock and subscriptions                            9,000       384,250
  Amounts paid to related party                      (1,300)            -
--------------------------------------------------------------------------
  Net cash provided by financing activities         245,241       394,250
--------------------------------------------------------------------------

Net increase (decrease) in cash during
 the year                                            (3,940)      (59,141)

Effect of foreign exchange rate changes
 on cash                                             (5,506)       (8,344)

Cash, beginning of year                              30,443        97,928
--------------------------------------------------------------------------

Cash, end of year                                 $  20,997   $    30,443
==========================================================================

Supplementary disclosure:
  Cash paid for:
    Interest                                      $   4,152   $     3,033
    Income tax                                                          -
  Non-cash transactions:
    Stock issued to acquire Destiny
     Software Productions, Inc.,
     net of cash acquired                                 -             -
    Stock issued for settlement of debt              85,543       180,000
    Stock issued for services rendered               15,000        45,300
    Stock issuable for services rendered                  -        44,372
    Deferred stock-based compensation                49,937        66,342
    Advertising obtained through barter
     transaction                                     36,000        36,000

==========================================================================




See accompanying notes to consolidated financial statements.


                                                                              4

<PAGE>

DESTINY MEDIA TECHNOLOGIES INC.
Notes to Consolidated Financial Statements
(Expressed in United States dollars)

Years ended August 31, 2002 and 2001
--------------------------------------------------------------------------------



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:

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  and  commitments  in the ordinary course of business. At August 31,
2002,  the Company has a working capital deficiency of $879,171 and a deficiency
of  assets  to  liabilities  of $696,202. Operations to date have been primarily
financed  by  long-term debt and equity transactions. 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.  Subsequent  to  August  31,  2002, the Company obtained
permission  to  begin  trading  on  the Third Market Segment of the Berlin Stock
Exchange and has commenced presentations in Germany and the UK to attract future
potential  investors.  There  can  be  no  assurances  that  the Company will be
successful in raising and/or generating additional cash for operations. 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.     Significant  accounting  policies:

These  consolidated  financial  statements  have  been  prepared using generally
accepted  accounting  principles  in  the  United  States.

(a)  Principles  of  consolidation:

     The financial statements include the accounts of the Company and its wholly
     owned  subsidiaries, Destiny Software Productions Inc. ("Destiny Software")
     and  Wonderfall Productions Inc. ("Wonderfall"), up to the date of the sale

     of  Wonderfall  on  August 27, 2002 (see note 4). All intercompany balances
     and  transactions  have  been  eliminated  on  consolidation.


                                                                              5


<PAGE>

DESTINY MEDIA TECHNOLOGIES INC.
Notes to Consolidated Financial Statements
(Expressed in United States dollars)

Years ended August 31, 2002 and 2001
--------------------------------------------------------------------------------



3.     Significant  accounting  policies:

(b)  Basis  of  presentation:

     Certain  comparative  figures  have  been  reclassified  to  conform to the
     presentation  adopted  in  the  current  year.

     The  preparation  of  the financial statements in conformity with generally
     accepted  accounting  principles  requires management to make estimates and
     assumptions  that affect the reported amounts of assets and liabilities and
     disclosure  of  contingent  assets  and  liabilities  at  the  date  of the
     financial  statements  and  the  reported  amounts of revenues and expenses
     during the period. Significant areas requiring the use of estimates include
     estimating  the  recoverability of accounts receivable and notes receivable
     and  the  valuation  of  equipment,  and other assets. Actual results could
     differ  from  those  estimates.

(c)  Short-term  investments:

     Short-term  investments  are  carried  at  market  value,  which  does  not
     materially  differ  from  cost.

(d)  Research  and  development  costs:

     Research  and, except as indicated below, development costs are expensed as
     incurred.  Software  and related development costs, after the establishment
     of  technological  feasibility and commercial viability, are capitalized as
     software  development  costs until the product is ready for general release
     to  customers.  Amortization is provided on a product by product basis over
     the  estimated  economic  life  of  the product, not to exceed three years.
     Amortization commences when the product is available for general release to
     customers.

(e)  Revenue  recognition:

     The  Company  recognizes  revenue  when  there is persuasive evidence of an
     arrangement,  delivery  has  occurred,  the  fee  is fixed or determinable,
     collectibility  is  reasonably  assured,  and  there  are  no  substantive
     performance  obligations  remaining.  The  Company's  revenue  recognition
     policies are in conformity with the AICPA's Statement of Position No. 97-2,
     "Software  Revenue  Recognition",  as  amended  ("SOP  97-2").


                                                                              6

<PAGE>

DESTINY MEDIA TECHNOLOGIES INC.
Notes to Consolidated Financial Statements
(Expressed in United States dollars)

Years ended August 31, 2002 and 2001
--------------------------------------------------------------------------------



3.     Significant  accounting  policies  (continued):

(e)  Revenue  recognition  (continued):

     SOP  97-2  generally  requires revenue from software arrangements involving
     multiple  elements to be allocated to each element of the arrangement based
     on  the  relative  fair  values of the elements, such as software products,
     post-contract customer support, installation, or training and recognized as
     the  element  is  delivered  and  the  Company has no significant remaining
     performance  obligations.  The  determination  of  fair  value  is based on
     objective  evidence  that  is  specific  to the vendor. If evidence of fair
     value  for  each  element  of  the arrangement does not exist, and the only
     outstanding  deliverable  is  post-customer  support,  all revenue from the
     arrangement  is  recognized  ratably  over  the  term  of  the arrangement.

     License  revenue  is  recognized  when  there  is persuasive evidence of an
     arrangement  and  delivery  to  the  customer  has  occurred,  provided the
     arrangement does not require significant customization of the software, the
     fee  is  fixed and determinable, and collectibility is considered probable.

     Service  revenue  from maintenance contracts is recognized ratably over the
     term  of  the maintenance contract, on a straight-line basis. Other service
     revenue  is  recognized  at  the  time  the  service  is  performed.

     The  Company  generally  recognizes product revenue upon transfer of title,
     which  generally  occurs  on  shipment  of  product,  as  all other revenue
     recognition  criteria  are  satisfied.  When  significant  post-delivery
     obligations  exist,  revenue  is  deferred  until  such  obligations  are
     fulfilled.  Cash  received  in  advance  of meeting the revenue recognition
     criteria  is  recorded  as  deferred  revenue.

     Royalty  revenue  from  third  party  sales  is  recognized  when  there is
     persuasive  evidence  that  the  arrangement is complete, and only when all
     deliverables  have  been  performed.

     Revenues  generated  in exchange for advertising services are valued at the
     fair value of the services exchanged, based on the Company's own historical
     practice  of  receiving  cash,  or  other  consideration  that  is  readily
     convertible  to  known  amounts of cash for similar advertising from buyers
     unrelated in the barter transaction. During the year ended August 31, 2002,
     the  Company  recognized  $36,000  (2001  - $36,000) of revenue from barter
     transactions.


                                                                              7

<PAGE>

DESTINY MEDIA TECHNOLOGIES INC.
Notes to Consolidated Financial Statements
(Expressed in United States dollars)

Years ended August 31, 2002 and 2001
--------------------------------------------------------------------------------



3.     Significant  accounting  policies  (continued):

(f)  Equipment:

     Equipment is stated at cost. Depreciation is calculated using the declining
     balance  method  at the following annual rates, commencing upon utilization
     of  the  assets:

     ---------------------------------------------------------------
     Asset                                                     Rate
     ---------------------------------------------------------------
     Furniture and fixtures                                     20%
     Computer hardware                                          30%
     Computer software                                          50%

--------------------------------------------------------------------------------

     Leasehold improvements are amortized on a straight-line basis over the term
     of  the  lease.

(g)  Intellectual  property:

     Intellectual  property  represents the technologies, which were acquired on
     the  acquisition  of  Destiny  Software  and  are  carried  at  cost  less
     accumulated amortization. Amortization is provided on a straight-line basis
     over  the  estimated  period  of  benefit being two years. As of August 31,
     2002,  all  amounts  have  been  fully  amortized.

(h)  Goodwill:

     Goodwill  represents  the  excess  of  the  cost  of acquisition of Destiny
     Software  over  the  fair  market  value  of  the  net  identifiable assets
     acquired.  These  amounts  are  amortized on a straight-line basis over the
     estimated  period  of  benefit  being two years. As of August 31, 2002, all
     amounts  have  been  fully  amortized.

(i)  Other  assets:

     Other  assets consist of domain names, trademarks and patents and are being
     amortized  straight-line  over  three  years.

(j)  Impairment  of  long-lived  assets:

     The  Company  assesses  the  recoverability  of  its  long-lived  assets by
     determining  whether  the  carrying  value  of the long-lived assets can be
     recovered  over  their remaining life through undiscounted future operating
     cash  flows.  The  amount  of  impairment,  if  any,  is  measured based on
     projected  discounted  future  operating  cash  flows using a discount rate
     reflecting  the  Company's  average  cost  of  funds. The assessment of the
     recoverability  will  be  impacted if estimated future operating cash flows
     are  not achieved. Through August 31, 2002, no impairment charges have been
     recognized.


                                                                              8

<PAGE>

DESTINY MEDIA TECHNOLOGIES INC.
Notes to Consolidated Financial Statements
(Expressed in United States dollars)

Years ended August 31, 2002 and 2001
--------------------------------------------------------------------------------



3.     Significant  accounting  policies  (continued):

(k)  Translation  of  foreign  currencies:

     The  Company's functional currency is the U.S. dollar. Financial statements
     of  foreign  operations  for  which  the  functional  currency is the local
     currency  are  translated  into  U.S.  dollars  with assets and liabilities
     translated  into  U.S.  dollars  at  the  rate of exchange in effect at the
     balance  sheet  date  and  revenue  and expense items are translated at the

     average  rates  for  the period. Unrealized gains and losses resulting from
     the translation of the financial statements are deferred and accumulated in
     a  separate  component  of stockholders' equity as a cumulative translation
     adjustment  in  accumulated  other  comprehensive  loss.

(l)  Advertising:

     Advertising  costs are expensed as incurred and totaled $38,977 and $40,792
     during  the  years  ended  August  31,  2002  and  2001  respectively.

(m)  Income  taxes:

     Income  taxes  are  accounted  for  under the asset and liability method in
     accordance  with  Statement  of  Financial  Accounting  Standard  No.  109
     "Accounting  for  Income  Taxes"  ("FAS  109").  Deferred  tax  assets  and
     liabilities  are recognized for the future tax consequences attributable to
     differences  between  the  financial statement carrying amounts of existing
     assets  and  liabilities  and their respective tax bases and operating loss
     and  tax  credit  carry  forwards.  Deferred tax assets and liabilities are
     measured using enacted tax rates expected to apply to taxable income in the
     years  in which those temporary differences are expected to be recovered or
     settled.  The  effect on deferred tax assets and liabilities of a change in
     tax rates is recognized in income in the period that includes the enactment
     date.  Deferred  tax  assets  are  reduced  by a valuation allowance to the
     extent  that  the  recoverability of the asset is not considered to be more
     likely  than  not.

(n)  Stock  option  and  share  purchase  plans:

     The  Company  applies  the  intrinsic  value-based  method  of  accounting
     prescribed  by  Accounting  Principles  Board  ("APB")  Opinion  No.  25,
     "Accounting for Stock Issued to Employees," and related interpretations, in
     accounting for awards to employees and directors under its stock option and
     share  purchase  plans.  As  such,  compensation is recorded on the date of
     grant  only if the current market price of the underlying stock exceeds the
     exercise  price.  SFAS  No. 123, "Accounting for Stock-Based Compensation,"
     established accounting and disclosure requirements using a fair value-based
     method  of  accounting  for  stock-based  employee  compensation  plans. As
     allowed  by  SFAS No. 123, the Company has elected to continue to apply the
     intrinsic  value-based  method  of  accounting described above for employee
     grants, and has adopted the disclosure requirements of SFAS No. 123. Grants
     to  non-employees  are  recognized  based  on  the fair value of the equity
     instrument  at  the  date  services  are  performed.


                                                                              9

<PAGE>

DESTINY MEDIA TECHNOLOGIES INC.
Notes to Consolidated Financial Statements
(Expressed in United States dollars)

Years ended August 31, 2002 and 2001
--------------------------------------------------------------------------------



3.     Significant  accounting  policies  (continued):

(n)  Stock  option  and  share  purchase  plans  (continued):

     Deferred compensation expense arises when the employee compensation expense
     relates  to  future services. Deferred compensation expense is amortized to
     income over the service period which generally reflects the vesting period.

(o)  Accounting  change:

     For  the  year  ended  August  31,  2002,  the Company adopted Statement of
     Financial  Accounting  Standards No. 145, ("SFAS 145"), which resulted in a
     change  in  the  classification  of a loss arising on debt settlement as an
     extraordinary  item  to  an  item  included  within  loss  from  continuing
     operations.

4.     Disposition:

On  August  27,  2002,  the  Company  entered  into  a binding agreement with an
unrelated  company,  (the  "Purchaser") to sell its subsidiary Wonderfall. Under
the  terms of the agreement, the Company agreed to sell and the Purchaser agreed
to  purchase  all  of  the  issued  and outstanding common shares in Wonderfall.

There  were  no  assets  owned by Wonderfall. The composition of the liabilities
sold  are  contained  in  the  following  table:

   =========================================================================
   Liabilities  assumed:

   Current portion of long-term debt                              $  160,762
   Long-term debt                                                     22,443
   -------------------------------------------------------------------------
   Total liabilities assumed                                         183,205

   Consideration received:
       Cash                                                              250
   -------------------------------------------------------------------------
   Gain on sale of Wonderfall                                     $  182,955
   =========================================================================



5.     Note  receivable:

The  note  receivable consists of proceeds from short-swing profits owing to the
Company  by a former director, in accordance with securities regulatory rules in
the  United  States.  The  note  bears  interest at a rate of prime plus 1%. The
Company  has  commenced  proceedings regarding the collection of the note as the
balance  plus interest was due on September 8, 2001. As the timing of resolution
is  uncertain,  the  principal  portion  of  the  note  has been classified as a
non-current  asset  in  the  consolidated  balance  sheet.


                                                                             10

<PAGE>

DESTINY MEDIA TECHNOLOGIES INC.
Notes to Consolidated Financial Statements
(Expressed in United States dollars)

Years ended August 31, 2002 and 2001
--------------------------------------------------------------------------------



6.     Equipment

  ======================================================================
                                             Accumulated
                                           depreciation and     Net book
  2002                             Cost      amortization         value
  ----------------------------------------------------------------------
  Furniture and fixtures        $ 52,570      $ 25,548         $ 27,022
  Computer hardware              106,933        67,872           39,061
  Computer software               15,036        10,189            4,847
  Leasehold improvements           7,769         5,713            2,056
  ----------------------------------------------------------------------
                                $182,308      $109,322         $ 72,986
  ======================================================================



  ======================================================================
                                             Accumulated
                                           depreciation and     Net book
  2001                             Cost      amortization         value
  ----------------------------------------------------------------------
  Furniture and fixtures        $ 53,256      $ 19,692         $ 33,564
  Computer hardware              102,397        52,608           49,789
  Computer software               12,696         6,815            5,881
  Leasehold improvements           5,771           511            5,260
  ----------------------------------------------------------------------
                                $174,120      $ 79,626         $ 94,494
  ======================================================================


7.     Related party payable:


  =============================================================================
                                                            2002         2001
  -----------------------------------------------------------------------------
  Loan payable, due to a shareholder, unsecured,
    non-interest bearing, due on demand                 $       35  $    1,352
  =============================================================================


8.     Loans payable:


  =============================================================================
                                                            2002         2001
  -----------------------------------------------------------------------------
  Loan payable, due to a shareholder, unsecured,
    non-interest bearing, due on demand                 $  168,291  $        -

  Loan payable, due to a shareholder, unsecured,
    non-interest bearing, due on demand                     24,000           -

  Loan payable, due to a shareholder, unsecured,
    non-interest bearing, due on demand                    100,000     100,000
  -----------------------------------------------------------------------------
                                                        $  292,291  $  100,000
  =============================================================================


                                                                             11

<PAGE>

DESTINY MEDIA TECHNOLOGIES INC.
Notes to Consolidated Financial Statements
(Expressed in United States dollars)

Years ended August 31, 2002 and 2001

--------------------------------------------------------------------------------

9.     Long-term debt:


  =============================================================================
                                                             2002        2001
  -----------------------------------------------------------------------------
  Amount is non-interest bearing and repayable
   in twelve monthly instalments commencing on
   September 30, 2001                                   $        -  $   81,450

  Full amount is repayable at the earlier of:
   (a) the first day of production work of a final
   version of Mission to Mars ("Production One")
   and (b) the sale, transfer, assignment,
   reassignment or other disposition of Production
   One.  Interest is payable on any balance
   outstanding from the date that the amount
   becomes repayable at prime plus 2%.                           -      45,228

  Full amount is repayable at the earlier of:
   (a) the first day of production work of a final
   version of Penitentiary ("Production Two") and
   (b) the sale, transfer, assignment, reassignment
   or other disposition of Production Two.  Interest
   is payable on any balance outstanding from the
   date that the amount becomes repayable at prime
   plus 2%.                                                      -      36,345

  Other                                                          -      22,320
  -----------------------------------------------------------------------------
                                                                 -     185,343
  Current portion                                                -    (163,023)
  -----------------------------------------------------------------------------
                                                        $        -  $   22,320
  =============================================================================


All  long-term  debt  was  disposed  of as part of the disposition of Wonderfall
Productions  Inc.  (note  4).

10.     Share  capital:

(a)  Non-cash  consideration:

     Shares  issued  for non-cash consideration have been valued at their market
     value  at  the  date  the  services  are  provided.

     (i)  During  the  year  ended  August  31, 2002, 250,000 common shares were
          issued  to  a  consultant and were held in escrow for future financing
          services.  Management  has  not  recorded  any compensation under this
          contract  as no services have been provided as at year end. The shares
          are  contingently  returnable to the Company in the event the services
          are  not  performed  under  the  contact.

    (ii)  During  the  year  ended  August  31, 2002, the Company issued 363,605
          common  shares  to officers of the Company for services rendered prior
          to August 31, 2001. Compensation expense related to these services was
          recorded  in  2001.  The  Company further issued 125,000 common shares
          with  a  fair market value of $15,000 for services rendered during the
          year  ended  August  31,  2002  and  recorded the compensation expense
          relating  to  these  services  in  the  same  period.


                                                                             12

<PAGE>

DESTINY MEDIA TECHNOLOGIES INC.
Notes to Consolidated Financial Statements
(Expressed in United States dollars)

Years ended August 31, 2002 and 2001
--------------------------------------------------------------------------------

10.     Share  capital  (continued):

(a)  Non-cash  consideration  (continued):

   (iii)  During  the  year  ended August 31, 2002, the Company issued 624,940
          common  shares  to officers of the Company in settlement of $68,743 of
          outstanding  accounts  payable and accrued liabilities of the Company.
          No  gain  or  loss  on  settlement  of  debt  resulted from these debt
          settlement  transactions.

    (iv)  During  the  year  ended  August  31, 2002, the Company issued 140,000
          common  shares  with  a  market value of $16,800 to settle outstanding
          accounts payable to an agent of the Company for finance considerations
          received  during  the  year.  The  Company  recorded  a  loss  on debt
          settlement  of  $2,800, representing the excess of the market value of
          the common shares at the date of settlement over the carrying value of
          the  debt.

     (v)  During  the  year  ended  August  31, 2001, 250,000 common shares were
          issued  from treasury for payment on a consulting agreement for future
          licensing  and  financing  services.  Management  has not recorded any
          compensation  under this contract, as no services, have been performed
          to  date.  Management  believes  that 100,000 common shares, which are
          being  held  by the contractor, are forfeitable and has requested that
          the common shares be returned to the Company for non-performance under
          the contract. The contractor is disputing the obligation to return the
          shares. The remaining 150,000 common shares issued from treasury under
          this contract have been cancelled by the Company during the year ended
          August  31,  2002.

(b)  Common  shares  issued  for  cash:

     (i)  During  the  year  ended  August  31, 2002, 100,000 common shares were
          issued  from  shares  reserved  for issuance relating to proceeds on a
          private  placement  received  by the Company prior to August 31, 2001.

     (ii) On  July  11,  2002,  the Company completed a private placement, which
          consisted of the issuance of 100,000 common shares at a price of $0.10
          per  share.

          In  connection  with  this offering, the Company agreed to pay agent's
          finders fees of $1,000. These fees are directly related to the private
          placement  and  have been offset against paid-in capital at August 31,
          2002.


                                                                             13

<PAGE>

DESTINY MEDIA TECHNOLOGIES INC.
Notes to Consolidated Financial Statements
(Expressed in United States dollars)

Years ended August 31, 2002 and 2001
--------------------------------------------------------------------------------


10.     Share  capital  (continued):

(c)  Common  shares  issuable:

     On  July  17,  2002,  the  Company  completed  a  private  placement, which
     consisted  of the issuance of 500,000 common shares at a price of $0.10 per
     share.  As  these  shares were not issued until subsequent to year end, the
     proceeds received from this offering were included in shares issuable as of
     August  31,  2002.

     In connection with this offering the Company paid an agent's finders fee of
     $5,000.  These fees were directly related to the private placement and have
     been  offset  against  the  proceeds  of  the  offering.

(d)  Stock  option  plan:

     Pursuant  to  a  stock  option plan dated October 12, 1999, the Company has
     reserved 3,750,000 common shares for future issuance under its stock option
     plan.

     Stock  option  activity  is  presented  below:


  -----------------------------------------------------------------
                                                       Weighted
                                       Number of        average
                                        shares       exercise price
  -----------------------------------------------------------------
  Outstanding, August 31, 2000         2,439,500       $  0.11
    Granted                            1,846,000          0.14
    Exercised                                  -             -
    Forfeited                         (1,317,000)        (0.59)
    Expired                             (450,000)        (0.39)
  -----------------------------------------------------------------
  Outstanding, August 31, 2001         2,518,500          0.40
    Granted                              220,000          0.07
    Exercised                                  -             -
    Forfeited                           (603,000)        (0.54)
    Expired                                    -             -
  -----------------------------------------------------------------
  Outstanding, August 31, 2002         2,135,500       $  0.49
  =================================================================



                                                                             14

<PAGE>

DESTINY MEDIA TECHNOLOGIES INC.
Notes to Consolidated Financial Statements
(Expressed in United States dollars)

Years ended August 31, 2002 and 2001
--------------------------------------------------------------------------------


10.     Share  capital  (continued):

(d)  Stock  option  plan  (continued):

     The  following  table  summarizes  information  concerning  outstanding and
     exercisable  options  at  August  31,  2002:

--------------------------------------------------------------------------------
                           Options outstanding             Options exercisable

                         Weighted
                         average       Weighted                       Weighted
                         remaining     average                        average
Exercise    Number       contractual   exercise price  Number     exercise price
prices    outstanding  life (in years) per share       exercisable    per share
--------------------------------------------------------------------------------
$ 0.25    1,157,500         3.45       $ 0.19            842,464      $ 0.19
  0.83      240,000         2.11         0.83            240,000        0.83
  1.00      663,000         2.25         0.97            650,880        0.97
  1.80       50,000         2.67         1.80             50,000        1.80
  2.50       25,000         3.08         2.33             23,000        2.33
--------------------------------------------------------------------------------
          2,135,500                                    1,806,344
================================================================================



     At  August  31, 2002, 2,135,500 (2001 - 2,518,500) options had been granted
     and  were outstanding and an additional 1,614,500 shares were available for
     grant  under  the  Plan.

     Of  the total options outstanding at year end, 1,732,500 (2001 - 2,048,000)
     were  granted  to  employees  and  403,000 (2001 - 315,500) were granted to
     non-employees  of  the  Company. The compensation expense, representing the
     intrinsic  value  of  the  options granted to employees was $33,146 (2001 -
     $72,250),  calculated  in  accordance  with  APB  Opinion  No.  25.  The
     compensation  expense  related  to  options  granted  to  non-employees was
     $16,793  (2001  -  $36,711),  calculated  in  accordance  with  SFAS  123.

     During  December  2000,  the  Company  cancelled  825,000  options  held by
     Directors  and granted replacement options with a lower exercise price. For
     accounting  purposes,  these  replacement  options  are  accounted  for  as
     variable plan options up until the date the awards are exercised, forfeited
     or expired, whereby compensation expense is recorded to the extent that the
     market  price  at  the reporting date exceeds the new exercise price. As at

     August  31,  2002, of the original 825,000 options cancelled and re-issued,
     385,000  options  have been forfeited. No incremental compensation has been
     recognized  for  variable  options  in  fiscal  year  2002.


                                                                             15

<PAGE>

DESTINY MEDIA TECHNOLOGIES INC.
Notes to Consolidated Financial Statements
(Expressed in United States dollars)

Years ended August 31, 2002 and 2001
--------------------------------------------------------------------------------


10.     Share  capital  (continued):

(d)  Stock  option  plan  (continued):

     The Company applies APB Opinion No. 25 in accounting for its employee stock
     option  plan  and,  accordingly,  employee stock compensation cost has been
     recognized  in  the  financial  statements  only to the extent of intrinsic
     value. Had the Company determined compensation cost based on the fair value
     on  the  measurement  date  for  its  employee  stock option plan using the
     assumptions  for  the  Black-Scholes  valuation  model described below, the
     Company's  net  loss  and  loss  per  share  for  2002  and 2001 would have
     increased  to  the  pro  forma  amounts  indicated  below:


    ----------------------------------------------------------------------------
                                                          2002          2001
    ----------------------------------------------------------------------------
    Loss for the period:
      As reported                                     $  (377,688)  $(1,556,869)
      Pro forma                                          (439,984)   (1,640,655)
    Loss per share, basic and diluted:
      As reported                                           (0.01)        (0.06)
      Pro forma                                             (0.02)        (0.07)
    ============================================================================

     The  fair  value of each option grant is estimated on the date of the grant
     using  the  Black-Scholes  option-pricing  model  with  the  following
     assumptions:

    ----------------------------------------------------------------------------
                                                          2002          2001
    ----------------------------------------------------------------------------
    Per share weighted - average fair value of stock
    options granted                                   $      0.13   $      0.29
    Expected dividend yield                                     -             -
    Risk-free interest rate                                   5.5%          5.5%
    Volatility                                                192%          189%
    Expected lives                                     2.00 years    2.01 years
    ============================================================================


11.     Income  taxes:


    ----------------------------------------------------------------------------
                                                          2002          2001
    ----------------------------------------------------------------------------
    Deferred tax assets:
      Net operating loss carry forwards               $ 1,121,883   $ 1,334,482
      Book over tax depreciation                           91,337        36,510
    ----------------------------------------------------------------------------
                                                        1,213,220     1,370,992
    Valuation allowance                                (1,213,220)   (1,362,051)
    ----------------------------------------------------------------------------
    Net deferred tax assets                                     -         8,941
    Deferred tax liabilities:
      Intangible costs                                          -        (8,941)
    ----------------------------------------------------------------------------
                                                      $         -   $         -
    ============================================================================


                                                                             16

<PAGE>

DESTINY MEDIA TECHNOLOGIES INC.
Notes to Consolidated Financial Statements
(Expressed in United States dollars)

Years ended August 31, 2002 and 2001
--------------------------------------------------------------------------------


11.     Income  taxes  (continued):

Based on historical operations, management is not able to demonstrate that it is
more  likely  than  not  that  the  results  of  future operations will generate
sufficient  taxable  income  to  realize the net deferred tax assets, before the
valuation  allowance,  reflected  on  the  Company's  balance  sheet.

The  reconciliation of income tax attributable to continuing operations computed
at  the  U.S.  federal  statutory  tax  rates  to  income  tax  expense  is:


  -----------------------------------------------------------------------
                                                      2002         2001
  -----------------------------------------------------------------------
  Tax at U.S. statutory rates                         34.0%         34.0%
  Rate difference in other jurisdictions               1.6%          8.3%
  Change in valuation allowance                      (35.6%)       (42.3%)
  -----------------------------------------------------------------------
  Tax recovery (expense)                                 -             -
  =======================================================================

  The  reconciliation  of  losses  from operations by geographic
  region is as follows:

  -----------------------------------------------------------------------
                                                      2002         2001
  -----------------------------------------------------------------------
  United States                                  $ (70,391)  $  (649,762)
  Canada                                          (307,297)     (907,107)
  -----------------------------------------------------------------------
                                                 $(377,688)  $(1,556,869)
  =======================================================================


12.     Commitment:

The  Company  leased  its  premises  in  Vancouver,  Canada  under  an operating
agreement  on  a  month to month basis during the year ended August 31, 2002. In
August  2002,  the Company moved its facilities and entered into a new operating
lease  agreement  effective  as of September 1, 2002 which expires at the end of
February  2004.

Under  this  new  operating  lease  agreement  the Company is committed to lease
payments  for  the  fiscal  years  of  $63,510 and $31,755 ending 2003 and 2004,
respectively.




                                                                             17

<PAGE>

DESTINY MEDIA TECHNOLOGIES INC.
Notes to Consolidated Financial Statements
(Expressed in United States dollars)

Years ended August 31, 2002 and 2001
--------------------------------------------------------------------------------


13.     Contingencies:

(a)  Destiny  Software has commenced legal proceedings against Impatica.com Inc.
     ("Impatica")  for  payment  of  approximately $512,500 in unpaid technology
     license fees. It is the Company's position that Impatica has repudiated the
     licensing  agreement and that the unpaid license fees totaling $512,500 are
     a  debt owing by Impatica to the Company. The amount that is subject to the
     legal  proceedings  has  not  been recognized in the Company's consolidated
     financial  statements.  Impatica  has filed a counter claim against Destiny
     Software  alleging  breach  of  contract  and  seeking  return  of $162,500
     previously  paid  under this contract. No amounts have been recorded in the
     financial statements at August 31, 2002 as the outcome of this claim is not
     determinable.

(b)  On  April 4, 2002, a company owned and operated by a former employee, filed
     a  claim  against  the  Company,  for  breach of an employment contract. No
     amounts  have  been recorded in the financial statements at August 31, 2002
     as  the  outcome  of  this  claim  is  not  determinable. Any amounts to be
     recognized  will  be  recorded  when  determinable.

(c)  On  April  22,  2002, a former officer of the Company filed a claim against
     the  Company  for  breach  of  an employment contract. No amounts have been
     recorded  in  the financial statements at August 31, 2002 as the outcome of
     this  claim  is  not  determinable.  Any  amounts  to be recognized will be
     recorded  when  determinable.


14.     Financial  instruments:

(a)  Fair  value  disclosures:

     The  carrying  value  of cash, short-term investments, accounts receivable,
     accounts  payable  and  accrued  liabilities, and loans payable approximate
     their  fair  values  due to the relatively short periods to maturity of the
     instruments.

     Due  to  the related party nature of the notes receivable and amounts owing
     to  a  related  party,  it  is  not practicable to estimate its fair value.

(b)  Foreign  currency  risk:

     The  Company  operates  internationally,  which gives rise to the risk that
     cash  flows  may  be  adversely  impacted  by  exchange  rate fluctuations.

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



                                                                             18

<PAGE>

DESTINY MEDIA TECHNOLOGIES INC.
Notes to Consolidated Financial Statements
(Expressed in United States dollars)

Years ended August 31, 2002 and 2001
--------------------------------------------------------------------------------


15.     Segmented  information:

In  the  opinion of management, the Company operates solely in the digital media
software  segment,  and  all  revenue from its products and services are made in
this  segment.  Management  of  the  Company  makes  decisions  about allocating
resources  based  on  this  one operating segment. Substantially, all assets and
operations  are  in Canada. A summary of revenue by region (based on location of
customers)  is  as  follows:


     -------------------------------------------------------------
     Years ended August 31,                    2002        2001
     -------------------------------------------------------------
     United States                          $ 423,562   $ 293,805
     Canada                                   137,635      20,494
     Other                                    208,129      31,354
     -------------------------------------------------------------
     Total revenue                          $ 769,326   $ 345,653
     =============================================================


16.     Subsequent  events:

(a)  On  September 17, 2002, the Company was granted permission to being trading
     on  the Third Market Segment of the Berlin Stock Exchange under the trading
     symbol  "DME".

(b)  On  September  23, 2002, the Company completed a private placement for cash
     consideration, which consisted of the issuance of 50,000 common shares at a
     price  of  $0.10  per  share.

(c)  On  September  27,  2002,  1,100,000  common shares were issued pursuant to
     consulting  agreements  for future licensing and finance services, of which
     800,000 was to a shareholder of the Company. The shares will be recorded at
     their  fair  value  as  the  services  are  provided and the shares earned.

(d)  On September 27, 2002, 25,000 common shares having a market value of $3,000
     to settle outstanding accounts payable and accrued liabilities were issued.
     The  shares  will  be  recorded  at  their  fair value, with any difference
     between  the  value of the shares and the amount of the debt being recorded
     as  a  gain  or  loss  in  the  year.


                                                                             19

<PAGE>

                                    PART III

ITEM  9.     DIRECTORS,  EXECUTIVE  OFFICERS,  PROMOTERS  AND  CONTROL  PERSONS;
             COMPLIANCE  WITH  SECTION  16(A)  OF  THE  EXCHANGE  ACT.

Our  executive  officers  and directors and their respective ages as of November
26,  2002  are  as  follows:

DIRECTORS:

Name  of  Director     Age
------------------     ---
Steven  Vestergaard     36

Edward  Kolic           41

Lawrence  J.  Langs     41

Yoshitaro  Kumagai      56

Wayne  Koshman          40


EXECUTIVE  OFFICERS:

Name  of  Officer      Age     Office  Held
-----------------              ------------
Steven  Vestergaard     36     President, Chief  Executive  Officer
                               and  Chief Financial  Officer

Edward  Kolic           41     Secretary



Set forth below is a brief description of the background and business experience
of  each  of  our  executive  officers  and  directors  for the past five years:

Steven  Vestergaard.  Mr.  Vestergaard is our president, chief executive officer
and  chief  financial  officer and is one of our directors.  Mr. Vestergaard has
been  our  chief  executive officer from May 1999, when we began negotiations to
purchase  our  operating  subsidiary, Destiny Software, from Mr. Vestergaard, to
January  2001  and then again from February 2002 to present.   Mr. Vestergaard's
responsibilities  include  overall  management  of our business and coordinating
strategy,  planning,  and  product  development. Mr. Vestergaard started Destiny
Software as a private company owned by Mr. Vestergaard in 1991 and developed its
business  through  to 1999 when it was acquired by us.  At Destiny Software, Mr.
Vestergaard  was  responsible for overall business management and supervision of
the  development  of  computer  games.  During this period, Destiny Software was
successful  in the production of a dozen successful video games, including Blood
Bowl,  Creepers  and  Dark Seed II, for major publishers, including Microleague,
Sony  and MGM.   In addition, Destiny Software completed work under contract for
innovative  computer  software  projects,  including  the  development  of  the
prototype  for  the  first  Internet  casino and a high performance HTTP server/
client  test software suite for use in the development of a proprietary web page
caching  machine.  Mr. Vestergaard has been involved in the software development
industry  since  1982  when he founded a private company called Tronic Software.
Tronic Software was a developer of computer games which were sold by mail order.
In  1990 he became employed as a software engineer by Distinctive Software Inc.,
a  company  that  later changed its name to Electronic Arts Canada, where he was
involved  in  developing  game products.  Mr. Vestergaard holds an International


                                  29 of 43

<PAGE>


Baccalaureate  Degree  and a Bachelor of Science Degree in Computer Science from
the  University  of  British  Columbia.

Edward Kolic. Mr. Edward Kolic has been one of our directors since February 1999
and  is  our  secretary.  Mr.  Kolic  served as our chief operating officer from
February  1999  to  October  2001  during  which time he was responsible for our
overall  product  strategy  and development of our core technologies.  Mr. Kolic
currently  consults  to senior management of companies developing Internet media
technologies  and  distributing  digital  content.  Mr.  Kolic has served as our
secretary  since February 1999.  From 1997 until June of 1999, Mr. Kolic was the
president  of  WonderFall  Productions Inc., a computer game development company
built  by  Mr. Kolic and which we purchased in June 1999.  From 1993 until 1997,
Mr.  Kolic  was  a partner in a private company called Jacqueline Conoir Designs
Ltd.  which  is  a  fashion design house. At Jacqueline Conoir Designs Ltd., Mr.
Kolic  was  general manager and vice-president of marketing and developed all of
the  marketing,  communications and image strategies for the company.  From 1988
until  1995, Mr. Kolic was employed as the president of Target Canada Production
Ltd., a company engaged in the development and distribution of educational video
resources  to  the  North  American  schools market  His experience includes the
production  of  documentary  television, educational and information programming
for  the  Canadian  Educational  Television  Networks,  large screen interactive
presentation  media  for  international conferences and a range of communication
programs  for  corporate,  government  and  institutional  clients.

Lawrence  J. Langs. Mr. Langs has been one of our directors since November 2000.
Mr.  Langs  most  recently  worked  as vice-president of business development at
MP3.com. Prior to MP3.com, Mr. Langs had a variety of experience as a technology
and  entertainment  lawyer  and  a  senior  management  consultant  as well as a
technology  advocate.  Mr. Langs worked with his associates at Interactive Media
Consulting  as  legal  and  business  counsel  exclusively  to  clients  in  the
interactive media industry since 1991. Projects undertaken by Mr. Langs included
joint  ventures,  mergers  and acquisitions, corporate structuring, intellectual
property,  licensing  and  royalties,  venture funding and finance. From 1995 to
1996,  Mr.  Langs  was  acting  business  development  manager for the New Media
Division  of Sybase, where he was involved with strategic interactive television
initiatives  and  with  developing  and  executing  strategic relationships with
Internet  companies.  Prior  experience  also  includes  several  years  as  an
Investment  Banker  for  Chemical  Bank  in  New York, and as a Senior Strategic
Consultant  for  Arthur  D.  Little in Boston. Mr. Langs holds a Juris Doctorate
from  Boston  University  School  of  Law,  and a Master's Degree in Finance and
Management of Technology from the Sloan School of Management at M.I.T. Mr. Langs
is  a  member  of  the  New  York  Bar.

Yoshitaro  Kumagai.  Mr. Kumagai was appointed as one of our directors in August
of  2001.  Mr.  Kumagai  is  a highly respected executive in the high-technology
industry  with  over  twenty years of experience in the electronics and consumer
fields.  Mr. Kumagai is currently the interim chief executive officer of Display
Research  Laboratories,  a  company  involved in the development of organic flat
panel  display technologies. Mr. Kumagai was the interim chief executive officer
and  president  of  Onna.com, a company engaged in the development of a Japanese
portal  web site targeted at Japanese women, from 1999 to 2001 when the business
was acquired in an acquisition. Mr. Kumagai was the chairman and chief executive
officer  of  Vivitar Corporation from 1997 to 1999. Vivitar is a global consumer
electronics  corporation.  Mr.  Kumagai  was  responsible  for the management of
global operations throughout the United States, Europe and Asia. Mr. Kumagai was
an  advisor  and  a  corporate director of Plaza Create Ltd., a Japanese company
engaged  in  franchising  an  innovative photograph processing store chain, from
1995  to  1999.  Mr.  Kumagai  has  also  held  key  management positions in the
following  companies: IDEC Corporation (from 1991 to 1993), the Mead Corporation
(from  1984  to  1991)  and  the Singer Company (from 1981 to 1986). Mr. Kumagai
holds a bachelor of science degree from Georgia State University and a BSME from
Hosei  University  in  Tokyo,  Japan.

Wayne  Koshman.  Mr.  Koshman  was  appointed as one of our directors on May 29,
2002.  Mr.  Koshman  has  been  a  director  and  the chief executive officer of
Terrawest Management Inc., a company engaged in mining and exploration in China,
from  June  2002 to present. Mr. Koshman was the director of GIS


                                  30 of 43

<PAGE>

Technologies, a company engaged in the development of smartcard technology, from
November  2000  to  March  2002. Mr. Koshman was a project consultant for Zaatec
Technologies  Inc.,  a  Japanese  hard  disk technology firm, from March 1999 to
April  2000. Mr. Koshman was the head of corporate development for international
sales for Moduline Industries Ltd., a subsidiary of Champion Industries, a large
home  manufacturer,  from  March  1998  to  June  1999.  Mr.  Koshman  was  the
international  sales manager for Asia for Nortec Design group from November 1996
to  February  1998.  Mr.  Koshman is a founder of Skytech Bio Conversion Inc., a
biotechnology  company  working with the National Research Council of Canada and
the  University  of British Columbia on phase one trials of microbial technology
for  treating  organic  solids.


SIGNIFICANT  EMPLOYEES

We have the following employees who we expect to make a significant contribution
to  our  business:

John  Gammack.  Mr.  Gammack  is  our vice-president of operations.  Mr. Gammack
previously  worked for us as a consultant and was appointed as vice-president of
operations  in  August  of 2002. Mr. Gammack was born and educated in the United
Kingdom  having graduated from West Nottinghamshire College H.N.C. in Mechanical
Engineering.  He  served  as  an  Officer  in  the  British  RAF  for  3  years.
Thereafter  he  moved to Canada and held positions with Financial Trusco, Morgan
Leasing  and  Amdica  Technology  Inc.  where  he  provided  the  BC  Provincial
government with computer technology solutions.  From January 1996 to April 1998,
he  worked  as Western Regional Sales Manager for Dynatek Automation Systems and
in May 1998 he started D-com Solutions Ltd., a computer storage device provider.
In  May  of  2000  he  started  GIS  Technologies  Inc., a smart card technology
company.  Mr.  Gammack's  core  responsibilities  include  overseeing  sales,
operations  and  assisting  with  external  financing  activities.

Jeffrey  Redmond.  Mr.  Redmond,  who joined us in March 2002, is our controller
and  reports  to Mr. Vestergaard, our chief financial officer.  Mr. Jeff Redmond
has  eight  years experience working with hi-tech companies at various stages of
development.  From  September  1998 to March 2002, he worked with KPMG LLP as an
auditor  focusing  on  publicly  listed  companies  (SEC/TSE) involved in unique
transactional work.  His core responsibilities include all accounting, treasury,
strategic  planning, financial controls and financial reporting functions of the
Company.  Mr.  Redmond  holds  a  professional designation with the Institute of
Chartered  Accountants  of British Columbia (Canada) and a Bachelor of Arts from
the  University  of  Western  Ontario.


ELECTION  OF  DIRECTORS  AND  OFFICERS

Our  directors  are  elected by our shareholders at our annual general meetings.
Each  director  holds  office until our next annual general meeting or until the
director  resigns or is removed in accordance with our bylaws.  We do not have a
classified  board  of  directors.

Our  officers  serve  at  the  discretion  of  our  board  of  directors.


AUDIT  COMMITTEE

Our  audit  committee  consists  of  Mr. Steven Vestergaard, our chief executive
officer,  Mr.  Edward  Kolic,  our  secretary  and Mr. Wayne Koshman, one of our
directors.  We  anticipate  modifying  our  audit  committee  during the current
fiscal  year  in  order  to  ensure  that all members of our audit committee are
independent  members  of  our  board  of  directors.

                                  31 of 43


<PAGE>



COMPENSATION  OF  DIRECTORS

We  do  not  compensate our directors for acting on our board of directors.  Our
directors  are  reimbursed  for  reasonable out-of-pocket expenses in connection
with  attendance  at board of director and committee meetings.  In addition, our
directors  are  eligible  for grants of options to purchase shares of our common
stock  at  the  discretion  of  our  board  of  directors.


COMPLIANCE  WITH  SECTION  16(a)  OF  THE  SECURITIES  EXCHANGE  ACT

Section 16(a) of the Exchange Act requires our executive officers and directors,
and persons who beneficially own more than ten percent of our equity securities,
to  file  reports  of ownership and changes in ownership with the Securities and
Exchange  Commission.  Officers,  directors  and  greater  than  ten  percent
shareholders  are  required  by  SEC regulation to furnish us with copies of all
Section  16(a)  forms they file. Based on its review of the copies of such forms
received by us, we believe that during the fiscal year ended August 31, 2002 all
such  filing requirements applicable to our officers and directors were complied

with  exception  that  reports  were  filed  late  by  the  following  persons:

--------------------------------------------------------------------------------
                        Number     Transactions      Known  Failures
Name and                Of Late    Not Timely        To File
Principal Position      Reports    Reported          a Required Form
--------------------------------------------------------------------------------
Wayne Koshman,
Director                One        One               None
================================================================================


                                  32 of 43

<PAGE>

ITEM  10.     EXECUTIVE  COMPENSATION.

COMPENSATION  OF  EXECUTIVE  OFFICERS

The following table sets forth certain compensation information as to Mr. Steven
Vestergaard,  our  chief  executive  officer, and Mr. David Lawrence, our former
chief  executive  officer,  for our fiscal years ended August 31, 2002, 2001 and
2000.   Mr. Vestergaard and Mr. Lawrence are our sole "named executive officer".
None  of our executive officers earned more than $100,000 during our last fiscal
year  ended  August  31,  2002.  No  person  other  than Mr. Vestergaard and Mr.
Lawrence  acted as our chief executive officer during our last fiscal year ended
August  31,  2002.  No  other  compensation  was  paid to Mr. Vestergaard or Mr.
Lawrence  other  than  the  compensation  set  forth  below.

--------------------------------------------------------------------------------

                           SUMMARY  COMPENSATION  TABLE

--------------------------------------------------------------------------------
                         ANNUAL COMPENSATION       LONG TERM COMPENSATION
                    ----------------------------  ------------------------
                                          Other                             All
                                          Annual    AWARDS        PAYOUTS  Other
                                            Com-  --------------  -------   Com-
                                            pen-  Restricted                pen-
                                            sa-   Stock   Options/  LTIP    sa-
Name      Title      Year  Salary  Bonus    tion  Awarded SARs*(#)payouts($)tion
----      -----      ----  ------  -----  ------- ------- ------- --------- ----
Steven    Director   2002  $49,044     0        0       0       0         0    0
Vester-   President  2001  $54,300     0        0       0       0         0    0
gaard     CEO, CFO   2000  $54,300     0        0       0       0         0    0
(1), (3)
--------------------------------------------------------------------------------

David      Former    2002  $28,413     0        0       0       0         0    0
Lawrence   Chief     2001  $57,194     0        0       0       0         0    0
(2),(3)    Executive 2000       $0     0        0       0       0         0    0
           Officer
--------------------------------------------------------------------------------

Notes  to  Summary  Compensation  Table:

(1)  All  salaries  paid  to  Mr.  Vestergaard  are  paid  in  Canadian dollars.

(2)  Mr.  Lawrence was our chief executive officer from January 2001 to February
     2002.  Amounts  paid  to Mr. Lawrence were paid in Canadian dollars. We are
     currently  involved with legal proceedings with Mr. Lawrence. See Item 3 of
     Part  I  of  this  Annual  Report  on  Form 10-KSB under the heading "Legal
     Proceedings".

(3)  Compensation is stated in United States dollars and is based on an exchange
     rate  of  $0.6314  US dollars for each $1.00 Canadian dollar as of November
     21,  2002.



                               STOCK OPTION GRANTS

We  did not grant any stock options to Mr. Vestergaard or Mr. Lawrence, our sole
named  executive  officers,  during our most recent fiscal year ended August 31,
2002.


                                  33 of 43

<PAGE>


              EXERCISES OF STOCK OPTIONS AND YEAR-END OPTION VALUES

Neither  Mr.  Vestergaard  nor  Mr.  David  Lawrence,  our  sole named executive
officers,  exercised  any stock options during our most recent fiscal year ended
August  31,  2002.  The  following  is  a  summary of the share purchase options
exercised by our named executive officers during the financial year ended August
31,  2002  and  the  year  end  values  of outstanding options held by our named
executive  officers:


               AGGREGATED  OPTION/SAR  EXERCISES  DURING  THE  LAST
           FINANCIAL YEAR END AND FINANCIAL YEAR-END OPTION/SAR VALUES
           -----------------------------------------------------------
                                                                       Value of
                                                                     Unexercised
                                                Unexercised         In-The-Money
                                                Options at          Options/SARs
                                                Financial           at Financial
              Common Shares                     Year-End (#)        Year-End ($)
              Acquired on       Value           exercisable/        exercisable/
Name  (#)     Exercise ($)     Realized ($)     unexercisable      unexercisable
--------      -------------    --------------   --------------     -------------

Steven           NIL           Not Applicable      375,000              $NIL
Vestergaard
President
CEO and CFO
Director

David            NIL           Not Applicable          NIL              $NIL
Lawrence
Former Chief
Executive Officer



                            LONG-TERM INCENTIVE PLANS

We  do  not  have  any  long-term  incentive  plans.





                                  34 of 43

<PAGE>

                            OUTSTANDING STOCK OPTIONS

The  following  table shows the issued and outstanding stock options held by our
officers and directors.  No  person known by us to beneficially own more than 5%
of  our  common  stock  as  of  November  26,  2002  holds  any  stock  options.


                             OUTSTANDING STOCK OPTIONS


              Exercise    No. of
Name          Price       Options   Date of Grant  Vesting Date   Expiry Date
------------  --------    --------  -------------  ------------   -----------

Steven        $1.00       105,000   Oct. 12, 1999  Apr. 12, 2001  Oct. 12, 2004
Vestergaard   $0.83       120,000   Oct. 12, 1999  Apr. 12, 2001  Oct. 12, 2004
Chief         $0.25        73,903   Dec. 21, 2000  Dec. 21, 2000  Dec. 21, 2005
Executive     $0.25        76,097   Dec. 21, 2000  Apr. 12, 2000  Dec. 21, 2005
Officer
and Chief
Financial
Officer
Director
--------------------------------------------------------------------------------
Edward Kolic  $1.00       105,000   Oct. 12, 1999  Apr. 12, 2001  Oct. 12, 2004
Secretary     $0.83       120,000   Oct. 12, 1999  Apr. 12, 2001  Oct. 12, 2004
Director      $0.25        73,903   Dec. 21, 2000  Dec. 21, 2000  Dec. 21, 2005
              $0.25        76,097   Dec. 21, 2000  Apr. 12, 2000  Dec. 21, 2005
--------------------------------------------------------------------------------

Wayne         $0.25       150,000   May 29, 2002   Vesting        May 29, 2007
Koshman                                            Monthly over
Director                                           24-Month Period
--------------------------------------------------------------------------------

Yoshitaro     $0.25        25,000   Apr. 1, 2000   May 1, 2002    Apr. 1, 2005
Kumagai       $2.50        25,000   Oct. 1, 2000   Nov. 1, 2002   Oct. 1, 2005
Director      $0.25       100,000   Aug. 23, 2001  Vesting        Sept. 23, 2003
                                                   Monthly over
                                                   25-Month Period
--------------------------------------------------------------------------------

Lawrence      $0.25        27,123   Dec. 21, 2000  Dec. 21, 2000  Dec. 21, 2005
J. Langs      $0.25       122,877   Dec. 21, 2000  May 21, 2001   Dec. 21, 2005
Director
--------------------------------------------------------------------------------



                            COMPENSATION ARRANGEMENTS

We  currently  pay  to  Mr.  Vestergaard  a salary of $96,315 Canadian (equal to
approximately  $60,813 US) per year.  We are not party to any written employment
agreement  with  Mr.  Vestergaard.   We  do  not  have  any  agreements with Mr.
Vestergaard  regarding  the  payments  of bonus or other performance incentives.
Mr. Vestergaard is eligible to receive stock options as and when approved by our
board  of  directors.



                                  35 of 43


<PAGE>

ITEM  11.     SECURITY  OWNERSHIP  OF  CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The  following  table  sets  forth  certain information concerning the number of
shares  of  our  common stock owned beneficially as of November 26, 2002 by: (i)
each person (including any group) known to us to own more than five percent (5%)
of  any  class  of our voting securities, (ii) each of our directors and each of
our  named  executive  officers,  and  (iii)  officers and directors as a group.
Unless  otherwise  indicated,  the  shareholders  listed possess sole voting and
investment  power  with  respect  to  the  shares  shown.



                   Name and address          Number of Shares    Percentage of
Title of class     of beneficial owner       of Common Stock     Common Stock(1)
--------------------------------------------------------------------------------
DIRECTORS AND OFFICERS:
--------------------------------------------------------------------------------
Common Stock       Steven Vestergaard            7,567,030 (2)          24.1%
                   President
                   Chief Executive Officer
                   and Chief Financial Officer
--------------------------------------------------------------------------------
Common Stock       Edward Kolic                    846,010 (3)           2.7%
                   Secretary
                   Director
--------------------------------------------------------------------------------
Common Stock       Lawrence J. Langs               150,000 (4)           0.5%
                   Director
--------------------------------------------------------------------------------
Common Stock       Yoshitaro Kumagai               268,000 (5)           0.9%
                   Director
--------------------------------------------------------------------------------
Common Stock       Wayne Koshman                    43,750 (6)           0.1%
                   Director
--------------------------------------------------------------------------------
Common Stock       All Officers and                 8,874,790           28.1%
                   Directors as a
                   Group (5 persons)
--------------------------------------------------------------------------------
5% SHAREHOLDERS
--------------------------------------------------------------------------------
Common Stock       David Lawrence                   1,700,000            5.5%
                   3236 Grand Avenue, Suite H500
                   Laramie, Wyoming 82070
--------------------------------------------------------------------------------

(1)  Under Rule 13d-3 of the Securities Exchange Act of 1934, a beneficial owner
     of  a security includes any person who, directly or indirectly, through any
     contract,  arrangement,  understanding,  relationship,  or otherwise has or
     shares:  (i)  voting  power,  which  includes  the  power  to  vote,  or to


                                  36 of 43



<PAGE>

     direct  the voting of shares; and (ii) investment power, which includes the
     power to dispose or direct the disposition of shares. Certain shares may be
     deemed  to  be beneficially owned by more than one person (if, for example,
     persons  share the power to vote or the power to dispose of the shares). In
     addition,  shares  are  deemed  to be beneficially owned by a person if the
     person  has  the right to acquire the shares (for example, upon exercise of
     an  option)  within  60  days  of  the  date as of which the information is
     provided.  In  computing the percentage ownership of any person, the amount
     of  shares  outstanding  is  deemed  to  include  the  amount  of  shares
     beneficially owned by such person (and only such person) by reason of these
     acquisition  rights.  As  a result, the percentage of outstanding shares of
     any person as shown in this table does not necessarily reflect the person's
     actual  ownership  or  voting power with respect to the number of shares of
     common  stock  actually outstanding on November 26, 2002. As of October 31,
     2002,  there  were  30,555,903  shares  of  our  common  stock  issued  and
     outstanding.

(2)  Consists  of  7,192,030  shares  held by Mr. Vestergaard and 375,000 shares
     that  are immediately acquirable upon the exercise of stock options held by
     Mr.  Vestergaard  within  60  days  of  November  26,  2002.

(3)  Consists  of  471,010  shares held by Mr. Kolic and 375,000 shares that are
     immediately acquirable upon the exercise of stock options held by Mr. Kolic
     within  60  days  of  November  26,  2002.

(4)  Consists  of  150,000  shares  that  are  immediately  acquirable  upon the
     exercise  of stock options held by Mr. Langs within 60 days of November 26,
     2002.

(5)  Consists  of 150,000 shares held by Mr. Kumagai and 118,000 shares that are
     immediately  acquirable  upon  the  exercise  of  stock options held by Mr.
     Kumagai  within  60  days  of  November  26,  2002.

(6)  Consists of 43,750 shares that are immediately acquirable upon the exercise
     of  stock options held by Mr. Koshman within 60 days of November 26, 2002.


================================================================================



CHANGE  IN  CONTROL

We  are not aware of any arrangement that might result in a change in control in
the  future.


                                  37 of 43

<PAGE>



EQUITY  COMPENSATION  PLAN  INFORMATION

We  have  one equity compensation plan, namely our 1999 Stock Option Plan, under
which  up  to  3,750,000  shares  of  our  common stock have been authorized for
issuance  to our officers, directors, employees and consultants.  Our 1999 Stock
Option  Plan  has  been  approved  by the Company's stockholders.  The following
summary  information is presented for our 1999 Stock Option Plan on an aggregate
basis  as  of  August  31,  2002.
                                                          Number  of
                 Number  of                               Securities Remaining
                 Securities  to                           Available for Future
                 be Issued                                Issuance Under Equity
                 Upon Exercise     Weighted-Average       Compensation Plans
                 of Outstanding    Exercise Price of      (Excluding Securities
                 Options, Warrants Outstanding Options,   Reflected in
                 and Rights        Warrants  and  Rights  column  (a))
--------------------------------------------------------------------------------
Plan Category          (a)                 (b)                   (c)
--------------------------------------------------------------------------------
Equity Compensation
Plans Approved By    2,135,500 Shares    $0.49 per Share    1,614,500 Shares
Security Holders     of Common Stock                        of Common Stock
--------------------------------------------------------------------------------
Equity Compensation
Plans Not Approved
By Security Holders  Not Applicable     Not Applicable     Not Applicable
--------------------------------------------------------------------------------


ITEM  12.     CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS.

Except  as  described  below,  none  of  the following persons has any direct or
indirect  material  interest  in any transaction to which we were or are a party
during  the  past two years, or in any proposed transaction to which the Company
proposes  to  be  a  party:

(A)  any  director  or  officer;

(B)  any  proposed  nominee  for  election  as  a  director;

(C)  any  person  who beneficially owns, directly or indirectly, shares carrying
     more  than  5%  of  the  voting  rights  attached  to  our common stock; or

(D)  any  relative or spouse of any of the foregoing persons, or any relative of
     such  spouse, who has the same house as such person or who is a director or
     officer  of  any  parent  or  subsidiary.



                                  38 of 43

<PAGE>


ACQUISITIONS  OF  BUSINESS  ASSETS

On  October  20,  1999, we completed the purchase of Destiny Software, a private
corporation  wholly  owned  by  Steven Vestergaard, the current president of the
Company.  The  purchase  price  was 1,800,000 shares of restricted common stock.

In  June  1999,  we  purchased  all  of  the  issued  and  outstanding shares of
Wonderfall  Productions Inc., a British Columbia company, from Mr. Ed Kolic, one
of  our directors, in consideration of the purchase price of $20,000. Wonderfall
Productions  had a history in computer games production and marketing and at the
time  of acquisition, had two games that had not been commercially released. The
rationale  for  the  acquisition  of WonderFall Productions was so that we could
exploit  the  potential  of these games and gain access to Mr. Kolic's marketing
skills.


SHARE  ISSUANCES

We  have  issued  the  following  shares of our common stock to our officers and
directors:

1.   On  September 21, 2001, we issued 353,930 shares of our common stock to Mr.
     Steven  Vestergaard,  our president and chief executive officer, as payment
     to  Mr.  Vestergaard of accrued but unpaid salary in the amount of $38,932.
     This  salary  was  accrued  in  our  fiscal year ended August 31, 2001. The
     deemed  price  of  $0.11  per  share  was based on the market price for our
     common  stock  as  of  September  21,  2001.

2.   On  September 21, 2001, we issued 271,100 shares of our common stock to Mr.
     Edward Kolic, a director and our former chief operating officer, as payment
     to  Mr.  Kolic  of accrued but unpaid salary in the amount of $29,811. This
     salary  was  accrued  in  our fiscal year ended August 31, 2001. The deemed
     price of $0.11 per share was based on the market price for our common stock
     as  of  September  21,  2001.

3.   On  September 12, 2001, we issued 250,000 shares of our common stock to Mr.
     David  Lawrence,  our  former  chief  executive  officer, as payment to Mr.
     Lawrence  of  accrued  but unpaid management fees in the amount of $31,875.

4.   On  November  30, 2001, we issued 125,000 shares of our common stock to Mr.
     David  Lawrence,  our  former  chief  executive  officer, as payment to Mr.
     Lawrence of accrued but unpaid management fees for our first quarter in the
     amount  of  $15,000.

These  shares  issuances  are  discussed  under Item 5 of Part II of this Annual
Report  on  Form  10-KSB  under  the  heading  "Recent  Sales  of  Unregistered
Securities".


MANAGEMENT  AGREEMENTS

We entered into a management agreement with Mr. David Lawrence, our former chief
executive  officer,  dated  May  1, 2001.  We are currently in legal proceedings
relating  to  this management agreement and other matters.  See Item 3 of Part I
of  this  Annual  Report  on  Form 10-KSB under the heading "Legal Proceedings".


                                  39 of 43


<PAGE>


ITEM  13.     EXHIBITS  AND  REPORTS  ON  FORM  8-K.

(a)     Exhibits

EXHIBIT
NUMBER     DESCRIPTION
--------------------------------------------------------------------------------
 3.1       Amended  Articles  of Incorporation of Destiny Media (1)
 3.2       By-Laws  of  Destiny  Media  (1)
23.1       Consent  of  KPMG,  LLP
99.1       Certification of Chief Executive Officer and Chief Financial Officer
           pursuant to pursuant to 18 U.S.C. Section 1350, as adopted
           pursuant to Section  906 of the  Sarbanes-Oxley  Act  of  2002(2)
--------------------------------------------------------------------------------
     (1)  Filed as an exhibit to the Company's Form 10-SB registration statement
          originally  filed  on  November  23, 1999 and as subsequently amended.
     (2)  Filed  as  an  exhibit  to  this  Annual  Report  on  Form  10-KSB


(b)     Reports  on  Form  8-K.

No  reports  on  Form  8-K were filed during the last quarter of our fiscal year
ended  August  31,  2002.

The  following  reports  on  Form  8-K  have  been  filed since August 31, 2002.

                     Date of Filing
Date of Form 8-K     with the SEC            Description of the Form 8-K
----------------     -------------------     ---------------------------
September 17, 2002   October 3, 2002         Disclosure  that  the  Company  has
                                             been  granted  permission  to begin
                                             trading on the Third Market Segment
                                             of  the  Berlin  Stock  Exchange
                                             starting  on  Friday, September 20,
                                             2002



                                  40 of 43


<PAGE>

ITEM  14.     CONTROLS  AND  PROCEDURES.

As  required  by  Rule  13a-15  under  the  Securities Exchange Act of 1934 (the
"Exchange Act"), we carried out an evaluation of the effectiveness of the design
and operation of our disclosure controls and procedures within the 90 days prior
to  the  filing  date of this report.  This evaluation was carried out under the
supervision  and with the participation of our Chief Executive Officer and Chief
Financial  Officer,  Mr.  Steven  Vestergaard.  Based  upon that evaluation, our
Chief  Executive  Officer  and  Chief  Financial  Officer  concluded  that  our
disclosure  controls  and procedures are effective in timely alerting management
to  material  information relating to us required to be included in our periodic
SEC filings.  There have been no significant changes in our internal controls or
in other factors that could significantly affect internal controls subsequent to
the  date  we  carried  out  our  evaluation.

Disclosure  controls  and  procedures are controls and other procedures that are
designed  to  ensure that information required to be disclosed our reports filed
or  submitted  under  the  Exchange  Act  is recorded, processed, summarized and
reported,  within  the  time  periods  specified  in the Securities and Exchange
Commission'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 Exchange Act is
accumulated  and  communicated  to  management,  including  our  Chief Executive
Officer  and  Chief  Financial  Officer,  to  allow  timely  decisions regarding
required  disclosure.




                                  41 of 43

<PAGE>

                                   SIGNATURES


In  accordance  with  Section  13  or  15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


DESTINY  MEDIA  TECHNOLOGIES,  INC.


By:  /s/ Steven  Vestergaard
     ___________________________________
     Steven  Vestergaard,  President
     Chief  Executive  Officer  and  Chief  Financial  Officer
     Director
     Date:     November  27,  2002


In  accordance  with  the  Securities  Exchange Act, this report has been signed
below by the following persons on behalf of the Registrant and in the capacities
and  on  the  dates  indicated.




By:  /s/ Steven  Vestergaard
     ___________________________________
     Steven  Vestergaard,  President
     Chief  Executive  Officer  and  Chief  Financial  Officer
     (Principal  Executive  Officer)
     (Principal  Financial  Officer  and  Principal  Accounting  Officer)
     Director
     Date:     November  27,  2002



By:  /s/ Edward  Kolic
     ___________________________________
     Edward  Kolic
     Director
     Date:     November  27,  2002



By:  /s/ Wayne  Koshman
     ___________________________________
     Wayne  Koshman
     Director
     Date:     November  27,  2002




<PAGE>


                                 CERTIFICATIONS*

I,  Steven  Vestergaard,  Chief Executive Officer and Chief Financial Officer of
Destiny  Media  Technologies,  Inc.,  certify  that;

1.   I  have  reviewed  this  annual  report  on  Form  10-KSB  of Destiny Media
     Technologies,  Inc.;

2.   Based  on  my  knowledge,  this  annual  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  annual  report;


3.   Based  on  my  knowledge,  the  financial  statements,  and other financial
     information  included in this annual 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 annual report;

4.   The  registrant's  other  certifying  officers  and  I  are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in  Exchange  Act  Rules  13a-14  and  15d-14) for the registrant and have:

     a)   designed  such  disclosure  controls  and  procedures  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 annual report
          is  being  prepared;

     b)   evaluated  the  effectiveness  of the registrant's disclosure controls
          and procedures as of a date within 90 days prior to the filing date of
          this  annual  report  (the  "Evaluation  Date");  and

     c)   presented  in  this  annual  report  our  conclusions  about  the
          effectiveness  of  the disclosure controls and procedures based on our
          evaluation  as  of  the  Evaluation  Date;

5.   The  registrant's  other certifying officers and I have disclosed, based on
     our  most  recent  evaluation,  to  the registrant's auditors and the audit
     committee  of  registrant's  board  of directors (or persons performing the
     equivalent  functions):


     a)   all  significant  deficiencies  in the design or operation of internal
          controls  which  could  adversely  affect  the registrant's ability to
          record,  process,  summarize  and  report  financial  data  and  have
          identified  for  the  registrant's auditors any material weaknesses in
          internal  controls;  and

     b)   any  fraud, whether or not material, that involves management or other
          employees  who  have  a  significant role in the registrant's internal
          controls;  and

6.   The  registrant's  other  certifying  officers and I have indicated in this
     annual  report  whether there were significant changes in internal controls
     or  in  other  facts  that  could  significantly  affect  internal controls
     subsequent  to  the  date  of  our  most  recent  evaluation, including any
     corrective  actions  with  regard  to significant deficiencies and material
     weaknesses.



Date:     November 27, 2002   /s/ Steven  Vestergaard
                              ___________________________________________
                              (Signature)

                              Chief Executive Officer and
                              Chief Financial Officer
                              ___________________________________________
                              (Title)