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

                                   FORM 10-KSB

            [xx] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                    For the Fiscal Year Ended August 31, 2001

                                       or

          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                SECURITIES EXCHANGE ACT OF 1934 [not applicable]

                         Commission File Number: 0-28259

                         Destiny Media Technologies Inc.
                        --------------------------------
        (Exact name of Small Business Issuer as specified in its charter)


           Colorado                                     84-1516745
           --------                                     ----------
(State or other jurisdiction of             (IRS Employer Identification Number)
incorporation or organization)

555 West Hastings Street, Suite 950, Vancouver, British Columbia Canada V6B 4N4
-------------------------------------------------------------------------------
                    (Address of Principal Executive Offices)

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


        Securities to be registered pursuant to Section 12(b) of the Act:
        -----------------------------------------------------------------
                                      None

        Securities to be registered pursuant to Section 12(g) of the Act:
        -----------------------------------------------------------------
                         Common Stock $0.001 par value.
                         ------------------------------
                                (Title of Class)


                                  Page 1 of 64
                          Index to Exhibits on Page 33
<PAGE>

                         Destiny Media Technologies Inc.

                                   Form 10-KSB
                                TABLE OF CONTENTS
                                     PART I
                                                             Page

Item 1.  Description of Business.............................   3

Item 2.  Management's Discussion and Analysis or Plan of
         Operation...........................................  16

Item 3.  Description of Property.............................  20

Item 4.  Security Ownership of Certain Beneficial Owners
         And Management.................................... .  20

Item 5.  Directors, Executive Officers, Promoters
         And Control Persons.................................  22

Item 6.  Executive Compensation..............................  26

Item 7.  Certain Relationships and Related Transactions......  28

Item 8.  Description of Securities...........................  28

                                     PART II

Item 1.  Market Price Of/And Dividends on the Registrant's
         Common Equity and Related Stockholder Matters.......  30

Item 2.  Legal Proceedings...................................  30

Item 3.  Changes in and Disagreements with Accountants......   31

Item 4.  Recent Sales of Unregistered Securities........... .  31

Item 5.  Indemnification of Directors and Officers......... .  31

                                    PART F/S

Item 1.  Consolidated Financial Statements...................  31

                                    PART III

Item 1.   Index to Exhibits                                    33

Item 2.   Description of Exhibits

                                       2
<PAGE>
                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS
--------------------------------

Introduction
------------

Destiny Media Technologies Inc. (hereinafter is also referred to as the
"Company" and/or the "Registrant") is a software developer and a sales and
marketing company. The Company was incorporated in August 1998 in the state of
Colorado under the name Euro Industries Ltd.

The Company was originally involved in the acquisition and exploration of mining
properties; however in July of 1999 with the start of the process involving the
Company's acquisition of Destiny Software Productions Inc. and the introduction
of a new management team, the Company became active in the software industry and
ceased all of its work in the mining industry.

On October 20, 1999 the Company completed the process of acquiring Destiny
Software Productions Inc.("Destiny Software"). Destiny Software is a Western
Canadian based software development company specializing in streaming media and
media distribution products. Destiny Software has created its own proprietary
compression format and technologies.

Destiny's suite of streaming and downloadable products includes: MPE(TM)
(http://www.destinympe.com), a complete, secure media distribution system that
provides e-commerce and digital rights management directly from within an
MP3-compatible multimedia file; Clipstream(TM) (http://www.clipstream.com), a
java-based tool which enables web pages, e-mail and banners to stream audio
without the use of a player; Video Clipstream(TM)
(http://www.videoclipstream.com), a technology for embedding streaming video
into a web page or e-mail; and the RadioDestiny Broadcaster(TM)
(http://www.radiodestiny.com), which allows a user to webcast live or scripted
internet radio from a computer to anyone on the Internet. All four products are
currently being sold in the market place.

Destiny has entered into a provisional agreement to sell the
Clipstream(TM)business and assets to a private company, Clipstream Technologies,
Inc. ("CTI).

The Clipstream business and assets are being transferred from Destiny to CTI
pursuant to an agreement (the "Technology Transfer Agreement" or "TTA") made as
of September 13, 2001. CTI has agreed to acquire all of the Clipstream assets
from Destiny for C$5,700,000, payable by issuance of 22,800,000 CTI Shares to
Destiny at the deemed price of CDN$0.25 each. Destiny's


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<PAGE>
obligation to complete the sale of the Clipstream assets is subject to CTI
obtaining financing of at least C$750,000 to fund the expanded marketing program
referred to above. CTI intends to complete a business combination with a Capital
Pool Corporation ("CPC") listed in the Canadian Venture Exchange ("CDNX") The
financing condition is expected to be fulfilled by a C$750,000 - C$1,500,000
financing intended to be carried out by the CPC, described below, since the
proceeds from that financing will be available to CTI upon completion of the
transaction.

The owners of CTI at the time of closing will be Destiny Software Productions
Inc. a wholly owned subsidiary of Destiny and Alfred Sanderson, both of
Vancouver, British Columbia. All Clipstream assets and operations are located in
Vancouver.

Under the TTA, Destiny will transfer the Clipstream technology to CTI and assign
its rights to all contracts respecting the Clipstream technology, to CTI upon
completion of the minimum financing referred to above. As a result, CTI will be
entitled to receive all future license fees and other payments under those
contracts, as well as all payments under any new contracts. CTI will also have
non-exclusive marketing rights for new and existing products of Destiny and will
be actively seeking other technology products to market through its sales
channels.

Under an Office Services Agreement with Destiny, CTI will for one year after
closing receive the use of Destiny office space, facilities and equipment for a
flat fee of C$4,500 per month, including taxes and utilities, and will receive
marketing and sales services for the Clipstream product line, as well as office
services, including administrative, secretarial, bookkeeping, billing,
collection and systems administration and management services, for an additional
C$45,000 per month. Under a Product Development Agreement with Destiny, CTI will
for one year after closing receive product maintenance and development services,
including ongoing development of the Clipstream technology to add new functions
and features, and website maintenance and technical support, for an additional
C$62,500 per month. These costs are expected by CTI to be easily covered by
revenues from Clipstream licensing arrangements, and the revenues being
generated at this time would cover such costs. It is expected that upon
completion of the transaction, the Company will be listed as a Tier 2 Technology
Issuer on CDNX.

Destiny is developing enhancements to the MPE media distribution technology to
support digital file formats other than music. The company believes there is
significant opportunity in distributing video and software content.



                                       4
<PAGE>
The latest version of the RadioDestiny (TM) network supports playerless access
to the live radio streams. This product is currently in Beta release.

The Company's principal office is located at 555 West Hastings Street,
Vancouver, British Columbia V6B 4N4. The contact person is Mr. Steve
Vestergaard, President and Director. The telephone number is (604) 609-7736; the
facsimile number is (604) 609-0611. The Company currently maintains four
websites, which are radiodestiny.com; dsny.com; destinympe.com; and,
clipstream.com.

The Company's authorized capital includes 100,000,000 shares of common stock
with $0.001 par value. On December 30, 1999 the Registrant announced that the
Board of Directors had approved a three for one stock split. The split was
affected in the form of a 200% stock dividend to the shareholders of record on
December 30, 1999. The additional shares were to be distributed by Computershare
Investor Services (formerly American Securities Transfer and Trust Inc.), the
Registrant's transfer agent. Shareholders were required to exchange their
existing shares as instructed by Computershare. The impact of the split was to
increase the outstanding shares of the Registrant from 7,167,000 as of December
30, 1999 to 21,501,000. All reference to share data in this document refers to
post split data. As of the close of the Company's latest fiscal year, August 31,
2001, there were 27,177,358 shares of common stock outstanding.

The Company's common stock trades on the OTC Bulletin board under the symbol
"DSNY".

The information in this Registration Statement is current as of November 23,
2001 unless otherwise indicated.

Historical Corporate Development
--------------------------------

The Company was incorporated in the state of Colorado on August 24, 1998 under
the name Euro Industries Ltd. On October 12, 1999 the name of the Company was
changed to Destiny Media Technologies Inc.

By March 1999, the Company sold 5,950,000 pre-split (17,850,000 post-split)
common shares for an aggregate purchase price of $59,500. Each share was issued
at $0.01 per share. The shares were purchased by thirty-one individuals all of
who were unrelated parties.

The shares of common stock in the foregoing offering, were offered pursuant to
an exemption to registration provided under Section 3(b), Regulation D, Rule 504
of the Securities Act of


                                       5
<PAGE>
1933, as amended and under the exemption to registration under Section
11-51-308(1)(p) of the Colorado Securities Act.

The shares of the Company began trading on the National Quotation Bureau's "Pink
Sheets" on June 17, 1999.

On June 16, 1999, the Company entered into an agreement to purchase control of
Destiny Software Productions Ltd., a company 100% owned by Steve Vestergaard who
subsequently became the president of the Registrant. At the time of this
transaction, Mr. Vestergaard owned 3.6 million shares of the Registrant. The 3.6
million shares represented 20% of the Registrant's outstanding shares. Mr.
Vestergaard acquired all of these shares from unrelated parties for cash
consideration of $1,200. The detail of these purchases is as follows:

Certificate #     Name                               Number of Shares

131               Lorraine Zaiser             900,000 shares (post split)
102               Elefterras Aligizakis     1,050,000 shares (post split)
129               Hilary Wipf                 750,000 shares (post split)
117               Patricia Parente            600,000 shares (post split)
113               George Paikos               300,000 shares (post split)

Since that time the business of the Company has centered on Destiny Software.
The purchase price of Destiny Software was 600,000 pre-split (1,800,000
post-split) common shares of the Company. (These shares were restricted and each
certificate includes the following legend: "The shares represented by this
Certificate have not been registered under the Securities Act of 1933 ("the
Act") and are "restricted securities" as that term is defined in Rule 144 under
the Act. The shares may not be offered for sale, sold or otherwise transferred
except pursuant to the effective registration statement under the Act, or
pursuant to an exemption from registration under the Act, the availability of
which is to be established to the satisfaction of the Company.")

This transaction was finalized on October 20, 1999 when the shares were
physically issued to the owners of Destiny Software. The contract of sale
required that the Company had to raise Cdn$1.1 million of which Cdn$1 million
would be used for development of the Destiny Software products. The contract of
sale further stipulated that a minimum amount of Cdn. $250,000 had to be raised
by September 16, 1999 and this was accomplished by a loan from Jade & Co., a
shareholder of the Company.

On June 16, 1999 the Company entered into a private placement whereby it sold
1,851,000 shares of its common stock at prices between $0.40 and $0.48 per
common share (post split). The net proceeds of this private placement were as
follows:



                                       6
<PAGE>
  I.   1,490,724 common shares issued on retirement of debt of $594,236
 II.     112,791 common shares issued for services rendered valued at $54,690
III.     247,485 common shares issued for net cash proceeds of $79,999

This offering officially closed on November 9, 1999.

In early 1999, Mr. Vestergaard and Mr. Kolic, an unrelated party and the owner
of a company called Wonderfall Productions Inc.("Wonderfall"), were introduced
to each other at an industry/investor forum. This meeting subsequently led to
the acquisition by Destiny Software of Wonderfall in June 1999. Total
compensation for this acquisition was $20,000, which was paid by a promissory
note.

Mr. Ed Kolic was subsequently appointed as the Secretary and Chief Operating
Officer of the Registrant. Wonderfall had a history in computer games production
and marketing. Wonderfall had two games, at the time of the sale, that had not
been commercially released and the rationale for the acquisition by Destiny
Software of Wonderfall was so that it could exploit the potential of these games
and gain access to Mr. Kolic's marketing skills.


The Company completed a private placement on April 25, 2000 whereby it sold
1,000,000 units. Each unit consisted of one common share and one warrant
exercisable for a period of six months from the closing of the private
placement. Each unit sold for $1.00 and the warrants gave the holder the right
to purchase one additional share of common stock for $3.00. This offering was
made under Regulation S to offshore investors. The stock is restricted for a
period of one year and is then subject to Rule 144.


The Company completed a private placement on November 14, 2000 whereby it sold
2,150,000 common shares for $0.10 per common share. This offering was made under
Regulation S to offshore investors. The stock is restricted for a period of one
year and is then subject to Rule 144.

The Company's strategy this year has been to build reseller sales channels.
Destiny announced an agreement for a Japanese agent on January 4, 2001 and
exclusive distribution in the UK on January 9, 2001. The Japanese agent, Mr.
Kumagai, was added as a


                                       7
<PAGE>
director on July 16th, 2001. Mr. Kumagai, previously CEO at Vivitar Corporation
has successfully established resellers in Sendai and Tokyo Japan.

On January 11th, 2001 Destiny announced the addition of David Lawrence as CEO.
Mr. Lawrence's previous experience was as co-founder of Reading's Fun, Ltd.,
which he built into a $200 million in annual revenues company.

On May 22nd, 2001, the Company announced the opening of an office in Silicon
Valley.

As part of the move to become a sales and marketing company, Destiny has sold
licenses to a number of key accounts, including the Weather Channel, Mt. Sinai
School of Education and Lions Gate Films.

















































                                       8
<PAGE>
BUSINESS
--------

Media Internet Applications

Company Background including Destiny Software
---------------------------------------------

Steve Vestergaard who was subsequently appointed as the president of the
Registrant formed Destiny Software as a private partnership in January 1991. The
private company was sold to Destiny Software Productions, Inc. in 1992. From
1992 until 1995, Destiny Software was involved solely in the development and
sale of computer games. In 1992, Destiny Software developed a game called
"Creepers" which was published by a subsidiary of Sony Corporation called
Psygnosis. Also, in 1992 Destiny Software developed a game called "Solitaire's
Journey" which was published by Quantum Quality Productions. In 1993, Destiny
Software developed two games, called "Lucky's Casino Adventure" and "Origamo"
which were also published by Quantum Quality Productions. Two other games
developed in 1993 were "Time Out Sports Baseball" and "Time Out Sports
Basketball" which were published by Microleague. In 1994, a game called "Blood
Bowl" was developed by Destiny Software and published by Microleague. Three
games were developed in 1995. "Dark Seed II" for Windows and "Dark Seed II" for
Macintosh were both published by Cyberdreams, "MGM" and "Jam" was a Windows
shareware product. In December of 1995, Destiny's first Internet radio prototype
was started and this product was then released in April of 1996.


The Company owns a proprietary media compression format known as ".dny" ("dny"
is an intellectual property which was developed in-house with no third party
involvement). The property is in the form of a trade secret, and can be patented
and trademarked. At the present time there have been no patents or trademarks
taken out for the "dny" intellectual property.  This format is used to deliver
real time streaming media, such as Internet radio, on an on-demand basis.

The ".dny" technology was developed by the Company because Internet radio
requires massive compression levels and data packets are not reliably
transmitted across the Internet. The Company's media compression technology
recursively compresses an audio stream to any target compression ratio and, at
the same time, interleaves and buffers data packets and estimates missing audio
information.


All three Destiny Products (MPE (TM), RadioDestiny (TM) and Clipstream (TM)) are
commercially available. In addition, Destiny released Clipstream (TM) Audiomail,
which enables users to create playerless


                                       9
<PAGE>
streaming emails from a telephone. The company has also developed a prototype
playerless live video streaming product.


Product Descriptions
--------------------

Products, which are complete, are available for download from the Destiny
websites at www.dsny.com.

Clipstream(TM)

The Clipstream (TM) product family consists of Audio Clipstream (TM), Video
Clipstream (TM) and Clipstream Audiomail (TM). These Java based technologies
allow access to streaming audio and streaming video without requiring the user
to download a player. Whereas player based solutions have a market penetration
of less than 40%, Clipstream can reach over 94% of browsers.

Because it caches, Clipstream offers a 90% cost savings over player based
streaming solutions. It is standards based, so it passes through firewalls.
Because there is no player, the cost of ownership is much lower for
corporations. Unlike player- based solutions, Clipstream (TM) can be embedded in
an email. This creates great opportunities for rich media marketing and movie
previews.


Destiny Media Player(TM)

The Destiny Media Player(TM) is a combination MP3/Music player and radio
receiver. The Destiny Media Player(TM) will receive two separate formats: live
or automated broadcasts from the Destiny Station broadcaster and Audio-on-Demand
which will stream from a standard HTTP server. In Radio mode a user can listen
to radio broadcasts from any of stations on the RadioDestiny Broadcast
Network(TM). Incorporated into the player are features such as a live directory
of stations with direct email and weblink to these broadcasters. In Mp3 mode a
user can play MP3 files directly from the player's instant library. The player
automatically scans the users hard drive for existing music files and creates an
Mp3 library. Another feature is the list of MP3 websites allowing a user to
easily click a link to access MP3 sources. The Player 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


                                       10
<PAGE>
can be downloaded and installed within two minutes. It will be distributed free
from the Destiny web site, partner sites and via OEM agreements with computer
and sound card manufacturers.

RadioDestiny Broadcaster(TM)

In live mode, the user simply puts their audio signal into the input of their
sound card, configures the options and clicks 'start broadcast'. Their station
is automatically added to the directory of stations at the Destiny portal. It is
extremely easy to use.

In script mode, the user prerecords a set of audio files, and then specifies a
schedule for play back. A broadcaster could spend a couple of hours setting up
the schedule for the week, then the automated DJ could play back the content 24
hours per day, 7 days per week.

The DestinyBroadcaster will also allow the input of metadata, which are digital
files such as album cover graphics, lyrics and other artist information that is
of interest to music fans. This metadata then streams out simultaneously with
music files to the Destiny Media Player allowing the listener to view this
information as they are listening to the songs. This technology is unique to
Destiny with no current competition.


MPE (TM)

MPE (TM) is a digital rights management system. It allows viral super
distribution of digital files via peer-to-peer systems such as Napster while
ensuring that the originating artist gets paid.

Currently, MPE will self-extract music files.

Destiny is modifying this core technology so that it can be used to distribute
playing cards, software, videos and research reports.


Competition

The market for software and services for the Internet and intranets is
relatively new, constantly changing and intensely competitive. As streaming
media evolves into a central and necessary component of the Internet experience,
more companies are entering the market for, and expending ever-greater resources


                                       11
<PAGE>
to develop, streaming media software and services, and competition is thus
intensifying. Many of the Company's current and potential competitors have
longer operating histories, greater name recognition, larger overall installed
bases, more employees and significantly greater financial, technical, marketing,
public relations and distribution resources than the Company.

The Company's two principal competitors in the development and distribution of
streaming media technology are RealNetworks and Microsoft Corporation. Both
Microsoft's and RealNetworks' commitment to and presence in the streaming media
industry has significantly increased and will continue to increase competitive
pressure in the overall market for streaming media software. This could lead to
increase pricing pressure, which may result in price reductions in the Company's
products.

In addition to Microsoft and RealNetworks the Company faces increased
competition from other companies that are developing and marketing streaming
media product offerings. As more companies enter the market with products and
services that compete with the Company's players and tools, the competitive
landscape could change significantly to the detriment of the Company.

The Company competes for user traffic and Internet advertising revenues with a
wide variety of Web sites, ISP's and especially audio, video and other media
aggregators, such as Broadcast.com and Microsoft's Web Events. While Internet
advertising revenues across the industry continue to grow, the number of Web
sites competing for such revenue is also growing rapidly. The Company's
advertising sales force and infrastructure are still in early stages of
development relative to its competitors. There can be no assurance that
advertisers will place advertising with the Company or that revenues derived
from such advertising will be material. In addition, if the Company fails to
attract new customers or is forced to reduce proposed advertising rates the
Company's business, financial condition and results of operations may be
materially adversely affected.

Competitive factors in the streaming media market include the quality and
reliability of software; features for creating, editing and adapting content;
ease of use and interactive user features; scalability and cost per user;
pricing and licensing terms; the emergence of new and better formats; and,
compatibility with the user's existing network components and software systems.
To expand its user base and further enhance the user experience, the Company
must continue to innovate and improve the performance of its products. The
Company anticipates that consolidation will continue in the streaming media
industry


                                       12
<PAGE>
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 the Company can
establish or sustain a leadership position in this market segment. The Company
is committed to working toward market penetration of its 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 its current brand and technology franchise. Price concessions
or the emergence of other pricing or distribution strategies by competitors may
have a material adverse effect on the Company's business, financial condition
and results of operations.

Government Regulation and Legal Uncertainties

The Company is 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 the Company 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 the Company's cost of doing business or increase its legal
exposure.

Risk Factors

Dependence On Key Personnel:

The Company's success is dependent, to a large degree, upon the efforts of its
current executive officers. The loss or unavailability of any such person could
have an adverse effect on the Company. At the present time the Company does not
maintain key man life insurance policies for any of these individuals. Also, the
continued success and viability of the Company is dependent upon its ability to
attract and retain qualified personnel in all areas of its business, especially
management positions. In the event the Company is unable to attract and


                                       13
<PAGE>
retain qualified personnel, its business may be adversely affected. There are
currently only employment agreements in place. Management is, however, currently
negotiating agreements with the remaining executive officers of the Company.

Limited Operating History:

The Company has a limited operating history upon which to base an evaluation of
its business and prospects. Operating results for future periods are subject to
numerous uncertainties, and there can be no assurance that the Company will
achieve or sustain profitability on an annual or quarterly basis. The Company's
prospects must be considered in light of the risks encountered by companies in
the early stage of development, particularly companies in new and rapidly
evolving markets. Future operating results will depend upon many factors,
including the demand for the Company's software products, the level of product
and price competition, the Company's success in attracting and retaining
motivated and qualified personnel, and in particular, the growth of activity on
the Internet World Wide Web as it relates to the internet broadcast industry.

History of Net Losses:

The Company has had net losses since its inception on August 24, 1998.

In the Period August 24, 1998 (date of inception) to August 31, 2001 the Company
had a net loss of $3,197,098.

There can be no assurance that this trend will not continue.

The Auditors Report on the consolidated financial statements for the year ended
August 31, 2001 includes an additional explanatory paragraph which states that
as the Company has incurred recurring losses from operations and has a working
capital deficiency that raises substantial doubt about its ability to continue
as a going concern. The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

Possible Dilution to Present and Prospective Shareholders:

The Company's plan of operation, in part, contemplates the accomplishment of
business negotiations by the issuance of cash, securities of the Company, or a
combination of the two, and possibly, incurring debt. Any transaction involving
the issuance of previously authorized but unissued shares of common stock, or
securities convertible into common stock, would result in dilution, possibly
substantial, to present and prospective holders of common stock.



                                       14
<PAGE>
Risks of Product Defects and Product Liability:

As a result of their complexity, 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 by the Company 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 the Company's products, which could
have a material adverse effect on the Company's business, financial condition
and results of operations. The Company's product 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 the
Company's customers, which may result in significant liability to the Company
and deter potential customers. The sale and support of the Company's products
may entail the risk of liability claims. A product liability claim brought
against the Company could have a material adverse effect on the Company's
business, financial condition and results of operations.

The Ability to Manage Growth:

Should the Company be successful in the sales and marketing efforts of its
software products it will experience significant growth in operations. If this
occurs, management anticipates that additional expansion will be required in
order to continue its product development. Any expansion of the Company's
business would place further demands on its management, operational capacity and
financial resources. The Company anticipates that it 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
the Company 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 the Company's current systems,
procedures or controls will be adequate to support any expansion of it's
operations. The failure to manage growth effectively could have a material
adverse effect on the Company's business, financial condition and results of
operations.

Risk of System Failure and/or Security Risks:

Despite the implementation of security measures, the core of the Company's
network infrastructure could be vulnerable to unforeseen computer problems.
Although the Company believes it


                                       15
<PAGE>
has taken steps to mitigate much of the risk, it 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 the Company and also may deter new customers from
purchasing its software and services, and individuals from utilizing it.
Although the Company intends to continue to implement and establish security
measures, there can be no assurance that measures implemented by it will not be
circumvented in the future, which could have a material adverse effect on the
Company's 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 the Company's 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 the Company's
products and services may not grow, or may develop more slowly than expected.

The Company believes that increased Internet use may depend on the availability
of greater bandwidth or data transmission speeds or on other technological
improvements, and the Company is largely dependent on third party companies to
provide or facilitate these improvements. Changes in content delivery methods
and emergence of new Internet access devices such as TV set-tops boxes could
dramatically change the market for streaming media products and services if new
delivery methods or devices do not use streaming media or if they provide a more
efficient method for transferring data than streaming media.

The electronic commerce market is relatively new and evolving. Sales of the
Company's 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 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.



                                       16
<PAGE>
Product Delays and Errors:

The Company has experienced development delays and cost overruns associated with
its product development. It may encounter such problems in the future. Delays
and cost overruns could affect the Company's ability to respond to technological
changes, evolving industry standards, competitive developments or customer
requirements. The Company's 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 the
Company's ability to transmit confidential information securely, and costs
associated with the prevention or elimination of such problems, could have a
material adverse effect on the Company's business.

International Operations:

The Company markets and sells its products in the United States, Canada, Europe
and Asia. As such, it is 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 Company's ability to enforce its
intellectual property rights, discontinuity of the Company's infrastructures,
limitations on fund transfers and other legal and political risks. Such
limitations and interruptions could have a material adverse effect on the
Company's business. The Company does not currently hedge its foreign currency
exposures.

Dividend Policy:

The Company does 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. However, the actual amount of dividends received from
the Company will remain subject to the discretion of the Company's Board of
Directors and will depend on results of operations, cash requirements and future
prospects of the Company and other factors.

The Lack of Assurance That the Company Will Be Able to Meet Its Future Capital
Requirements:



                                       17
<PAGE>
The Company currently has no source of operating cash flow to fund future
projects or corporate overhead. The Company has limited financial resources, and
there is no assurance that additional funding will be available. The Company's
ability to continue to operate will be dependent upon its ability to raise
significant additional funds in the future.

Risks Associated with Penny Stock Classification:

The Company's stock is subject to "penny stock" rules as defined in 1934
Securities and Exchange Act rule 3151-1. The Commission has adopted rules that
regulate broker-dealer practices in connection with transactions in penny
stocks. The Company's 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 U.S. $5.00 (other than 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.



Significant Customers and/or Suppliers
--------------------------------------

                                       18
<PAGE>
The Company has moved into the selling and marketing of its products and has a
broad scope of customers and suppliers, it continues to develop and expand its
product base.

Employees
---------

At 11/01/01, the Company operated with the services of its Directors, Executive
Officers, and 9 additional employees. There is no collective bargaining
agreement in place.


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS
---------------------------------------------
OR PLAN OF OPERATION
--------------------

SELECTED FINANCIAL DATA
-----------------------

The selected financial data in Table No. 1 for the period from incorporation on
"August 24, 1998 to August 31, 2001 was derived from the consolidated financial
statements of the Company.

The selected financial data was extracted from the more detailed consolidated
financial statements and related notes included therein and should be read in
conjunction with such consolidated financial statements and with the information
appearing under the heading, "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

                  Table No. 1 (Destiny Media Technologies Inc.)
                       Selected Financial Data (USD 000's)

--------------------------------- ------------------- ------------ ------------
                                  The Period 8/24/98   Fiscal Year  Fiscal Year
                                       8/24/98 (date         Ended        Ended
                                   of incorporation)     8/31/2001    8/31/2000
                                          to 8/31/01
--------------------------------- ------------------- ------------ ------------
--------------------------------- ------------------- ------------ ------------
Revenue
                                                $431         $346          $85
--------------------------------- ------------------- ------------ ------------
Net Income (Loss)
                                            ($3,197)      (1,557)     ($1,581)
--------------------------------- ------------------- ------------ ------------
Earnings (Loss) per Share
                                             ($0.17)      ($0.06)      ($0.07)
--------------------------------- ------------------- ------------ ------------
Dividends per Share
                                                   0            0            0
--------------------------------- ------------------- ------------ ------------
Weighted Average Number of Shares
Outstanding                               19,314,335   25,068,025   21,512,150
--------------------------------- ------------------- ------------ ------------
--------------------------------- ------------------- ------------ ------------
Working Capital                                  N/A       ($697)        ($51)

--------------------------------- ------------------- ------------ ------------
Long Term Debt                                   N/A          $22          195

--------------------------------- ------------------- ------------ ------------
Shareholders' Equity
(Deficiency)                                     N/A       ($527)         $273

--------------------------------- ------------------- ------------ ------------
Total Assets                                     N/A         $391         $731

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





                                       19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATION
--------------------

The following discussion of financial condition of the Company and its
subsidiaries and the results of operations should be read together with the
consolidated financial statements and related notes that are included later in
this registration statement. This discussion contains forward-looking statements
that involve risks and uncertainties. The Company's 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 registration statement.

Cash Balances
-------------

The Company maintains its major cash balances at two financial institutions. One
is located in Vancouver, British Columbia, Canada. The balances in that
institution are insured up to $40,200 (Cdn$60,000) per account by the Canada
Deposit Insurance Corporation. The second is located in Bolder, Colorado.

Commitments and Contingencies
-----------------------------

The Company leases its office facility in Vancouver, British Columbia, Canada.
The Company entered into a one-year lease in June 2001. The total minimum lease
payments to May 31,2002 under the operating leases are US $51,416.

Liquidity and Capital Resources
-------------------------------

Cash used during the fiscal year ended August 31, 2001 for operating activities
totaled $419,897 (2000-$1,227,225). Common stock was issued for debt and
services rendered of $45,300 (2000-$54,690) stock-based compensation in the form
of stock options totaled $108,961 (2000-$21,346); shares issuable for services
rendered totaled $44,372 (2000-nil) and interest accrued on note receivable
totaled $11,187 (2000-nil).

Cash flows from investing activities related to the purchases of other assets of
$34,498 (2000-$79,468. The net cash outflow by investing activities totaled
$33,494 (2000-inflow of $162,789).

Cash flows from financing activities totaled $394,250 (2000-$1,181,384). This
was made up of $384,250 (2000-$1,079,999) in net proceeds from the issuance of
common stock and subscriptions and $10,000 in common stock issuable.



                                       20
<PAGE>
The Company had a negative working capital position at August 31,2001 of
$696,917 as compared to a negative working capital balance of $51,258 at the
fiscal year ended August 31,2000.

Results of Operations
---------------------

The Company has moved into the selling and marketing of its products and has a
broad scope of customers and suppliers, it continues to develop and expand its
product base. For the year ended August 31, 2001, 85% of the sales were derived
from customers located in the United States and the balance from international
locations. Sales for the period were $345,653 (2000-$85,544).

Operating expenses totaled $1,888,943 (2000-$1,681,127). Major expenses incurred
during the period-included $692,349 (2000-$494,857) in wages and benefits. This
increase is due to the hiring of 4 additional sales staff and the payment of
sales commissions of $79,425 (2000-nil), the increase is also due to the
inclusion of stock based compensation expense of $108,961 (2000-21,346). This
stock compensation expense relates to the costs associated with granting stock
options to employees and directors at a price below the current market price at
the date of grant. This expense relates to the fair market value of the options.
This form of non-cash compensation is important to the company as it allows the
company to retain employees at lower wages, which helps reduce operating cash
outflow.

Consulting expenses also increased by $279,063 due to the hiring of the CEO and
CFO and two other outside consultants for two separate contracts of business
development in Eastern Canada and fundraising.

Bad debt increased by $33,583. A large part of this change is due to the
write-off of a particular receivable in the amount of $13,564. The Company is
currently pursuing the customer for default of contract (refer to item 2- Legal
Proceedings). The increase in bad debt is also due to the Company forgiving a
$12,144 portion of note receivable with one of its officers. The balance of bad
debt relates to various unrelated transactions.

Business development expenses for the year were $29,300 compared to nil in the
prior year. This expense relates to compensation paid under a business
development contract and relates specifically to two business promotion
initiatives undertaken by the company during the year. This business development
relationship with the McKenna Group brought strategic deals with Solutions
America, an ecommerce service provider and Lions Gate Films.




                                       21
<PAGE>
Professional fees increased by $31,835 due to the additional costs incurred in
legal fees relating to patent and trademarks and to various sales and reseller
agreements.

Rent also increased in fiscal 2001 by $24,468. This relates to the Company
operating out of 2 offices for additional rental costs of CDN$18,488. The
Company merged the 2 offices and moved into the larger and hence more expensive
suite at CDN$9,452 per month (2000-CDN6,300). The Company incurred moving
expenses of CDN$1,650 and additional insurance costs of CDN1,867.




Telephone and communications increase of $29,429 resulted from increased usage
in bandwidth, Internet connections, 4 additional phone/fax/modem lines, and
cellular phones.

During fiscal 2001, the Company concentrated on sales and cost control. Savings
of $114,718 were realized in the advertising and promotion categories. The
Company had incurred a one time advertising deal with MP3.com of $50,000 in
fiscal 2000, which did not repeat in fiscal 2001. The Company also was able to
cut CDN$74,287 in costs relating to website design, promotional brochure design
and printing. Savings of $173,330 in marketing expense are due to the cutting of
costs of relating to establishment of the Company's image, branding and cutting
all trade show expenses and travel which were incurred in fiscal 2000. The
Company was also able to save $78,068 in shareholder and transfer agent cost due
to the expiration of an agreement between the company and investor relations
firm. The Company had also incurred a one-time shareholder expense in fiscal
2000.



For the Period August 24, 1998 (Date of Incorporation) to August 31, 2001 the
Company reported a net loss of $3,197,098 (2000-$1,580,729).



























                                       22
<PAGE>
During the Fiscal year ending 8/31/02, management plans on concentrating its
efforts in the following three areas in order to become profitable:

         1.       Marketing the "Clipstream" java based audio streaming
                  solution. Development has been completed and the Company is
                  now embarking on a marketing and sales program to fully
                  exploit and maximize revenue from this product. Secure online
                  sales are now available online at www.clipstream.com. A sales
                  group will be assembled for direct sales efforts. This will
                  include both inside and outside sales. License agreements and
                  partnership opportunities will be sought with larger content
                  providers, aggregators and resellers.

Additional product development will take place to extend the product to a rich
media ad banner product targeted to the advertising community and interactive ad
agencies.

         2.       Product development is planned to complete the Listen Look and
                  Buy" streaming metadata component of the RadioDestiny
                  Broadcast solution. Once complete, this product will then be
                  launched and marketed in the second quarter.
         3.       Continued marketing of the Destiny Media Player to build the
                  registered users base is also planned. This will include
                  various online promotions and marketing initiative, trade show
                  participation and partnership opportunities.

As stated above, the Registrant will have to raise additional funds to complete
the aforementioned business plan. As yet, no investment banking agreements have
been reached. There is no guarantee that the Registrant will be able to raise
the capital necessary to complete the business plan for the period ending
8/31/02.


Known Trends
------------

Management has determined that because of the deficiency in working capital,
significant operating losses and lack of liquidity, there is doubt about the
ability of the Company to continue as a going concern unless additional working
capital is obtained. Consequently such trends or conditions could have a
material adverse effect on the Company's financial position, future results of
operations, or liquidity. The Company currently has plans to raise sufficient
working capital through equity financing or reorganization of the Company.

Income Taxes
------------

                                       23
<PAGE>
All tax returns due for the Company have been filed.

Inflation
---------

The Company's results of operations have not been affected by inflation and
management does not expect inflation to have a material impact on its operations
in the future.


ITEM 3. DESCRIPTION OF PROPERTY
-------------------------------

The Company leases approximately 3,525 square feet of space at 950 - 555 West
Hastings Street, Vancouver, British Columbia, Canada V6B 4N4 for administrative
and sales efforts. The Company pays approximately Cdn$8,860 per month going
forward, with a lease term of one year, for this facility. The Company considers
the facility adequate for current purposes.

ITEM 4.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
------------------------------------------------------------
         MANAGEMENT
         ----------

The Registrant is a publicly owned corporation, the shares of which are owned by
United States and Canadian residents. Another corporation or any foreign
government does not control the Registrant directly or indirectly.

Table No. 2 lists as of October 31, 2001persons/companies the Registrant is
aware of as being the beneficial owner of more than five percent (5%) of the
common stock of the Registrant.






























                                       24
<PAGE>
                                   Table No. 2

Title                                Amount and Nature Percent
  of                                 of Beneficial     of
Class     Name of Beneficial Owner   Ownership         Class #
------   -------------------------   ----------------- -------
Common   Steve Vestergaard (1)        5,645,430          19.80%
Common   David Lawrence (2)           1,575,000           5.52%
Common   Jade Capital                 1,551,000           5.44%

  TOTAL                               8,771,430          30.76%

# Based on 28,515,903 shares outstanding as of October 31, 2001 and options to
purchase shares of common stock.


(1) Does not include a vested option to purchase 255,416 shares of common stock.
(2)Does not include a vested option to purchase 38,125 shares of common stock.

Table No. 3 lists as of August 31, 2001 all Directors and Executive Officers who
beneficially own the Registrant's voting securities and the amount of the
Registrant's voting securities owned by the Directors and Executive Officers as
a group.

                                   Table No. 3
                Shareholdings of Directors and Executive Officers

Title                                                  Amount and Nature Percent
  of                                                   of Beneficial     of
Class     Name of Beneficial Owner                     Ownership         Class #
------   -------------------------                     ----------------- -------

Common   Steve Vestergaard, Pres. & Director           (1)5,645,430      19.79%
Common   Ed Kolic, Chief Operating Officer & Secretary (2)  471,010       1.65%
Common   Greg Foisy, Director                          (3)   25,000       0.09%
Common   Larry Langs, Director                         (4)        0       0.0%
Common   Yoshitaro Kumagai, Director                   (5)        0       0.0%

        Total                                             6,141,440      21.53%

# Based on 28,515,903 shares outstanding as of October 31, 2001.

(1)  Does not include vested options to purchase 280,834 shares of common stock.
(2)  Does not include vested options to purchase 280,834 shares of common stock.
(3)  Does not include vested options to purchase 144,563shares of common stock.


                                       25
<PAGE>
(4)  Does not include vested options to purchase 83,032 shares of common stock.
(5)  Does not include vested options to purchase 37,364 shares of common stock.


ITEM 5.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
-----------------------------------------------------
         CONTROL PERSONS
         ---------------

Table No. 4 lists as of August 31, 2001 the names of the Directors of the
Company. The Directors have served in their respective capacities since their
election and/or appointment and will serve until the next Annual Shareholders'
Meeting or until a successor is duly elected, unless the office is vacated in
accordance with the Articles/By-Laws of the Company. Three of the 5 Directors
are residents of and citizens of Canada and the other 2 are residents and
citizens of the United States of America.















































                                       26
<PAGE>
                                   Table No. 4
                                    Directors

                                      Date
First
                                                          Elected
Name                                    Age          or Appointed
---------------------   -------------------   -------------------
Steve Vestergaard (1)                    35           July 1999
Greg Foisy        (1)                    39           Oct. 1999
Ed Kolic                                 40           July 1999
Lawrence J. Langs                        40           Aug 2000
Yoshitaro Kumagai                        55           July 2001

(1)  Members of Audit Committee.

Table No. 5 lists, as of August 31, 2001, the names of the Executive Officers of
the Company. The Executive Officers serve at the pleasure of the Board of
Directors. Three of the four Executive Officers are residents/citizens of
Canada. One Officer is resident and citizen of the USA.

                                   Table No. 5
                               Executive Officers

Name               Position                               Date of Board Approval
-----------------  -------------------------------------  ----------------------

Steve Vestergaard  President                                      Oct. 1999
Ed Kolic           Chief Operating Officer and Secretary          Oct. 1999
David Lawrence     Chief executive Officer                        Jan. 2001
Alf Sanderson      Chief Financial Officer                        Mar. 2001
--------------------------------------------------------------------------------

Business Experience

Steve Vestergaard. Mr. Vestergaard is President and a Director of the Company.
The Company has employed him since June 1999 when the Company began negotiations
to purchase Destiny Software Productions Inc. His responsibilities include
coordinating strategy, planning, and product development. Mr. Vestergaard
devotes 100% of his time to the affairs of the Company. He has been involved in
the software development industry since 1982 at which time 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 by Distinctive
Software Inc., a company that later changed its name to Electronic Arts Canada.
At Electronic Arts Canada he was involved in developing game products. In 1991
he became the Chief Executive Officer of Destiny Software Productions, Inc. At
Destiny Software Productions Inc. his responsibilities included not only general
managerial functions, but also supervision of the development of computer games.
Mr. Vestergaard holds an International Baccalaureate Degree and a Bachelor of
Science


                                       27
<PAGE>
Degree in Computer Science from the University of British Columbia.

Ed Kolic. Mr. Kolic is the Chief Operating Officer and Secretary. His
responsibilities include overseeing the marketing efforts of the Company. He
devotes 100% of his time to the affairs of the Company. From 1988 until 1995, he
was employed as the President of Target Canada Production Ltd. 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. From
1993 until 1997, he was a partner in a private company called Jacqueline Conoir
Designs Ltd., which is a fashion design house. At Conoir Designs Ltd. he
developed all of the marketing, communications and image strategies for the
company. From 1997 until June of 1999, he was the president of WonderFall
Productions Inc., a computer game development company, which he sold to the
Company in June of 1999.

David Lawrence

Mr. Lawrence was responsible for building the sales organization, bottom line
revenue generation, strategic deployment of resources and recruiting and product
development of Reading's Fun Ltd. Launched in November of 1990; the company's
revenues grew at the rate of 225% annually for five years. In 1999, with annual
sales well above $200 million, the company was renamed "Books are Fun" and sold
to Reader's Digest for $380 million US

Alf Sanderson

Alf Sanderson has served in executive roles with Go Vacations America Inc,
Carriage Lane Furniture and for the past eight years has operated as a private
consultant to firms operating in the public market. He has a background in
company valuations and preparation of business plans. His credentials include a
Partners and Directors certification from the Canadian Securities Institute. He
has studied business administration at the University of Calgary and is a Member
and registered student in the Canadian Institute of Chartered Business
Valuators.





Greg Foisy. Mr. Foisy is a member of the Company's Board of Directors. From 1986
until 1991 Mr. Foisy worked in sales with Apollo Computer, which subsequently
became the workstation


                                       28
<PAGE>
division of Hewlett-Packard. In 1991 a company called Interactive Development
Environments, a software company specializing in development tools, employed
him. He opened up the first offices in Canada for Interactive Development
Environments and was successful in making the Canadian organization one of the
top producing regions within that company. He left Interactive Development
Environments in 1995 and founded a private company called Red Brick Systems. Red
Brick Systems is a provider of database technology for the Data Warehousing and
Decision Support market space and was involved in providing loyalty management
and click-stream analysis for companies involved in e-commerce or Internet
access. In 1998, a company called Informix purchased Red Brick Systems. Mr.
Foisy is now employed as the Director of Sales for Data Warehousing for
Informix. As a member of the Board of Directors, Mr. Foisy devotes 5% of his
time to the affairs of the Company.

Lawrence J. Langs Mr. Langs most recently worked as Vice President of Business
Development at MP3.com (Nasdaq: MPPP). Prior to MP3.com, Larry had a variety of
experience as a technology and entertainment lawyer, 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. From
1995-96 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 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. He is a member of the
New York Bar.




There have been no events during the last five years that are material to an
evaluation of the ability or integrity of any director, person nominated to
become a director, executive officer, promoter or control person including:

a) Any bankruptcy petition filed by or against any business of which such person
was a general partner or executive officer either at the time of the bankruptcy
or within two years prior to that time;



                                       29
<PAGE>
b) Any conviction in a criminal proceeding or being subject to a pending
criminal proceeding (excluding traffic violations and other minor offenses);

c) Being subject to any order, judgment, or decree, not subsequently reversed,
suspended or vacated, of any court of competent jurisdiction, permanently
enjoining, barring, suspending or otherwise limiting his/her involvement in any
type of business, securities or banking activities;

d) Being found by a court of competent jurisdiction (in a civil action), the
Commission or the Commodity Futures Trading Commission to have violated a
federal or state securities or commodities law, and the judgment has not been
reversed, suspended, or vacated.

Family Relationships
--------------------

There are no family relationships between any of the officers and/or directors.

Other Relationships/Arrangements
--------------------------------

There are no arrangements or understandings between any two or more Directors or
Executive Officers, pursuant to which he/she was selected as a Director or
Executive Officer. There are no material arrangements or understandings between
any two or more Directors or Executive Officers.


ITEM 6.  EXECUTIVE COMPENSATION
-------------------------------

The Company has no formal plan for compensating its Directors for their service
in their capacity as Directors. Directors are entitled to reimbursement for
reasonable travel and other out-of-pocket expenses incurred in connection with
attendance at meetings of the Board of Directors. The Board of Directors may
award special remuneration to any Director undertaking any special services on
behalf of the Company other than services ordinarily required of a Director.
During Fiscal 2001, no Director received and/or accrued any compensation for his
services as a Director, including committee participation and/or special
assignments.

The Company has no material bonus or profit sharing plans pursuant to which cash
or non-cash compensation is or may be paid to the Company's Directors or
Executive Officers. The Company has no formal stock option plan, which has been
approved by regulatory authorities or other long-term compensation program.



                                       30
<PAGE>
The President's and COO's compensation are outlined in the following table which
also includes the material terms of the two employment agreements:
<TABLE>
<CAPTION>
--------------------- ----------------------------------- -----------------------------------
<S>                   <C>                                 <C>
                      Steve Vestergaard President         Ed Kolic (COO)
--------------------- ----------------------------------- -----------------------------------
Responsibilities      Responsible for software            Responsible for All operations of
                      development activities of the       the business including financial,
                      Company, new product development    administration, operational and
                      and public company issues.          sales and marketing
--------------------- ----------------------------------- -----------------------------------
Reports to            Board of Directors                  Board of Directors
--------------------- ----------------------------------- -----------------------------------
Commencement date     Aug 01,1999                         March 1, 2001
--------------------- ----------------------------------- -----------------------------------
Term                  N/a                                 12 months
--------------------- ----------------------------------- -----------------------------------
--------------------- ----------------------------------- -----------------------------------
Severance- On         1 years salary + 2                  1 years salary + 2
change of Control     years performance                   years performance
                      bonus + waiver of                   bonus + waiver of
                      vesting on stock                    vesting on stock
                      options                             options
--------------------- ----------------------------------- -----------------------------------
Salary                $86,000 CDN                         $86,000 CDN
--------------------- ----------------------------------- -----------------------------------
</TABLE>

During Fiscal 2001, no funds were set aside or accrued by the Company to provide
pension, retirement or similar benefits for Directors or Executive Officers.

Except as indicated above, the Company has no plans or arrangements in respect
of remuneration received or that may be received by Executive Officers of the
Company in Fiscal 2001 to compensate such officers in the event of termination
of employment (as a result of resignation, retirement, change of control) or a
change of responsibilities following a change of control, where the value of
such compensation exceeds $60,000 per Executive Officer.

The Company has two written employment agreements.

Other than that disclosed above, no compensation was paid during Fiscal 2001 to
any of the officers or directors of the Company to the extent that they were
compensated in excess of $60,000.

ITEM 7.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
-------------------------------------------------------


                                       31
<PAGE>

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

In June 1999 Destiny Software purchased Wonderfall from Mr. Ed Kolic, the
Secretary and Chief Operating Officer of the Registrant.

In September of 1999, Jade Co., a private company owned by a shareholder of the
Registrant, loaned the Registrant $250,000 to assist in covering operating
expenses, this amount has since been repaid through the issuance of shares
referred to in "Historical Corporate Developments" above.

Other than described above, there have been no transactions since August 24,
1998 (Date of Inception), or proposed transactions, which have materially
affected or will materially affect the Company in which any Director, Executive
Officer, or beneficial holder of more that 10% of the outstanding common stock,
or any of their respective relatives, spouses, associates or affiliates has had
or will have any direct or material indirect interest.


ITEM 8.  DESCRIPTION OF SECURITIES
----------------------------------

The authorized capital of the Registrant is 100,000,000 shares of common stock
with a par value of $0.001 per share. 27,177,358 shares of common stock were
issued and outstanding at August 31, 2001, the end of the most recent fiscal
year.

All common shares are equal to each other, and when issued, are fully paid and
non-assessable, and the private property of shareholders who are not liable for
corporate debts. Each holder of a common share of record has one vote for each
share of stock outstanding in his name on the books of the Corporation and shall
be entitled to vote said stock.

The common stock of the Company shall be issued for such consideration as shall
be fixed from time to time by the Board of Directors. In the absence of fraud,
the judgment of the directors as to the value of any property or services
received in full or partial payment for shares shall be conclusive. When shares
are issued upon payment of the consideration fixed by the Board of Directors,
such shares shall be taken to be fully paid stock and shall be non-assessable.

Except as may otherwise be provided by the Board of Directors, holders of shares
of stock of the Corporation shall have no


                                       32
<PAGE>
preemptive right to purchase, subscribe for or otherwise acquire shares of stock
of the Company, rights, warrants or options to purchase stocks or securities of
any kind convertible into stock of the Company.

Dividends in cash, property or shares of the Company may be paid, as and when
declared by the Board of Directors, out of funds of the Company to the extent
and in the manner permitted by law.

Upon any liquidation, dissolution or winding up of the Company, and after paying
or adequately providing for the payment of all its obligations, the remainder of
the assets of the Company shall be distributed, either in cash or in kind,
pro-rata to the holders of the common stock, subject to preferences, if any,
granted to holders of the preferred shares. The Board of Directors may, from
time to time, distribute to the shareholders in partial liquidation from stated
capital of the Company, in cash or property, without the vote of the
shareholders, in the manner permitted and upon compliance with limitations
imposed by law.

Each outstanding share of common stock is entitled to one vote and each
fractional share of common stock is entitled to a corresponding fractional vote
on each matter submitted to a vote of shareholders. Cumulative voting shall not
be allowed in the election of Directors of the company and every shareholder
entitled to vote at such election shall have the right to vote the number of
shares owned by him for as many persons as there are Directors to be elected,
and for whose election he has a right to vote.

When, with respect to any action to be taken by the Shareholders of the Company,
the Colorado Corporation Code requires the vote or concurrence of the holders of
two-thirds of the outstanding shares entitled to vote thereon, or of any class
or series, any and every such action shall be taken, notwithstanding such
requirements of the Colorado Corporation Code, by the vote or concurrence of the
holders of a majority of the outstanding shares entitled to vote thereon, or of
any class or series.

Debt Securities to be Registered. Not applicable.
--------------------------------
American Depository Receipts.  Not applicable.
----------------------------
Other Securities to be Registered.  Not applicable.
---------------------------------

                                     PART II

Item 1.  Market Price Of And Dividends on the Registrant's
----------------------------------------------------------
         Common Equity and Other Shareholder Matters
         -------------------------------------------


                                       33
<PAGE>
The Company's common stock trades in the OTC Bulletin Board in the United
States, having the trading symbol "DSNY" and CUSIP# 25063G204. Trading volume
and high/low/closing prices, on a monthly basis, for the period September 30,
1999 to August 31, 2001 is given in the following table.

                                   Table No. 7
                           DSNY Stock Trading Activity


---------------------------- ------------ -------------- ------------------
     Month         High         Low           Close           Volume
--------------- ------------ ------------ -------------- ------------------
September,1999     $1.03        $0.83         $1.02                457,200
--------------- ------------ ------------ -------------- ------------------
October            $1.04        $0.68         $0.99                880,500
--------------- ------------ ------------ -------------- ------------------
November           $1.02       $$0.58         $0.95                591,600
--------------- ------------ ------------ -------------- ------------------
December           $0.92        $0.67         $0.88              1,254,900
--------------- ------------ ------------ -------------- ------------------
January,2000       $2.70        $0.55         $1.40              1,998,000
--------------- ------------ ------------ -------------- ------------------
February           $4.00        $1.41         $3.40              2,078,000
--------------- ------------ ------------ -------------- ------------------
March              $3.95        $2.00         $2.60              2,271,600
--------------- ------------ ------------ -------------- ------------------
April              $2.60        $1.20         $1.65                797,700
--------------- ------------ ------------ -------------- ------------------
May                $2.90        $1.40         $1.70                745,300
--------------- ------------ ------------ -------------- ------------------
June               $1.15        $1.05         $1.13                714,100
--------------- ------------ ------------ -------------- ------------------
July               $1.07        $0.75         $0.81              1,167,400
--------------- ------------ ------------ -------------- ------------------
August             $1.09        $0.69         $1.10              1,313,000
--------------- ------------ ------------ -------------- ------------------
September,2000     $1.18       $0.625        $0.625                763,000
--------------- ------------ ------------ -------------- ------------------
October            $0.52        $0.17        $0.219              1,316,800
--------------- ------------ ------------ -------------- ------------------
November           $0.29        $0.20         $0.24              1,060,400
--------------- ------------ ------------ -------------- ------------------
December           $0.24        $0.15         $0.19              1,159,300
--------------- ------------ ------------ -------------- ------------------
January,2001       $0.57        $0.21        $0.438              3,192,200
--------------- ------------ ------------ -------------- ------------------
February           $0.50        $0.26         $0.26              1,344,500
--------------- ------------ ------------ -------------- ------------------
March              $0.33       $0.145         $0.20              1,500,300
--------------- ------------ ------------ -------------- ------------------
April              $0.23        $0.14         $0.14              1,418,200
--------------- ------------ ------------ -------------- ------------------
May                $0.27       $0.105         $0.27              1,445,900
--------------- ------------ ------------ -------------- ------------------
June               $0.27        $0.11        $0.145              3,012,400
--------------- ------------ ------------ -------------- ------------------
July               $0.16        $0.12        $0.123              1,831,200
--------------- ------------ ------------ -------------- ------------------
August             $0.13        $0.08        $0.115              1,298,600
--------------- ------------ ------------ -------------- ------------------


The Company's common stock is issued in registered form. Computershare Investor
Services (located in Denver, Colorado) is the registrar and transfer agent for
the common stock.

On September 30, 2001 the shareholders' list for the Company's common shares
showed one hundred and twelve registered shareholders and 28,165,903 of common
stock outstanding.

The Company has not declared any dividends since incorporation and does not
anticipate that it will do so in the foreseeable future. The present policy of
the Company is to retain future earnings for use in its operations and expansion
of its business.



                                       34
<PAGE>
ITEM 2.  LEGAL PROCEEDINGS
--------------------------


Destiny Software Productions Inc, a wholly owned subsidiary of Destiny Media
Technologies, Inc. has commenced legal proceedings against Impatica.com Inc. in
the Supreme Court of British Columbia, Canada for payment of approximately
US$512,500 in unpaid technology licensing fees. During November 2000, Destiny
agreed to license its Clipstream(TM) and Videoclipstream(TM) technology to
Impatica in return for a US$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 Destiny received the first two
payments totalling US$162,500, but Impatica has defaulted in paying the last
US$62,500 in cash and delivering the 200,000 Impatica shares which were to make
up the balance of the purchase price. It is Destiny's position that Impatica has
repudiated the licensing agreement and that the unpaid license fees totalling
US$512,500 are a debt owing by Impatica to Destiny. The outstanding balance has
not been booked as revenue. The Writ of Summons was filed in the BC Supreme
Court on June 6, 2001. The S.C.B.C. Registry No. is S013166.



ITEM 3.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
------------------------------------------------------

                                 Not Applicable


ITEM 4.  RECENT SALES OF UNREGISTERED SECURITIES
------------------------------------------------
On September 12, 2001, the Company issued 250,000 common shares to an officer of
the company for services rendered in lieu of cash at a price of $0.10 per share
for total proceeds of $26,250.

On September 12, 2001, the Company issued 113,605 common shares to an officer of
the company for services rendered in lieu of cash at a price of $0.11 per share
for total proceeds of $11,361.

On September 21, 2001, the Company issued 353,930 common shares to an officer of
the company for debt settlement in lieu of cash at a price of $0.10 per share
for total proceeds of $35,393.

On September 21, 2001, the Company issued 271,010 common shares to an officer of
the company for debt settlement in lieu of cash at a price of $0.10 per share
for total proceeds of $27,101.

                                       35
<PAGE>
On October 5, 2001, the Company issued 250,000 common shares to an unrelated
party for services rendered in lieu of cash at a price of $0.10 per share for
total proceeds of $25,000.

On October 11, 2001, the Company issued 100,000 common shares to an unrelated
party for cash proceeds of $10,000 at a price of $0.10 per share.








ITEM 5.  INDEMNIFICATION OF DIRECTORS AND OFFICERS
--------------------------------------------------

The Company's By-Laws address indemnification under Article Seven (b).

The corporation shall indemnify, to the maximum extent permitted by Colorado
law, any person who is or was a director, officer, agent, fiduciary or employee
of the corporation against any claim, liability or expense arising against or
incurred by such person made party to a proceeding because he is or was a
director, officer, agent, fiduciary or employee of the corporation or because he
is or was serving another entity or employee benefit plan as a director,
officer, partner, trustee, employee, fiduciary or agent at the corporation's
request. The corporation shall further have the authority to the maximum extent
permitted by Colorado law to purchase and maintain insurance providing such
indemnification.


                                    PART F/S

ITEM 1.  FINANCIAL STATEMENTS
-----------------------------

The financial statements and notes thereto as required under ITEM #13 are
attached hereto and found immediately following the text of this Registration
Statement. The audit report of KPMG LLP, independent Chartered Accountants, on
the audited financial statements is included herein immediately preceding the
audited financial statements.

(A-1) Audited Financial Statements: Fiscal 2001

Auditors' Report, dated September 28, 2001
Consolidated Balance Sheets at August 31, 2001 and 2000


                                       36
<PAGE>
Consolidated Statements of Operations for the years ended August 31, 2001 and
2000; and, for the period from August 24, 1998 (inception) to August 31, 2001.

Consolidated Statements of Stockholders' Equity (Deficiency) and Comprehensive
Loss for the period from inception to August 31, 2001.

Consolidated Statements of Cash Flows for the years ended August 31, 2001 and
2000; and, for the period from August 24, 1998 (inception) to August 31, 2001.

Notes to Consolidated Financial Statements
















































                                       37
<PAGE>
                                    PART III
Item 1.  INDEX TO EXHIBITS:

         None

                                       38
<PAGE>
                      Consolidated Financial Statements
                      (Expressed in United States dollars)



                      DESTINY MEDIA TECHNOLOGIES INC.
                      (A Development Stage Company)



                      Years ended August 31, 2001 and 2000
           Period from August 24, 1998 (inception) to August 31, 2001
<PAGE>
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. and subsidiaries (A Development Stage Company) as of August 31, 2001 and
2000 and the consolidated statements of operations, stockholders' equity
(deficiency) and comprehensive loss, and cash flows for the years then ended and
for the period from August 24, 1998 (inception) to August 31, 2001. 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. and subsidiaries as of August 31, 2001 and 2000 and the
results of their operations and their cash flows for the years then ended and
for the period from August 24, 1998 (inception) to August 31, 2001 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.




"KPMG LLP"

KPMG LLP


Chartered Accountants
Vancouver, Canada
September 28, 2001
<PAGE>
<TABLE>
<CAPTION>
Destiny Media Technologies Inc.
(A Development Stage Company)
Consolidated Balance Sheets
(Expressed in United States dollars)

August 31, 2001 and 2000

-------------------------------------------------------------------------------- ------------- --------------
                                                                                         2001         2000
-------------------------------------------------------------------------------- ------------- --------------
<S>                                                                              <C>           <C>
Assets

Current assets:
      Cash and cash equivalents                                                  $     30,443  $    97,928
      Short-term investments                                                            7,022        7,070
      Accounts receivable, net of allowance for doubtful accounts of $683              62,981       83,495
      (2000 - $719)
      Prepaid expenses                                                                 11,946       24,071
      -------------------------------------------------------------------------- ------------- ------------
      Total current assets                                                            112,392      212,564

Other assets, net of accumulated amortization of $ 5,959 (2000 - $680)                 29,862        1,392

Notes receivable (note 5)                                                              99,946      111,133

Equipment:
       Furniture and fixtures                                                          53,256       66,120
       Computer hardware                                                              102,397      101,425
       Computer software                                                               12,696       10,646
       Leasehold improvements                                                           5,771        6,002
       ------------------------------------------------------------------------- ------------- ------------
                                                                                      174,120      184,193
       Accumulated depreciation and amortization                                     (79,626)     (47,960)
       ------------------------------------------------------------------------- ------------- ------------
       Net property and equipment                                                      94,494      136,233

Intellectual property, net of accumulated amortization of $137,293 (2000 -             19,599       98,057
   $58,835)

Goodwill, net of accumulated amortization of $240,850 (2000 - $103,222)                34,408      172,036
-------------------------------------------------------------------------------- ------------- ------------

Total assets                                                                     $    390,701  $   731,415
-------------------------------------------------------------------------------- --- --------- --- --------

Liabilities and Stockholders' Equity (Deficiency)

Current liabilities:
      Accounts payable and accrued liabilities                                   $    388,277  $   162,400
      Related party payable (note 6)                                                    1,352      101,422
      Demand loan (note 6)                                                            100,000            -
      Deferred revenue                                                                156,657            -
      Current portion of long-term debt (note 7)                                      163,023            -
      -------------------------------------------------------------------------- ------------- ------------
      Total current liabilities                                                       809,309      263,822

Long-term debt (note 7)                                                                22,320      194,590

Deferred revenue                                                                       85,589            -

Shareholders' equity (deficiency):
     Common stock, par value $0.001
        Authorized:  100,000,000 shares
        Issued and outstanding:  27,177,358 shares (2000 - 22,501,000)                 26,928       22,501
     Common stock issuable                                                             54,372            -
     Additional paid-in capital                                                     2,648,018    1,986,553
     Deferred stock compensation                                                     (44,931)     (87,550)
     Deficit accumulated during the development stage                             (3,197,098)  (1,640,229)
     Accumulated other comprehensive loss                                            (13,806)       (8,272)
     --------------------------------------------------------------------------- ------------- ------------
     Total stockholders' equity (deficiency)                                        (526,517)      273,003
-------------------------------------------------------------------------------- ------------- ------------

Total liabilities and stockholders' equity (deficiency)                          $    390,701  $   731,415
-------------------------------------------------------------------------------- --- --------- --- --------
</TABLE>

Commitments and contingencies (notes 2 and 11)
Subsequent events (note 15)

See accompanying notes to consolidated financial statements.
                                       1
<PAGE>
<TABLE>
Destiny Media Technologies Inc.
(A Development Stage Company)
Consolidated Statements of Operations
(Expressed in United States dollars)

------------------------------------------------------ ------------------ ------------------ -----------------
                                                                                                  Period from
                                                                                                   August 24,
                                                              Year ended         Year ended  1998 (inception)
                                                              August 31,         August 31,     to August 31,
                                                                    2001               2000              2001
------------------------------------------------------ ------------------ ------------------ -----------------
<S>                                                    <C>                <C>                <C>
Sales                                                   $        345,653  $          85,544   $       431,197

Operating expenses:
        Advertising and promotion                                 40,792            155,510           196,302
        Bad debt expense                                          34,297                714            35,011
        Bank charges and interest                                  3,033              4,811             7,844
        Business Development                                      29,300                  -            29,300
        Consulting                                               330,085             51,022           381,107
        Depreciation and amortization                            256,573            197,368           453,941
        Filings and listings                                      10,134             20,541            31,125
        Financing                                                  6,585              3,597            10,182
        Foreign exchange                                         (5,395)                  -           (5,395)
        In-process research and development                            -             33,846            33,846
        Management fees                                                -              6,071             6,071
        Marketing                                                 10,419            183,749           194,168
        Meals and entertainment                                    7,865              6,130            13,995
        Office and miscellaneous                                  11,988             25,640            47,002
        Professional fees                                        156,484            124,649           283,101
        Shareholder relations and transfer agent                  45,737            123,805           170,292
        Rent                                                      85,607             61,139           154,746
        Research and development                                       -              8,995             8,995
        Repairs and maintenance                                    3,688              3,529             7,217
        Subcontracts                                              38,334             70,326           108,660
        Trademark                                                    113              5,751             5,864
        Telephone and telecommunications                          74,166             44,737           118,903
        Travel                                                    56,789             54,340           111,129
        Wages and benefits                                       692,349            494,857         1,226,164
        ---------------------------------------------- ------------------ ------------------ -----------------
                                                               1,888,943          1,681,127         3,629,570
------------------------------------------------------ ------------------ ------------------ -----------------

Loss from operations                                          (1,543,290)        (1,595,583)       (3,198,373)

Interest income and other income                                  15,170             14,854            30,024
------------------------------------------------------ ------------------ ------------------ -----------------

Loss for the period, before extraordinary item               (1,528,120)        (1,580,729)       (3,168,349)

Loss on debt settlement (note 9(c))                             (28,749)                  -          (28,749)
------------------------------------------------------ ------------------ ------------------ -----------------

Loss for the period                                     $    (1,556,869)  $     (1,580,729)   $   (3,197,098)
------------------------------------------------------ ------------------ ------------------ -----------------

Loss per common share, basic and diluted
     before extraordinary item                                    (0.06)             (0.07)            (0.16)
------------------------------------------------------ ------------------ ------------------ -----------------

Loss per common share, basic and diluted                $         (0.06)  $          (0.07)   $        (0.17)
------------------------------------------------------ ------------------ ------------------ -----------------

Weighed average common shares
     outstanding, basic and diluted                           25,068,025         21,512,150        19,314,335

------------------------------------------------------ ------------------ ------------------ -----------------
</TABLE>

See accompanying notes to consolidated financial statements.
                                       2
<PAGE>
<TABLE>
<CAPTION>
Destiny Media Technologies Inc.
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity (Deficiency) and Comprehensive Loss
(Expressed in United States dollars)

-----------------------------------------------------------------------------------------------------------------------------------
                                                                                               Deficit
                                                                                           accumulated                        Total
                                        Common stock    Additional               Deferred       during    Cumulative  stockholders'
                                     ------------------    paid-in   Shares         stock    velopment   translation         equity
                                       Shares    Amount    capital issuable  compensation        stage    adjustment   (deficiency)
------------------------------------ ---------- -------  --------- -------- ------------- ------------ ------------ ---------------
<S>                                  <C>        <C>      <C>       <C>      <C>           <C>          <C>           <C>
Balance, August 24, 1998                      - $     -  $     -   $      - $       -     $         -  $          -  $           -

  Loss for the period                         -       -          -        -         -         (59,500)            -        (59,500)
                                                                                                                      -------------
  Comprehensive loss                                                      -                                                (59,500)
  Common stock issued for cash       17,850,000  17,850     41,650        -         -               -             -         59,500
------------------------------------ ---------- -------  --------- -------- ------------- ------------ ------------ ---------------
Balance, August 31, 1999             17,850,000  17,850     41,650        -         -         (59,500)            -              -

  Loss for the period                         -       -          -        -         -      (1,580,729)            -     (1,580,729)
  Cumulative translation adjustment           -       -          -        -         -               -        (8,272)        (8,272)
                                                                                                                      -------------
  Comprehensive loss                                                                                                    (1,589,001)

  Common stock issued for cash
     on private placement             1,000,000   1,000    999,000        -         -               -             -      1,000,000
  Common stock issued for cash          247,485     247     79,752        -         -               -             -         79,999
  Common stock issued on acquisition  1,800,000   1,800    (1,200)        -         -               -             -            600
  Common stock issued
     for retirement of debt           1,490,724   1,491    592,745        -         -               -             -        594,236
  Common stock issued
     for services rendered              112,791     113     54,577        -         -               -             -         54,690
  Deferred stock compensation                 -       -    108,896        -  (108,896)              -             -              -
  Amortization of deferred stock              -       -          -        -    21,346               -             -         21,346
  compensation
  Return of profit from shareholder
     from short-swing profit                  -       -    111,133        -          -              -             -        111,133
------------------------------------ ---------- -------  --------- -------- ------------- ------------ ------------ ---------------
Balance, August 31, 2000             22,501,000  22,501  1,986,553        -   (87,550)     (1,640,229)       (8,272)       273,003

  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 (note 8)      3,571,200   3,571    370,679   10,000         -               -              -       384,250
  Common stock issued for services
     rendered                           180,158     181     45,119        -         -               -              -        45,300
  Common stock issued for debt
     settlement (note 9(c))             675,000     675    179,325        -         -               -              -       180,000
  Common stock issued for
     services to be rendered            250,000       -          -        -         -               -              -             -
  Common stock issuable                       -       -          -   44,372         -               -              -        44,372
  Deferred stock compensation                 -       -     29,631        -   (29,631)              -              -             -
  Amortization of deferred stock              -       -          -        -    72,250               -              -        72,250
     compensation
  Options issued to non-employees for         -       -     36,711        -          -              -              -        36,711
     services
------------------------------------ ---------- -------  --------- -------- ------------- ------------ ------------ ---------------
Balance, August 31, 2001                 77,358 $26,928 $2,648,018  $54,372 $ (44,931)  $  (3,197,098) $   (13,806)  $    (526,517)
------------------------------------ ---------- -------  --------- -------- ------------- ------------ ------------ ---------------
</TABLE>
See accompanying notes to consolidated financial statements.
                                       3
<PAGE>
<TABLE>
<CAPTION>
Destiny Media Technologies Inc.
(A Development Stage Company)
Consolidated Statements of Cash Flows
(Expressed in United States dollars)

-------------------------------------------------- --------------- -------------- -------------------
                                                                                         Period from
                                                                                     August 24, 1998
                                                       Year ended     Year ended      (inception) to
                                                       August 31,     August 31,          August 31,
                                                             2001           2000                2001
-------------------------------------------------- --------------- -------------- --------------
<S>                                                <C>             <C>            <C>
Cash flows from operating activities:
     Loss for the period                            $ (1,556,869)  $ (1,580,729)  $ (3,197,098)
     Items not involving cash:
        Depreciation and amortization                     256,573        197,368        453,941
        Write-off of in-process research and
           development                                          -         33,846         33,846
        Shares issuable for services                       44,372                        44,372
        Shares issued for services rendered                45,300         54,690         99,990
        Shares issued for debt settlement                 180,000              -        180,000
        Stock-based compensation - employees               72,250         11,248         83,498
        Stock-based compensation - non-employees           36,711         10,098         46,809
        Interest accrued on term deposit                    (304)              -          (304)
        Interest accrued on note receivable                11,187              -         11,187
     Changes in non-cash working capital:
        Accounts receivable                                16,541       (82,937)       (66,396)
        Prepaid expenses                                   11,034       (15,872)        (4,838)
        Accounts payable and accrued liabilities          221,061        145,063        366,124
        Deferred revenue                                  242,247              -        242,247
     --------------------------------------------- --------------- -------------- --------------
     Net cash used in operating activities              (419,897)    (1,227,225)    (1,706,622)

Cash flows from investing activities:
     Cash acquired on acquisition                               -        250,719        250,719
     Purchase of equipment                               (10,276)       (79,468)       (89,744)
     Refund on return of equipment                         11,280              -         11,280
     Purchase of other assets                            (34,498)        (1,392)       (53,390)
     Investment in short-term investments                       -        (7,070)       (29,770)
     Proceeds on disposal of mineral properties
        and marketable securities to related party              -              -         40,200
     Long-term loan receivable from related party               -              -      (594,236)
     --------------------------------------------- --------------- -------------- --------------
     Net cash provided (used in) by investments          (33,494)        162,789      (464,941)

Cash flows from financing activities:
     Net proceeds from issuance of debt                         -        101,385        695,621
     Common stock issuable                                 10,000              -         10,000
     Net proceeds from issuances of common
        stock and subscriptions                           384,250      1,079,999      1,523,749
     --------------------------------------------- --------------- -------------- --------------
     Net cash provided by financing activities            394,250      1,181,384      2,229,370
---- --------------------------------------------- --------------- -------------- --------------

Net increase (decrease) in cash and cash
     equivalents during the period                       (59,141)        116,948         57,807

Effect of foreign exchange rate changes on cash           (8,344)       (19,020)       (27,364)

Cash and cash equivalents at beginning of period           97,928              -              -
-------------------------------------------------- --------------- -------------- --------------

Cash and cash equivalents at end of period          $      30,443  $      97,928  $      30,443
-------------------------------------------------- --------------- -------------- --------------

Supplementary disclosure:
     Cash paid for:
        Interest                                    $           -  $           -  $           -
        Income tax                                              -              -              -
     Non-cash transactions:
        Stock issued to acquire Destiny Software
           Productions Inc., net of cash acquired               -      (250,119)      (250,119)
        Stock issued for settlement of debt               180,000        594,236        774,236
        Stock issued for services rendered                 45,300         54,690         99,990
        Stock issuable for services rendered               44,372              -         44,372
        Deferred stock-based compensation                  66,342        108,896        175,238
        Note receivable for return of profit from
           shareholder from short-swing profit                  -        111,133         99,946
        Advertising obtained through barter                36,000              -         36,000
        transaction
-------------------------------------------------- --------------- -------------- --------------
</TABLE>
See accompanying notes to consolidated financial statements.
                                       4
<PAGE>
Destiny Media Technologies Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Expressed in United States dollars)

Years ended August 31, 2001 and 2000
Period from August 24, 1998 (inception) to August 31, 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:

       From inception of the business, the Company has incurred cumulative
       losses of $3,197,098 and at August 31, 2001 had a working capital
       deficiency of $696,917. As a result, substantial doubt exists about its
       ability to continue as a going concern.

       These financial statements have been prepared on the going concern basis
       under which an entity is considered to be able to realize its assets and
       satisfy its liabilities and commitments in the ordinary course of
       business. 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 year end, the Company
       has entered into an agreement to sell the Clipstream Technology in order
       to generate additional cash for future operations (see note 15). There
       can be no assurances that the Company will be successful in 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"). All intercompany balances and transactions have
             been eliminated on consolidation.

             For United States accounting and reporting purposes, the Company is
             considered to be in the development stage as it has not generated
             significant revenue from its operating model and is devoting
             substantially all of its efforts to developing its business
             operations and these consolidated financial statements are those of
             a development stage enterprise.



                                       5
<PAGE>
Destiny Media Technologies Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Expressed in United States dollars)

Years ended August 31, 2001 and 2000
Period from August 24, 1998 (inception) to August 31, 2001

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


3.     Significant accounting policies (continued):

       (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 property and equipment, intellectual property,
             goodwill and other assets. Actual results could differ from those
             estimates.

       (c)   Cash and cash equivalents:

             For the purposes of the statements of cash flows, the Company
             considers all highly liquid marketable securities with original
             terms to maturity of three months or less when acquired to be cash
             equivalents.

       (d)   Short-term investments:

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

       (e)   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.

       (f)   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.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Expressed in United States dollars)

Years ended August 31, 2001 and 2000
Period from August 24, 1998 (inception) to August 31, 2001

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

3.     Significant accounting policies (continued):

       (f)   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
             arrangements.

             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, 2001, the Company recognized $36,000 (2000 - nil) of
             revenue from barter transactions.

                                       7
<PAGE>
Destiny Media Technologies Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Expressed in United States dollars)

Years ended August 31, 2001 and 2000
Period from August 24, 1998 (inception) to August 31, 2001

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


3.     Significant accounting policies (continued):


       (g)   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.

       (h)   Intellectual property:

             Intellectual property represents the technologies, which were
             acquired on the acquisition of Destiny Software (note 4) 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.

       (i)   Goodwill:

             Goodwill represents the excess of the cost of acquisition of
             Destiny Software over the fair market value of the net identifiable
             assets acquired (note 4). These amounts are amortized on a
             straight-line basis over the estimated period of benefit being two
             years.

       (j)   Other assets:

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

       (k)   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,
             2001, no impairment charges have been recognized.



                                       8
<PAGE>
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Expressed in United States dollars)

Years ended August 31, 2001 and 2000
Period from August 24, 1998 (inception) to August 31, 2001

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


3.     Significant accounting policies (continued):

       (l)   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.

       (m)   Advertising:

             Advertising costs are expensed as incurred. Advertising costs are
             separately disclosed on the consolidated statements of operations.

       (n)   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.

       (o)   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.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Expressed in United States dollars)

Years ended August 31, 2001 and 2000
Period from August 24, 1998 (inception) to August 31, 2001

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


3.     Significant accounting policies (continued):

       (o)   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.


4.     Acquisition:

        On October 20, 1999, the Company issued 1,800,000 common shares for the
        purchase of 100% of Destiny Software Production Inc. Destiny Software is
        a high-tech development company that develops video and audio
        compression software and to a lesser extent design and development of
        computer games. The transaction has been recorded under the purchase
        method of accounting with effect from the date of acquisition. The
        market value of the consideration paid for the acquisition was based on
        the trading price of the Company's shares at the time the terms of the
        transaction were agreed to between the parties and announced. At that
        time, there had been only one significant block of shares traded. The
        per share value of this trade was considered representative of market
        value.

        The Company's interest in the net assets acquired, at assigned values
are as follows:

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

        Cash                                          $    250,719
        Other current assets                                 8,722
        Property and equipment                              91,977
        Intellectual property                              156,892
        Goodwill                                           275,258
        Acquired in-process research and development        33,846
        Current liabilities                               (22,289)
        Long-term liabilities                            (794,525)
       ------------------------------------------------------------

                                                      $        600
       ------------------------------------------------------------

        Consideration:
              1,800,000 common shares                 $        600

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


        Acquired in process research and development was valued based on
        accumulated expenditures incurred by Destiny Software to the acquisition
        date on specifically identified products that are in the early stages of
        development and on which the core technology stage had not been reached.
        Goodwill has been valued as equal to the excess of the fair value of the
        consideration given over the fair value of the net identifiable assets
        and liabilities acquired.

        A 20% shareholder of the Company owned 100% of the outstanding shares of
        Destiny Software at the time of the acquisition.



                                       10
<PAGE>
Destiny Media Technologies Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Expressed in United States dollars)

Years ended August 31, 2001 and 2000
Period from August 24, 1998 (inception) to August 31, 2001

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


5.      Related party transactions:

         During the year ended August 31, 2000, certain officers were required
         to remit proceeds from short-swing profits of $111,133 to the Company.
         During fiscal 2001, the Company entered into notes receivable for the
         settlement of the proceeds. These notes bear interest at a rate of
         prime plus 1% and are repayable on September 8, 2001. On February 12,
         2001, the Company entered into an agreement with one of the officers to
         forgive his portion of the receivable, totaling $12,144, which includes
         principal and interest. The amount forgiven has been included in bad
         debt expense in the consolidated statements of operations. The
         remaining balance of the note receivable is $99,946 at August 31, 2001.
         This amount was not repaid on September 8, 2001. The Company has
         commenced proceedings regarding the collection of the note receivable.
         However, as the timing of resolution is not certain, the note
         receivable has been classified as a non-current asset in the
         consolidated balance sheet.


6.      Related party loans payable:
<TABLE>
<CAPTION>
        ---------------------------------------------------------------- ---------- ----------
                                                                              2001       2000
        ---------------------------------------------------------------- ---------- ----------
<S>                                                                      <C>        <C>
        Loan payable, due to a shareholder, unsecured, non-interest
           bearing, due on demand                                        $   1,352  $   1,422

        Loan payable, due to an individual related to a shareholder,
           unsecured, non-interest bearing, due on demand                        -    100,000
        ---------------------------------------------------------------- ---------- ----------

                                                                         $   1,352  $ 101,422
        ---------------------------------------------------------------- ---------- ----------
</TABLE>
         The loan payable due to an individual for $100,000 was reclassified to
         a demand loan during the year as the individual is no longer a related
         party.



                                       11
<PAGE>
Destiny Media Technologies Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Expressed in United States dollars)

Years ended August 31, 2001 and 2000
Period from August 24, 1998 (inception) to August 31, 2001

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


7.      Long-term debt:
<TABLE>
<CAPTION>
        ---------------------------------------------------------------- ------------- ------------
                                                                                 2001         2000
        ---------------------------------------------------------------- ------------- ------------
<S>                                                                      <C>           <C>
        Amount is non-interest bearing and repayable in twelve monthly
           instalments commencing on September 30, 2001                  $     81,450  $    85,317

        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       47,570

        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       38,227

        Other                                                                  22,320       23,476
        ---------------------------------------------------------------- ------------- ------------
                                                                              185,343      194,590

        Current portion                                                      (163,023)           -
        ---------------------------------------------------------------- ------------- ------------

                                                                         $     22,320  $   194,590
        ---------------------------------------------------------------- ------------- ------------
</TABLE>

8.      Private placement equity financing:

         (a)   On November 14, 2000, the Company completed a private placement,
               which consisted of the issuance of 2,150,000 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 $6,500. These fees are directly related
               to the private placement and have been offset against paid-in
               capital at August 31, 2001.

         (b)   On December 15, 2000, the Company issued 18,000 common shares at
               $0.15 per share on exercise of warrants, which entitled the
               holder of the warrant to purchase one additional common share at
               a price of $0.15 per share.

         (c)   On March 6, 2001, the Company completed a private placement,
               which consisted of the issuance of 218,200 common shares at a
               price of $0.25 per share.

         (d)   On June 14, 2001, the Company completed a private placement,
               which consisted of the issuance of 1,185,000 common shares at a
               price of $0.10 per share.

                                       12
<PAGE>
Destiny Media Technologies Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Expressed in United States dollars)

Years ended August 31, 2001 and 2000
Period from August 24, 1998 (inception) to August 31, 2001

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


9.      Share capital:

        (a)  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, 1999                  -  $             -
             Granted                          2,439,500             0.11
             Exercised                                -                -
             Forfeited                                -                -
             Expired                                  -                -
        --------------------------------- -------------- ----------------

        Outstanding, August 31, 2000          2,439,500             0.11
             Granted                          1,691,000             0.14
             Exercised                                -                -
             Forfeited                       (1,317,000)           (0.59)
             Expired                           (450,000)           (0.39)
        --------------------------------- -------------- ----------------

        Outstanding, August 31, 2001          2,363,500  $          0.40
        --------------------------------- -------------- ----------------






                                       13
<PAGE>
Destiny Media Technologies Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Expressed in United States dollars)

Years ended August 31, 2001 and 2000
Period from August 24, 1998 (inception) to August 31, 2001

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


9.      Share capital (continued):

        (a)   Stock option plan (continued):

              The following table summarizes information concerning outstanding
              and exercisable options at August 31, 2001:
<TABLE>
<CAPTION>
             -----------------------------------------------------------------------------------------------------
                                                            Options outstanding               Options exercisable
                                                      Weighted
                                                       average         Weighted                          Weighted
                                                     remaining          average                           average
                                       Number      contractual   exercise price           Number   exercise price
              Exercise prices     outstanding         life (in        per share      exercisable        per share
                                                        years)
             ------------------ -------------- ---------------- ---------------- ---------------- ----------------
<S>                 <C>             <C>                   <C>              <C>       <C>                   <C>
                    $     0.25      1,371,000             4.20             0.11          757,164             0.11
                          0.83        240,000             3.12             0.78          240,000             0.78
                          1.00        675,000             3.58             0.71          593,540             0.71
                          1.80         50,000             3.67             1.20           32,400             1.20
                          2.50         27,500             3.35             2.07           19,530             2.07
             ------------------ -------------- ---------------- ---------------- ---------------- ----------------

                                    2,363,500                                          1,642,634
             ------------------ -------------- ---------------- ---------------- ---------------- ----------------
</TABLE>


              At August 31, 2001, 2,363,500 (2000 - 2,439,500) options had been
              granted and were outstanding and an additional 1,386,500 shares
              were available for grant under the Plan.

              Of the total options outstanding at year end, 2,048,000 (2000 -
              2,309,000) were granted to employees and 315,500 (2000 - 130,500)
              were granted to non-employees of the Company. The compensation
              expense, representing the intrinsic value of the options granted
              to employees was $72,250 (2000 - $11,248), calculated in
              accordance with APB Opinion No. 25. The compensation expense
              related to options granted to non-employees was $36,711 (2000 -
              $10,098), 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 whereby the date the awards
              are exercised, forfeited or expired to the extent that the market
              price at the reporting date exceeds the new exercise price. No
              incremental compensation has been recognized for variable options
              in fiscal year 2001.




                                       14
<PAGE>
Destiny Media Technologies Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Expressed in United States dollars)

Years ended August 31, 2001 and 2000
Period from August 24, 1998 (inception) to August 31, 2001

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


9.      Share capital (continued):

        (a)   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 2001 and 2000 would have decreased to
              the pro forma amounts indicated below:

             ----------------------------------- -------------- -------------
                                                         2001            2000
             ----------------------------------- -------------- -------------

             Loss for the period:
                 As reported                     $ (1,556,869)  $  (1,580,729)
                 Pro forma                         (1,640,655)     (1,627,815)
             Loss per share, basic and diluted:
                 As reported                            (0.06)          (0.07)
                 Pro forma                              (0.07)          (0.08)

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


             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:

             ----------------------------------- -------------- -------------
                                                         2001            2000
             ----------------------------------- -------------- -------------

             Per share weighted - average fair value of stock
               options granted                   $       0.29   $         0.21
             Expected dividend yield                         -               -
             Risk-free interest rate                      5.5%             5.5%
             Volatility                                   189%            70.0%
             Expected lives                         2.01 years       2.08 years

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





                                       15
<PAGE>
Destiny Media Technologies Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Expressed in United States dollars)

Years ended August 31, 2001 and 2000
Period from August 24, 1998 (inception) to August 31, 2001

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


9.      Share capital (continued):

        (b)  Non-cash consideration:

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

             During the year ended August 31, 2001, 250,000 common shares were
             issued to a consultant for future licensing and financing services.
             Management has not recorded any compensation under this contract as
             no services have been performed to August 31, 2001. Management
             believes that the common shares are forfeitable and has requested
             that the common shares be returned for non-performance under the
             contract. The contractor is currently disputing the obligations to
             return the shares.

        (c)  Shares issued for debt settlement:

             Throughout the year ended August 31, 2001, the Company issued
             675,000 common shares having a market value of $180,000 to various
             individuals to settle outstanding accounts payable and accrued
             liabilities. The Company has recorded an extraordinary loss on debt
             settlement of $28,749, representing the excess of the market value
             of the common shares at the date of settlement over the carrying
             value of the debt.


10.     Income taxes:

        --------------------------------------- ------------- --------------
                                                        2001           2000
        --------------------------------------- ------------- --------------

        Deferred tax assets:
             Net operating loss carryforwards   $  1,334,482  $     757,668
             Book over tax depreciation               36,510         20,910
             ---------------------------------- ------------- --------------
                                                   1,370,992        778,578
        Valuation allowance                       (1,362,051)     (724,898)
        --------------------------------------- ------------- --------------

        Net deferred tax assets                        8,941         53,680
        Deferred tax liabilities:
             Intangible costs                         (8,941)      (53,680)
        --------------------------------------- ------------- --------------

                                                $          -  $           -
        --------------------------------------- ------------- --------------


         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.




                                       16
<PAGE>
Destiny Media Technologies Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Expressed in United States dollars)

Years ended August 31, 2001 and 2000
Period from August 24, 1998 (inception) to August 31, 2001

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

10.     Income taxes (continued):

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

        ----------------------------------------- ------------- -------------
                                                          2001          2000
        ----------------------------------------- ------------- -------------

        Tax at U.S. statutory rates                     34.0%         34.0%
        Rate difference in other jurisdictions           8.3%          8.3%
        Change in valuation allowance                  (42.3%)       (41.2%)
        Other net                                           -         (1.1%)
        ----------------------------------------- ------------- -------------

        Tax recovery (expense)                              -             -
        ----------------------------------------- ------------- -------------

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

        ----------------------------------------- ------------- -------------
                                                          2001          2000
        ----------------------------------------- ------------- -------------

        United States                             $  (649,762)  $  (360,443)
        Canada                                       (907,107)   (1,220,286)
        ----------------------------------------- ------------- -------------

                                                  $(1,556,869)  $(1,580,729)
        ----------------------------------------- ------------- -------------

11.     Commitments and contingencies:

        (a)   The Company leases office facilities in British Columbia under an
              operating lease agreement that expires May 31, 2002. The Company
              is committed to minimum lease payments to May 31, 2002 under this
              lease agreement totalling $51,416.

        (b)   Destiny Software Productions Inc., a wholly owned subsidiary of
              the Company, 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 outstanding balance has not been booked as
              revenue at year end.





                                       17
<PAGE>
Destiny Media Technologies Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Expressed in United States dollars)

Years ended August 31, 2001 and 2000
Period from August 24, 1998 (inception) to August 31, 2001

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

12.     Financial instruments:

        (a)   Fair value disclosures:

             The carrying value of cash and cash equivalents, short-term
             investments, accounts receivable, accounts payable and accrued
             liabilities, demand loan and long-term debt 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.

13.     Segmented information:

        In the opinion of management, the Company operates solely in the digital
        media software segment, and all sales of 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 sales by region
        (based on location of customers) is as follows:

        ------------------------------ ----------------- -----------------
        Years ended August 31,                     2001              2000
        ------------------------------ ----------------- -----------------

        United States                  $        293,805  $         72,712
        Other                                    51,848            12,832
        ------------------------------ ----------------- -----------------

        Total sales                    $        345,653  $         85,544
        ------------------------------ ----------------- -----------------




                                       18
<PAGE>
Destiny Media Technologies Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Expressed in United States dollars)

Years ended August 31, 2001 and 2000
Period from August 24, 1998 (inception) to August 31, 2001

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14.     Recent accounting pronouncements:
        In July 2001, the Financial Accounting Standards Board ("FASB") released
        Statement of Financial Accounting Standards No. 141, "Business
        Combinations" (collectively, "Business Combinations") and Statement of
        Financial Accounting Standards No. 142, "Goodwill and Other Intangible
        Assets" (collectively, "Goodwill"). The Business Combinations standard
        requires that the purchase method of accounting be used for all business
        combinations initiated after June 30, 2001. Use of the
        pooling-of-interests method is prohibited. The standards related to
        Goodwill change, among other things, the accounting for goodwill from an
        amortization method to an impairment-only approach, and are required to
        be applied prospectively with effect, for the Company, from September 1,
        2002, although adoption in the first quarter of fiscal 2002 is available
        to the Company. Management has not yet concluded on the timing of
        adoption of the Goodwill standard.
        Under the Goodwill standard, the Company is required to perform an
        initial benchmark test of impairment within six months of adoption, and
        subsequent annual tests of impairment at the reporting unit level. If
        the carrying value of goodwill of a reporting unit exceeds the fair
        value of the reporting unit's goodwill, the carrying value must be
        written down to fair value. Management has not currently done a
        comprehensive analysis of the potential impact of this standard.

15.     Subsequent events:
        (a)   On September 13, 2001, the Company entered into an agreement with
              Clipstream Technologies Inc. ("CTI"), a related company, whereby
              CTI will acquire the Clipstream(TM) technologies, trademarks,
              patents, permits and licenses from the Company in exchange for
              22,800,000 shares of CTI giving the Company majority interest
              shareholdings of CTI. Under the terms of the agreement, CTI will
              have the right to pledge as security the Clipstream(TM)
              technology.
              This agreement is contingent upon CTI obtaining at least Cdn.
              $750,000 in financing. Under the terms of the agreement, CTI will
              have the right to use, sell, license and carry on all business
              related to Clipstream(TM). The Company has also contracted to
              supply office support and services and product development support
              to CTI and royalties will be received from CTI based on specified
              future revenue targets if the transactions complete.
        (b)   On September 12, 2001, the Company issued 363,665 common shares to
              officers of the Company for services rendered prior to August 31,
              2001. Compensation expense of $44,372 related to these services
              was fully accrued as at August 31, 2001.
              On September 21, 2001, the Company issued 624,940 common shares to
              officers of the Company in settlement of outstanding liabilities
              of the Company. No material gain or loss on settlement of debt
              resulted from these transactions.

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