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EX-31.1 - SECTION 302 CERTIFICATION OF CHIEF EXECUTIVE OFFICER - DESTINY MEDIA TECHNOLOGIES INCexhibit31-1.htm
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STOCKHOLDERS EQUITY
12 Months Ended
Aug. 31, 2012
STOCKHOLDERS EQUITY [Text Block]

5. STOCKHOLDERS’ EQUITY

[a] Common stock issued and authorized

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

2012

During the year ended August 31, 2012, 557,500 common shares were issued for a cash exercise of 557,500 warrants at $0.50 for proceeds of $278,750. Also, 5,249,750 warrants exercisable at $0.50, 352,118 warrants exercisable at $0.40, 330,000 warrants exercisable at $0.70 and 350,000 warrants exercisable at $0.22 were cashless exercised resulting in the issuance of 1,021,702 common shares.

During the year ended August 31, 2012, 110,000 share purchase options exercisable at $0.50 were cashless exercised resulting in the issuance of 51,793 common shares. Of this total, 24,225 were issued during the year ended August 31, 2012 and 27,568 were issued subsequent to August 31, 2012.

2011

During the year ended August 31, 2011, 50,625 shares were issued in a cashless exercise of 135,000 options with an exercise price of $0.25. 400,000 shares were issued in an exercise of 400,000 options with cash proceeds of $100,000.

[b] Common stock cancelled

During the year ended August 31, 2012, the Company cancelled 124,930 common shares which were repurchased during the last quarter of fiscal 2011.

During the year ended August 31, 2011, the Company repurchased 1,106,895 shares at an open market, of which it paid $400,779 for 981,965 shares and $50,076 for 124,930 shares. As of August 31, 2011, the 981,965 shares had been cancelled.

[c] Stock option plans

The Company has two existing stock option plans (the “Plans”), namely the Amended 1999 Stock Option Plan and the 2006 Stock Option Plan, under which up to 3,750,000 and 5,100,000 shares of the common stock, respectively, have been reserved for issuance. A total of 2,169,716 common shares remain eligible for issuance under the plans. The options generally vest over a range of periods from the date of grant, some are immediate, and others are 12 or 24 months. Any options that do not vest as the result of a grantee leaving the Company are forfeited and the common shares underlying them are returned to the reserve. The options generally have a contractual term of five years.

Stock-Based Payment Award Activity

A summary of option activity under the Plans as of August 31, 2012 and 2011, and changes during the years ended are presented below:

                Weighted        
                Average     Aggregate  
          Weighted     Remaining     Intrinsic  
          Average     Contractual     Value  
Options   Shares     Exercise Price     Term     $  
Outstanding at September 1, 2010   3,225,000     0.47     1.68     117,600  
Granted   -     -              
Exercised   (535,000 )   0.25           79,250  
Expired or forfeited   (400,000 )   0.63              
Outstanding at August 31, 2011   2,290,000     0.50     0.99     25,500  
Granted   900,000     0.50              
Exercised   (110,000 )   0.50           48,995  
Repurchased and cancelled   (150,000 )   0.50           19,080  
Expired or forfeited   (1,130,000 )   0.53              
Outstanding at August 31, 2012   1,800,000     0.48     1.57     802,500  
Vested and exercisable at August 31, 2012   1,800,000     0.48     1.57     802,500  

The following table summarizes information regarding the non-vested stock purchase options outstanding as of August 31, 2012:

    Number of Options    
Non-vested options at August 31, 2011   14,583    
Granted   900,000    
Vested   (914,583 )  
Non-vested options at August 31, 2012   -    

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted price of the Company’s common stock for the options that were in-the-money at August 31, 2012.

During the year ended August 31, 2012, total stock-based compensation expense related to employees of $42,797 are reported in the statement of operations as follows:

    2012     2011  
     $     $  
Stock-based compensation            
   General and administrative   6,746     3,276  
   Sales and marketing   7,168     1,969  
   Research and development   28,883     3,738  
Total stock-based compensation   42,797     8,983  

Valuation Assumptions

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

    2012     2011  
    $     $  
Expected term of stock options (years)   1.00     0.55  
Expected volatility   41-45%     52%  
Risk-free interest rate   0.20%     0.06%  
Dividend yields        

Expected volatilities are based on historical volatility of the Company’s stock. The Company uses historical data to estimate option exercise and employee termination within the valuation model.

The expected term of options granted represents the period of time that options granted are expected to be outstanding. The risk-free rate for periods within the contractual life of the options is based on US Treasury bill rates in effect at the time of grant.

During the year ended August 31, 2012, 900,000 options exercisable at $0.50, previously issued to directors and officers of the Company, expired. 900,000 replacement options, also immediately exercisable at $0.50, were issued upon expiry for an additional two years. 450,000 options granted to employees, not listed as expired above, were extended by two years with no changes to other terms. The weighted-average grant-date fair value of options granted and extended during the year ended August 31, 2012 was $0.03. As a result of the extension of the life of the 450,000 options, the Company recorded an incremental value of $13,519 as part of the total stock based compensation of $42,797 on the statement of operations during the year ended August 31, 2012.

During the year ended August 31, 2011, there were no options granted. 110,000 options were extended for one more year. The weighted-average grant-date fair value of options extended during the year ended August 31, 2011 was $0.029. As a result of the extension of the life of the 110,000 options, the Company recorded an incremental value of $3,189 as part of the total stock-based compensation of $8,983 on the statement of operations during the year ended August 31, 2011.

[d] Employee Stock Purchase Plan

The Company’s 2011 Employee Stock Purchase Plan (the “Plan”) became effective on February 22, 2011. Under the Plan, employees of Destiny are able to contribute up to 5% of their annual salary into a pool which is matched equally by Destiny. Independent directors are able to contribute a maximum of $12,500 each for a combined maximum annual purchase of $25,000. The maximum annual combined contributions will be $400,000. All purchases are made through the Toronto Stock Exchange by a third party plan agent. The third party plan agent will also be responsible for the administration of the Plan on behalf of Destiny and the participants.

During the year ended August 31, 2012, the Company recognized compensation expense of $89,139 (2011: $61,141) in salaries and wages on the statement of operations in respect of the Plan, representing the Company’s employee matching of cash contributions to the plan. The shares were purchased on the open market at an average price of $0.55 (2011: $0.36) . The shares are held in trust by the Company for a period of one year from the date of purchase.

[e] Warrants

As at August 31, 2012, the Company had no common stock warrants outstanding. A summary of common stock warrant activity as of August 31, 2012 and changes during the year ended August 31, 2012 are presented below:

                Weighted        
          Weighted     Average        
          Average     Remaining        
    Number of     Exercise     Contractual     Expiry  
Options   Shares     Price ($)     Term (years)     Date  
Outstanding at August 31, 2011   7,031,000     0.50              
Exercised   (6,839,368 )   0.49              
Expired   (191,632 )   0.67              
Outstanding at August 31, 2012                  

During year ended August 31, 2012, 330,000 warrants exercisable at $0.70, 5,249,750 warrants exercisable at $0.50, 352,118 warrants exercisable at $0.40 and 350,000 warrants exercisable at $0.22 were cashless exercised. 170,000 warrants exercisable at $0.70, 12,750 warrants exercisable at $0.50 and 8,882 warrants exercisable at $0.40 expired unexercised. 557,500 warrants exercisable at $0.50 were exercised for gross proceeds of $278,750.