John Beisler - Three Part Advisors, IR Fred Vandenberg - CFO Steve Vestergaard - CEO

Hubert Mak - Cormark Securities Walter Schenker - MAZ Partners

Good afternoon, ladies and gentlemen and welcome to Destiny Media Technologies Inc. Fourth Quarter Fiscal 2014 Earnings Release Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for a question. [Operator instructions] I would like to remind everyone that this call is being recorded on Monday, November 24, 2014. I would now like to turn the conference over to Mr. John Beisler from Three Part Advisors. Please go ahead.

Thank you, operator and hello everyone. Good afternoon and thank you for joining us on the call today. Before we begin, I’d like to announce we will be referring to today’s earnings release which was sent to the newswires earlier this afternoon. I’d also like to remind everyone that this conference call could contain forward-looking statements about Destiny Media Technologies within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward [Audio Gap] based upon current beliefs and expectations of management, and are subject to risks and uncertainties which could cause actual results to differ materially from those forward-looking statements. Such risks are more fully discussed in the Company’s filings with the Securities and Exchange Commission and SEDAR and the Company does not assume any obligations to update information contained in this call. During this conference call, we will discuss certain non-GAAP financial measures. These non-GAAP financial measures are presented in the supplemental disclosures and should not be considered in isolation of, or as a substitute for, or superior to the financial information prepared in accordance with GAAP, and should be read in conjunction with the Company’s financial statements filed with the SEC and SEDAR. The non-GAAP financial measures used in the Company’s presentation may differ from similarly titled measures presented by other companies. A reconciliation of the non-GAAP financial measures to the most comparable GAAP financial measures can be found in the earnings press release. On today’s call are Steve Vestergaard, the Chief Executive Officer and Fred Vandenberg, Chief Financial Officer. I’ll now turn the call over to Fred.

Thanks John. Thanks for everyone to join the call. I’ll be fairly brief. Play MPE is a content delivery system that record labels use to deliver songs to radio and constitutes 97% of our revenue. Aside from initial comments on the overall revenue, most of my comments will relate to Play MPE only, the reduction in revenue with our largest client seen only in the first half of the calendar year -- the fiscal year. Total Q4 revenue grew by 4%. This is derived by a 6% growth in Play MPE revenue. Those of you who are more familiar with the Company will know that after the second quarter of last year fiscal 2013, we came under a new agreement with our largest customer. As a result, in the first quarter of fiscal 2013, we had higher comparative revenue amounts from this client. So looking at only six month revenue for Play MPE for the last half of fiscal 2014 compared to the same period in the prior year, revenue grew by 7.6% and this growth came from a variety of sources. First of all, USA independent revenue grew by 12%. This includes growth in the fourth quarter and as a result represents the 24th time over the past 25 quarters that this segment’s revenue has increased. Revenue from major labels in Scandinavia grew by 12% and we added another major label in Australia and as a result have all major labels in Australia now using Play MPE and we’ve seen also growth in the independent customer base as well. This Australian growth accounts for 3% of the 7.6% growth that I referred to above. Moving onto expenses, the total expenses grew by 14.5%, 85% of this is attributable to one-time cost associated with few things. One is the repurchase of options from directors and officers, recruitment fees for Clipstream and legal cost associated with updating corporate governance policies. The remainder of the increase is caused by increased Investor Relations activities and increased rent. And I’ll turn it over to Steve on that note.

Thanks Fred. So, fiscal 2014 has been a year of great behind-the-scenes progress. Although it hasn’t been reflected in the share price to-date, we feel that we planted seeds this year, which should lead to growth in calendar 2015, and we expect it’ll reflect in new shareholder value. So the Company has two business lines. Play MPE is a secure distribution system, the record companies use to distribute pre-released music to trusted recipients. It relies on three proprietary patterns and algorithms and trade secrets developed by the company. Developed with the participation of the majors in design and testing it in use by all the majors and it is set for expansion into new territories and new recipient types. We’ve grown independent usage in 24 out of the last 25 quarters. We expect this trend to continue. We see independence as half of our opportunity. So, revenue from this system is seasonal, but it’s recurring, predictable and profitable. We have fairly high fixed cost for five several locations around the world, our ongoing R&D, our list management and support, but incremental revenues, extremely high margin as the system is completely automated and new expenses are just sales related. This product generates as Fred said about 97% of our current revenues. So our second suite of products and solutions Clipstream has the potential to be a dominant solution for providing streaming video on the Internet. This new engine has been underdevelopment since 2010, with our original professional patent filing in August 2011, so it has immediately taken some patience for investors but there is light at the end of the tunnel. We built the protective mode of IP around the technologies, so this will be the only cross-platform secure player list format. All seven of our Clipstream patents have gone into examination. We’ve already had our first patent claim approved. : The most widely used examples of streaming video would be YouTube, where there is thousands of companies providing streaming services, so we’re the technology kind of behind-the-scenes. So historically, the technology that was kind of dominant the power of these streaming solutions was Flash, it's a product from Adobe, on a computer Flash is still the dominant video format but when Steve Jobs announced that his devices wouldn’t support Flash, Adobe discontinued support outside of computers. That led publishers to choose from a cacophony of pitches for a new standard for devices. So in the device world some browsers chose H.264 or H.265 which involve patent fees and others choose technologies such as VP8, VP9 or other open-source formats. By contrast Clipstream is a single format that plays everywhere, users don’t need a player plug-in and publishers don’t need proprietary streaming servers. So this unique approach creates solutions to a series of problems that the industry currently faces. So the first big one is that Clipstream is completely cross-platform, this means that any device with reasonable RAM and CPU resources that supports the HTML5 standard will natively play Clipstream video. This includes computers, smartphones, tablets and complaint Internet TVs and eBook readers, it also includes devices even invented yet. For example, if your car or refrigerator door of the future supports the modern browser standards it will also support Clipstream video playback. So the advantage to the consumer is obvious, but the advantage to the publisher is a bit more subtle so currently the industry spends about 1.6 billion transcoding into the various sizes and formats. This is unnecessary with Clipstream as it automatically adjusts to fit whatever browser it's playing on. So that leads to the second advantage which is storage, because there is only one format rather than three or more, Clipstream takes a fraction of the drive space that leads to less hardware, servers, electricity, less cooling, less real estate, less technical stuff. Because there is no proprietary streaming server and because the Clipstream video is actually part of the webpage it takes advantage of widely deployed cashing infrastructure which effectively recycles the stream, so multiple clients from the same viewer eyes can conceive that same originating or reuse that same originating stream. This can save up to 90% on bandwidth while improving quality as the stream is closer to the edge. The industry spends about $12 billion on content delivery networks and Clipstream could allow this dependency on third-party servers to be reduced. Many people don’t configure the latest player plug-in and many can’t, leading to dropout rates of up to 20% on computers. Also many publishers don’t bother supporting the device formats, instead leaving a black rectangle for users who are trying to view on mobile. If some industries such as advertising that drop of rate could reflect in a large loss of potential revenue to the site and a loss click through for the advertiser. The fifth problem with competing formats is they are always being updated overtime and new few format such as H.265 are compatible with old formats such as H.264, overtime video goes dark unless the publisher re-encodes a great extents, Clipstream has done a future proof. The six, some other formats are well suited for high volume database driven video where cost is an issue, opportunities vary from online retail auction sites and classifieds, to social media sites and dating sites. The new video tech formats don’t support interactive advertising such as where the ad can be interacted with besides a simple click, ad agencies like the ability to make video driven games, new attractive ads where the user plays with the ad content, those features that were available in Flash have been lost when it comes to mobile. Also they can’t easily tell if the video was watched all the way through or if the ad was showing in the displayable part of the device and not off screen, even though mobile is the future this has made mobile advertising less valuable. An ace but not final advantage is a big one and that’s security, so reporting over our knowledge from MPE to completely control access to content this is only valuable for content that is for sale, but we can keep content private so companies can stream to remote employees and subscribers without the content leaking more widely on the Internet. So with that long winded introduction to the advantages, the areas we've decided to focus on initially are licensing the raw agent directly, marketing to select verticals using the automated cloud-based solution, offering secure video questionnaires of the high play rate to the market research industry where the test market, movie trailers, ads and other high value content. So the just defined these here, the cloud product is available at my.clipstream.com. The market research product is available at surveys.clipstream.com and you could try the two add prototypes at tinyurl.com/clipstream-ad and tinyurl.com/clipstream-survey-ad. So we beta launched the cloud product in the second quarter of fiscal 2014 to fix minor problems with that product in January. We developed an ad prototype early in the New Year and a primitive market research solution early in the New Year where we did the encoding hosting manually at our office as a service. Then we began marketing the cloud product and market research solutions using our own ad prototype across a wide variety of sites into millions of impressions and we did that throughout February and March. Besides marketing the two solutions, this also served a performance test of our ad prototype which works very well in a wide variety of browsers and environments. So the initial feedback from customers though was that the cloud and market research solutions were not market ready. We also discovered that in some markets, ISPs were throttling our available bandwidth against the net neutrality expectations we are relying. Without getting too technical, our video reconnected to the server every two second which some ISPs considered nuisance traffic and they throttled their Internet speed. Clipstream would respond appropriately by lowering quality and frame rate and re-buffering more often to fit in the available data stream, but that lowered the quality. So it's clear that this needed to be addressed and we stopped our marketing efforts more or less around April. So we believe we have this throttling issue beat, the new version of the technology that should provide HD quality to much larger fraction of viewers is in internal testing as we speak. We've actually released new versions throughout the year. And even that the publically available video are showing much better quality, but this eternal fix which we are hoping to put out before the end of the year should give significant improvement for people who have been having problems. So the developers completely redid the architecture so the ISP connection only occurs once. Testing shows that we are getting a much higher fraction of the available pipe and our streams are generally not being throttled now. So again we hope to make this new version public in either December or January, depending on how the testing goes. We spent much of calendar 2014 recruiting to find senior leaders for our business units, timing the new expenses with market readiness. So Dale Borland began fulltime October 1st as VP Clipstream Operations gives an impressive track record serving as the senior management and one of the first employees of Microsoft for 17 years. He was responsible for 4 billion that’s billion with a B in revenue, 7,000 clients in 28 countries as Head of Global Operations and IT Services across Europe, the Middle East and Africa. Later he headed up Strategy, Sales, Marketing and Channel Development for Microsoft's pursuit of the home market during the time of initial commercialization of MSN Network, Digital Media Products and Xbox. So under Dale's leadership, we are continuing to recruit and we’d be in the process of hiring and recruiting engineers, project management professionals, QA, sales, marketing and support staff. Our current offices is bursting at the seams so he was able to secure us high-end space double the size of our current offices at a similar rent to what we pay now. We expect to move into this new space when minor renovations are complete towards the end of January. Rent to the new location doesn't begin until May 1st so we get a few months rent free. So the main issue with the market research offering was that it needed to be ported from our own servers to the more robust cloud infrastructure and we needed to include security as many of the videos offered in surveys are highly sensitive. So we launched a powerful new security solution that watermarks the video, locks it and blocks less of third-party functionality to assure the video can't be copied and Dale and team began marketing at the Kantar Market Research Show which we sponsored at the beginning of October. We are continuing to prove this product incorporating feedback from the show and adding features and the ability for market research customers to self serve as they are going through our service stuff. Now this will improve margins and will allow better turnaround for encodings in other time zones and on weekends and holidays. So based on initial customer feedback, development continued in building out a host of features for the Clipstream cloud product, including title and image support, content management security, player customization, user interface and billing components, the Clipstream cloud backend was also rebuilt to not be reliant on the Amazon CDN network, so we've supported it was built out for easy integration at any third-party solutions including the customer zone servers. So we use our servers for live check and then third-party servers for the high volume hosting. So we added support for the Google CDN networks the secondary host and went live with that over the summer. This change allows us to take rapid advantage of the best commodity pricing and performance as offerings by the various providers improve overtime. So ongoing development advance the reliability, functionality, cross-platform functionality and performance of the underlying core Clipstream video engine with expanded testing to all major mobile platforms, as well as continued compatibility work with the major PC and Mac browsers, so Clipstream video is being tested on all major PC, Mac OS, Android, BlackBerry and iOS browsers and then dozens of the most popular mobile devices. Major strides were made throughout the year in the area of performance, image and audio quality for the player. Features are continuing to be added and marketing of this product is expected to resume early in Calendar 2015. So as I mentioned we began testing our advertising prototype in the spring, running a series of public ads promoting two of our other Clipstream products. This campaign provides a valuable feedback for building a solution for that industry. The quality of experience and play rate was high and since then the company has engaged consultants and we’ll be working with potential customers in that industry as it continue a process of developing a product roadmap and converting this right technology into an initial packaged offering for availability by the first half calendar 2015. So now Play MPE. So, as Fred noted, we didn’t show annual revenue growth in Play MPE but that’s because when you approach the global agreements not some of that year-over-year usage growth where we compare light quarters with consistent contractual terms such as Q4, we showed an increase of 6%. With this new agreement we restructured our billings for global instead of regional minimums. We priced our largest agreement in euro for usage anywhere in the world and we increased the number of transaction in activities that we don’t charge for. We’re revisiting some of these free bees with our new contract renewals, but the reason for that strategy was to make it easier and more predictable for majors to move into new markets. When they do that, they open up the market for us to selling to independents which again is about half of our potential revenue. Throughout the year our staff has been supporting future regional growth internationally visiting and training local at offices as necessary. The reception has been positive but many of these new markets have yet to do paid transactions in commercial volumes. So we’ve been doing the effort but haven’t been getting the reward. We hope that these new transaction levels are still coming in 2015. It’s been easy for us to rely on the predictable reliable cash flow from Play MPE and the majors have been great and supporting us to eventually become a global standard but going forward we’re going to be more proactive in growing these revenue streams. We’ve been recruiting for executive leadership for Play MPE and have been restructuring and clarifying staff roles and reporting relationships. We’ll also be hiring additional people to assist with sales and marketing, we expect to announce progress of our executive recruiting efforts for Play MPE this quarter. We were able to close Sony Australia in the spring and now have all the majors under contract in that market. Whenever that happens it makes it easier for us to sell into independent labels as radio goes where the major music is, as we close off all of the majors in each region we’ll expect to leverage that to add on significant independent revenue. We’ll be launching new initiatives intended for the independent such as a new feature and an online newsletter we’re launching for promoting the success and independent level has had with MPE each issue. During the year we were able to complete a number of development initiatives including a pilot for new possible Play MPE initiative for a major that ties into Clipstream. We also built our integration into Shazam where our servers send metadata to their servers as songs are encoded. Shazam is a system for identifying new songs besides the small year one revenue stream from Shazam that we expect to grow in future years, the instant actual transmission of song metadata into their database is a great value-add especially for smaller labels that in the past might have been left out of this catalog. We’ve also been completing and launching mobile apps to make the system accessible to radio and label staff when they’re travelling and to better service music reviewers and other recipients that don’t need broadcast quality and some of other functionality that is available for the computer-based MPE players the radio. Based on label demand we’ve been building out a browser-based decoder that will make it easier for staff throughout the majors to create and send songs. A lot of this distribution is happening through other systems currently and we believe we can capture new revenue by making a lighter version of the system more widely available for quick and dirty type sends where quality is less important. We expect to have this launch earlier in the New Year. As part of the initiative to grow international we’ve set up new servers in the UK to support better streaming performance, this requires some engineering changes to ensure the streams are watermarked individually at the time a user clicked play to accurately report that back to that listener. So, this project is pretty well ready to go which is in final testing. So to summarize the year, we’ve always had a great team of engineers and visionaries but this year we began adding executive in sales and marketing roles to complement existing staff. We’re hoping the discipline of people that run big organizations will help us to build a well oiled machine, eliminating friction as we clarify rules and hires where we have historically had some holes. We’re staffing up but the goal is future long-term recurring profitability and we expect Clipstream to contribute positive cash flow before the end of the new fiscal year. I know investors are being a bit frustrated that our new video products haven’t been ready for primetime yet but the opportunity is just as big and the technology just as disruptive as we’ve always said it is. And the fundamentals justify it, we’ll pursue a more senior listing and during the year we’ve secured the necessary shareholder approvals, we re-domiciled the Company, we addressed all necessary corporate government issues through the lawyers. We’ve been building a fortress of patents and trademarks around both of our product lines. I encourage you to take the time to review our 10-K to see just how exhausted our filings have been especially internationally. We’re building protection all over the world. As I said at the beginning, this year has been one where we quietly build the structure and foundation for building out partnerships, PR and marketing in 2015 and we’re excited about our future. So on that note, I’ll turn the call over to questions. Thank you. Question-and:

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Your first question comes from Hubert Mak from Cormark Securities. Please go ahead.

Let me just start with the Play MPE, can you give us some color in terms of the maybe potential contract renewal here with Universal and in that context as well how the international roll out has been like I just want to get a feel like are they’re really pushing this or they’re not, like what’s so special about it?

Sure. Hubert I can take that one. So we’re in negotiations with Universal, a lot of the terms seem to be no brainers they don’t seem to have an issue with pricing. There is a couple of points that we’re still negotiating, but we’re hoping that we can if anything improve the terms. I’d mention that with the previous contract we’ve given away a bunch of free bees I’m hoping that we can pull back on some of that. And in terms of international we’ve done a couple trips to London, we did training in Japan, trip to Ireland so we’ve been working with the sub-labels, in prior year where did quite a bit stuff with Germany. So we’ve been working with these sub-labels in the regions. They’ve been doing a lot of testing, doing internal sense. There have been some small volumes that we’ve gotten paid for but they haven’t really light up to commercial transaction levels yet, and so to tell you the truth I am a little frustrated by that. But besides the revenue in the new markets when they light up a market usually Universal goes into market first, they are 45% of the market, when they light up the market they pave the way for Sony and Warner to come in and they make it easier for us to send to independence. So we’re kind of trying to do what we can to open up these markets but it’s gone a little slower than we’d hoped.

Why do you think it’s going slower than you had originally speculated and maybe just also you also made a comment about, if I’ve heard correctly that you’re looking to put a new sort of how would I say, a light up version of your Play MPE, so is it competition or what is it that like why they’re not pushing?

With sometimes, let’s say somebody let’s say promotions guys sends a song to an artist or something or vice versa. They don’t want to go through the centralization, they don’t want to wait three days for somebody in distribution to encode the song for them and they’re sending it to somebody that they trust so they don’t care what the security is much and because it’s a small volume of sends they don’t care about the reporting that much. And so we’ve been losing stuff to systems that are, not loosing. There is business that we’ve not gotten where the system is just basically a glorified Web site. So some of the majors are telling us that if we make a quick a dirty version that doesn’t require any installation on their desktop that they can use, if these little desktops are generally locked down, that they can use through a web browser that they’ll require that the sends go through our system, so just great potential revenue there. In answer to your other question, one of the challenges we’ve had is staff turnover. A lot of the senior people that we’ve worked with at the majors have moved on they’ll be cutting a lot of executives staff to try and save money and then that’s been kind of an ongoing problem. So on their side their intent is to rollout globally but every time something like that happens it slows them down. So I’m just trying to remember I think Japan trip was, I think that was in September so I’m thinking we may see something from that after Christmas. But again it is little bit frustrating.

But do you have any thoughts in terms of when they may actually start to aggressively pushing though or do you think it’s going after sort of your negotiation?

I think the contract is part of it, so once we light up the contract you’ll probably, I’m hoping that their usage is going to increase.

And then the last question on Play MPE again just towards your new version, like are you seeing competition that like in a way your differentiator was the fact that you can do quality sense and it sounds like you guys are moving through this newer version less quality but at the same time…?

I’m actually not seeing anybody else offer broadcast quality. A lot of people are using MP3s, and MP3 really shouldn’t be used for broadcast, but preceding to general list and stuff where it’s not going on the air that can be fine. So a lot of features like the security, the broadcast quality and everything they do not match to anywhere else.

So you’re seeing the impact of competition or recent alternative in terms of…?

No, what’s different is, that low-end market we had never really chased before, but with the web-based encoder we can actually get some of that. So that’s revenue that we actually weren’t looking at. So we’ve not seen any erosion if that’s what you are talking about but at the low-end there definitely are other providers.

Okay, but among your major labels like Universal or Warner they’re still looking for high quality secured…?

And when they send a song to radio, the quality is really important, but there’s actually couple of more things that like when we do market research there is a couple of more things that they excited about. One is, is that we can lock it down, so everybody can have the same impact, so all the radio stations get the song at the same time which creates a bit of a buzz. Then they get the reporting. A lot of these other systems there’s no reporting, so you can’t tell what happened to the song when it goes out there, they want to see who streamed it, and who’s downloaded it. Even if it hasn’t gone into rotation yet, they want to see that if the song is active. Another one is the speed, that’s instant, they can do it themselves. They’re not going through a service where it’s 9 to 5 and somebody at the service has to do the encoding. They can send a song from any time zone, weekends whatever. And then of course cost, we -- because we are automated and we don’t have to use a lot of labor, we’re quite competitive in terms of cost.

And maybe just switching over to Clipstream, Dale Borland joined your company on October 1st I know he also knew [indiscernible] wholly ramped up, but since he joined, any thoughts in terms of what his thought is and what his view is in terms of the market and what’s changed?

Yes, so I don’t want to put any words to his mouth, if we’re getting into anything non-public. But just the fact that he joined with us, it tells you that he sees the opportunity. So what we’ve done so far is launched the market research instead that kind of -- so he launched at [indiscernible] role beginning of October. He’s been putting a lot of effort into recruiting and trying to bring the right people on. He’s also being working with the developers to make sure all the right features are in the various products. So in terms of really getting going on sales and marketing that’s going to happen just as we get back from Christmas, so probably early January. One of the big thing is we’re pushing for us to get this throttling issue addressed and hoping I can get that live but either it’s just before Christmas or just after and that makes the product a lot more compelling commercially.

And do you see the throttling as a persistent impact as you just has to do with sort of like the throttling issue as well, right?

Yes, so the way we developed the original Clipstream, is that we reconnect to the server every two seconds, and so some servers -- some ISPs when they see that, we look like maybe we’re peer-to-peer traffic or a robot for a search engine or something like that. So they would just throttle our bandwidth rate back like so a connection to a server for example should take like a fraction of a second and we’re seeing some of the ISPs take as long as 2 seconds to respond to a connection request. So we’ve rebuilt the software so that our traffic looks more typical and more traditional. And in our testing that seems to be in the solution. So if we have adequate bandwidth our quality can go much higher than YouTube.

And then what traction or I’m not sure that’s the right word actually given that you haven’t really started pushing again, but you provided cloud servers where you have the price range 5 to 5,000 any thoughts or any sort of metrics you can throw out there?

Yes, so the feedback from pricing is we’re probably not too far off. But again we stopped marketing that product in March. So it’s available online you can go put your credit card in and try it. But the people that are subscribing or people have kind of stumbled across it or else our own investors. And the reason is that we’re missing a bunch of features that other cloud products have and we have that throttling issue. So it made no sense to push it until those issues were addressed. So the cloud product is one that I want to start marketing in the New Year, when we get back from Christmas.

And what verticals would that be with that right now you’re targeting the market research?

Yes, I’d like the -- no the market research is a separate product, it’s a standalone product but with the cloud I kind of like targeting web developers, but I think Dale’s actually targeting government and education first.

And then lastly just on the expenses in Q4 is that sort of the level of expenses or do you think that’s going to pop up during [indiscernible] investments?

We’re in the recruiting mode, so we are going to go into a bit of a loss position. But we’re hoping that’s not going to be more than about a quarter, quarter and a half.

And you believe your balance sheet has the cash to I guess go through that loss period…?

Yes, and we are not going to go that negative, we are still going to manage cash flow in conjunction with Clipstream sales. So as Clipstream starts to pay for itself we can kind of reinvest back into sales and marketing. The focus next year is going to be on partnerships and awareness to really get the product out there.

Thank you. Your next question comes from Walter Schenker from MAZ Partners. Please go ahead.

One of the question you just sort of answered which is how you’re going to fund the pickup in expenses, and basically your answer was being redundant that the cash flow from MPE that and the base business should be sufficient to fund and not require any additional outside funding?

That’s well a combination of the cash, so we expect to increase MPE cash flow in the new revenue is really high margin, but even if that doesn’t happen, we think we have adequate cash in the balance sheet to launch the product.

Okay. And the second question is for my history which is about a year, we have almost, always almost the Clipstream issues, I mean throttling issues has been around for a while now, none of the other issues have been around for a while now, why always we but I understand that you are trying to work things out and now we’re looking to the end of the year and the beginning of next year hopefully to abort these things out?

So the throttling issue, so the throttling issue is being fixed internally amidst in testing, so we just haven’t released it yet, the thing to remember is there is more than one product, so the licensing the raw engine and the cloud product we don’t feel ready for primetime, market research we’ve gone ahead and started marketing that in October and then the ad prototype, we’re still actually working with the ad agencies to speck-out what to build, so besides the raw engine we’ve got to integrate with other third-parties, so like real-time bidding networks, or auditing systems encoding and reporting systems. And so we brought in an outside consultant just helping us speck that out, I mean it's not whole kind of programming but we’re expecting that, that will get live and kind of launch in the first-half of next year in the calendar year. But the big thing that has been holding us back besides features in the cloud has been quality and then a lot of people are getting HD, and a lot of people aren’t and the ones that aren’t is because their ISP is throttling it and it was not a simple thing to fix, it was a complete rewrite of the architecture.

Okay. And just again to put it on the record that you haven’t at what point will we see from externally from actual revenues, Clipstream revenues any of consequence?

I don’t want to give anything forward-looking, I don’t want to pull numbers out of the air because we haven’t really been selling it yet, so until we sell it, and we haven’t done any real market research, we’re not going to know, but the market research it's minimal still but we started marketing at again in October. So the cloud and the engine we plan to start marketing in January, so when we have our next conference call, well actually next conference call is early January, but the call after this we’ll be able to better answer that question.

Okay. Again it seems as if and this is whining, this isn’t a question that I am sure it’s leads this frustrating to you maybe more so, you own a lot of stock that working through these problems and having a commercial revenue generating Clipstream offering is taking a lot longer at least through 2014 than you originally expected?

Yes, so -- I know it's not a question, but I’ll answer it anyway, I mean I wish I could wave a magic wound and make development go faster, but the reality is that JavaScript was not intended for to be a programming language, there is no memory management, no multi-threading, no interrupts, how do you tube to audio and video at the same time, when you only have a single code line, there is not data buffers, we have to convert everything into text and send the data as text. So 2010 when I suggested adjusted to the engineers that we build this Dale told me that it was impossible, so it's been a real feat to get this working, but that’s why nobody else is doing it, that’s why we’re the only player list streaming solution. So the good news is there is light at the end of the tunnel, the last big problem is this throttling and we think we’ve got a beat otherwise it's all looking good. I mean if it's a vote of confidence, we hired Dale and we’re recruiting aggressively, we’re building up the team and I am known to be a fairly frugal what that says is I have confidence that our cash flow from Clipstream is coming early in the New Year.

Thank you. [Operator Instructions] Your next question is a follow-up question from Hubert Mak. Please go ahead.

Hey, Steve just want to follow on the Clipstream and just towards the comments that was made [indiscernible] now and if and at this technology improving or improving based on the feedbacks of the customers, over this time have you seen the demand change or at least is the desire to have a solution still there given that the market in the video obviously continues to go forward here going toward from to H-264 as you talked and H-265 and the ultra high desk given the marketing technology typically moves quite fast here like have you seen any change in the desire for its solution and your customers or -- and maybe a comment from Dale as well while you guys maybe discuss as probably but…?

Yes, actually if anything the demand has increased. Over the last four years the market has become a lot more fragmented. In 2010, flash was still widely available on mobile as an example. The new formats like VP9 and H.265 are not compatible with the old formats. But as you know, the lifecycle of a computer or a cellphone can be three to give years, so they came up with something new, it’s going to take five years for that new thing to be quite common. The reason I spent a bit of time at the beginning talking about our advantages is everybody thinks the advantage is that just we have cross-platform but in reality there is a whole series. And they are kind at opposite ends. So for example an advertiser doesn't care about security at all, go ahead and pirate my Coca-Cola commercial but they care like crazy about dropout. They want to reach 100% of people not 80%, but they care about mobile, they care about interactivity, they care about reporting like knowing if that video was actually seen and like the other technologies you can't tell if the video was actually viewed. To the opposite end of the spectrum where there is people selling movies that would love to have security. But we are finding there is actually a lot of demand just for privacy, so companies that are showing videos to clients or remote employees where they don't want it widely available on the net. And so there is that whole range and in between these HTML5 video formats are completely inflexible, they are built into the browsers, they can't be updated easily and there is different flavors for different browsers, even though Android is a standard when Qualcomm does the Web Cat may license it out, the manufacturers will play with it, different widths and heights and different aspect ratios and it's becoming more and more difficult to have a single video that plays everywhere. So from the viewer’s point of view, I've had investors say to you what's the big deal? The video looks the same as any other video, well that's the point, the point is that we can swap out in the backside, create all this additional functionality and save the publisher a tonne of money and the viewer doesn’t see a difference.

Thank you. There are no further questions at this time. Please proceed, Mr. Vestergaard.

So just to maybe put out one more time to see if there is any other questions, and if not we will wrap it up.

[Operator Instructions]

Okay. So it looks like just there is no other questions, I know a lot of people don't like to ask questions in a public forum. Both Fred and myself are accessible as is Three Part Advisors our IR firm. You are free to reach out to Fred, John or I either by e-mail or phone. I welcome feedback from investors. That said, thank you very much and I look forward to our next call.