Jeff Elliott - IR Fred Vanderberg - CFO Steve Vestergaard - CEO Dale Borland - COO Stephen Green - SGC Media

Hubert Mak - Cormark Securities Walter Schenker - MAZ Partners

Good afternoon, ladies and gentlemen, and welcome to Destiny Media Technologies, Inc. Second Quarter Results Conference Call. [Operator Instructions] This call is being recorded on Tuesday, April 14, 2015. I would now like to turn the conference over to Mr. Jeff Elliott, Investor Relations representative. Please go ahead.

Thank you, operator, and hello everyone. Good afternoon and thank you for joining us for the call today. Before we begin, I would like to announce, we will be referring to today's earnings release which was sent to the newswire 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-looking statements are 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 Exchange Commission and CEDAR, and the Company does not assume any obligation to update information contained in this call. During this conference call we may 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 CEDAR. On today's call are Steve Vestergaard, Chief Executive Officer; Dale Borland, Chief Operating Officer; and Fred Vanderberg, Chief Financial Officer. I'd now like to turn the call over to Fred. Fred?

Thanks, Jeff. Our second quarter includes the December holidays and is seasonally our lowest quarter. Total revenue for the quarter fell by 8% compared to the previous year, due entirely to foreign exchange fluctuations and the strength of the U.S. dollar relative to the euro. Absent the exchange fluctuations though, Play MPE revenue would have shown a 3% increase with a nominal total increase for the quarter. Similarly, revenue for the year would have shown a 7% increase and -- for Play MPE, and 4% overall. When we signed Sony Australia in February last year, we had all the major record labels using Play MPE in Australia. With that, we believed the Play MPE revenue would increase in Australia in the independent market. In our first and second quarters this year, that has begun to occur and these additions represent approximately 6% of the year-to-date revenue, and it's growing rapidly. Over the past year, we've added ancillary revenue with Play MPE. These items, combined with another quarter of growth in the U.S. independent label sector, represents our total fluctuations in revenue. In the seven years we have been operating Play MPE revenue, this sector has shown growth in every quarter year over year, but one. Operating expenses for the year declined by 8% -- sorry, for the quarter, declined by 8%, as a result of the strength of the U.S. dollar relative to the Canadian dollar where the majority of our costs are. Additionally, there was a reallocation of resources from G&A to development and sales and marketing. The majority of our cash reserves are kept in Canadian dollars for use in our Canadian operations. With the strength of the U.S. dollar, this balance has been adjusted to just under $600,000, but we additionally generate $100,000 from our Australian note receivable. Net cash usage for the remainder of the year is expected to decrease significantly. With that, I'll turn it over to Steve.

Thanks, Fred. And thank you all for joining on the call today. So how we'd like to start, for new callers, I'd like to remind everyone what our product offerings are. So, Play MPE is a secure automated system that record labels use to move broadcast-quality new music releases securely to trusted recipients such as radio, internet radio, bloggers, DJs, and VIPs. All the major labels are active customers, and as we grow recipients in geographies, incremental revenues and margins are extremely high. This system represents the bulk of our current revenue. So, Clipstream is a new solution that uses web servers, the canvass tag, and JavaScript to deliver high-quality streaming media directly to the browser. We're abandoning the more common approach of using the video tag streaming servers transcoding to various formats and viewing through plug-ins. And because we're doing that, we're able to deliver features and benefits to publisher that they really need and want, but they can't get through the standard HTML5 video tag. Unfortunately, making this work has been technically extremely difficult. Back in 2011 when I first talked to the developers about doing this, they told me it was impossible, and we've had a couple of false starts in the last year. The good news is we’ve recognized that the benefits and large revenue opportunity was growing rapidly, but we needed to go back and fix the technical issues. So last year we hired senior executives and new development marketing talent to manage various roles that brought a more formal approach to development quality assurance. We launched a new version last week that we're beginning to market this current quarter. And despite the false starts, the opportunity that we've always talked about is here and we're ready to go and we're ready to go now. So finally there's light at the end of the tunnel. But we went back and kind of self-reflected, we had a realization that to become a much bigger company, we needed to review and examine the way that we're doing things and to make changes at Destiny to be more effective. So the first step, we brought in new personnel. Dale Borland is now running operations on a day-to-day basis, and Karen is managing the processes to grow Play MPE revenue in the coming quarters. So, recently we've moved into a much larger office with open cubicles, you know, instead of having personal offices, we've kind of gone to an open floor plan. And not only does that accommodate growth, but it's facilitating much active internal communication. I've actually found that people that aren't in the open environment are wishing that they were. And, you know, the brainstorming, the ideas, you know, everything is starting to gel. And I thank Dale for that. So under his leadership, we formalized job descriptions, we set up middle management hierarchy, and we've improved accountability. We've made personnel changes to remove weaker contributors. We brought on a new Director of Software Development and a new Director of Product Management, each with extremely impressive track records of success. What I've realized is you've got to hire people that have been there or done that just to do that. So we now have a strong product path, it's aligned to the market opportunity and customer needs, and we've improved operational efficiencies to take the Company to the next level. Internally, we've created a staff culture where there's an appetite for growth and success. And I'll let Dale talk about that a little further, but that's something that he really brought to the table, and he'll talk about that later in the call. The recent press releases provide evidence what Dale and the team have been doing around progressive steps and execution and traction. We expect to continue to provide feedback to investors through press releases on successes as we achieve them. For example, we've been building out a strong outreach to independents, which is already yielding growth. We launched a new music reviewer blog product that appeals to new artists. We've started the process of establishing partnerships with resellers that can grow business locally. Play MPE has aspects that lead to a natural monopoly, and we're not aware of anyone else with a video product that uses the JavaScript and Canvass tag to decompress and render the video. But we're afraid of copycats. In both cases, the advantages are so strong that we've invested extremely heavily in intellectual property to protect our inventions. Last week we announced that the U.S. Patent Office is immediately granting four of our seven patents. With the remaining three claims, many of those claims have been granted. The ones that aren't granted are just going to take some minor modifications. We expect at the end of the day all seven are going to be granted. But we received approval of our PCT application that dates back to August 2011 with the World Intellectual Property Organization. And what that means, it's moved our patent applications into the national phase. So we're -- we've got applications now pending with the European Union and 11 other countries. So at the end of the day, Clipstream and the Canvass tag and the JavaScript and the way we're doing things is going to be protected globally. You know, in the U.S. we have seven patents, with four granted, three pending. On the MPE side, we also announced last week that our watermarking patent was just approved for grant in Canada. Just to remind everybody, besides the international patents, we have two watermarking patents in the U.S. and we have a third one pending. The watermarking is a bit of a sleeper opportunity for us. To see our exhaustive list of granted and pending patents and trademarks, please visit, it's hard to read here, but DSNY.com/intellectual-property. And there's a couple of PDFs there that kind of give you the state of where our trademarks and patents are at. So at this point, I'd like to introduce Dale Borland who will be speaking for the first time. This is his first time presenting on a Destiny conference call. And he'll be happy to join Fred and I in answering questions. So, Dale comes to Destiny with 30 years experience in the tech industry and he's bringing a lot of value to the Company. He has held a variety of senior positions in small, medium enterprise organizations. Dale worked with Microsoft in the 1990s and early 2000s in a very senior role, in a number of growth business divisions like Xbox, MSN. And he ran the reseller and retail channels in Europe, Middle East and Africa, as well as their enterprise operations and infrastructure group. He also has a vast level of experience in SMB and the startup world. He has shown Destiny, in the short time that he's been here, how we need to be organized aligned to markets, plan and execute, so we can advantage of our strong leadership and our huge opportunities. So on that point, I'll turn the call over to Dale Borland, our Chief Operating Officer.

Thank you, Steve. Good afternoon to everybody on the call. Thanks for joining us. And I think this is probably my first opportunity to certainly speak to most of the people that I can see online who are on the call. So, thanks for joining us. So really further to Steve's comments, I really wanted to talk and focus some of my commentary today just around some of those organizational changes that we've made and certainly the benefits and the progress that we've made over the last few months, and also comment on some of the product-related activities that I've been working on, not specifically just for recent releases but the work that we're doing in the background on our roadmap and certainly plans and opportunities that we can talk further to later in the year. Most of the work that I've been doing really follows an organizational review that we did at the end of 2014. And Steve alluded to, there were things that we really needed to change and make happen here at Destiny for us to capitalize on our opportunity. And we really drew a hard line in the sand at the end of 2014 and really started to position the organization for much more sort of optimistic and confident outlook in regards to what we were doing. Certainly the change was needed and we've been very busy on architecting those changes. Steve alluded to one specific area of activity around leadership personnel, and I'm very pleased to have put together a team over the last few months, especially so in the way in which Karen is leading our business development and sales activity around Play MPE and also specifically around our appointments of directors in our software development environment and also software product management. And those are two areas that we've really done a lot of work on optimizing our processes, looking at tools and procedures that we use in those environments, really building a strong predictability and aptitude for achieving milestones based upon what our goals are, what our specification of product is, in a timely and appropriately and cost-effective manner as we move forward. So, certainly we will continue to hire strong. We're looking at roles in sales and marketing and our infrastructure operation currently, and the leadership areas, to really build out the strength of the team that we have here. And that will really enable us to move forward in a very strong, predictable manner with a lot of confidence. One of the other areas that we spent a lot of time on is in the product and what product we have today, how it best suits our customers and needs of our existing customers, and that demands and the changing business requirements, but at the same time obviously taking a look at where our opportunities are and how to best align what we currently have today, to take advantage of low-hanging fruit and early market traction, as well as the medium, longer-term roadmap plans that we want to develop and build our organization from. Specifically with Clipstream, you may have seen last week that we released really what we would consider to be an MVP, the minimum viable product, into market. And that really came from looking at where we are three to four months ago, the state, the quality of the product and that offering, and really deciding that we needed to walk before we could run, and really to make sure that we did some substantial improvement in performance and quality before we put that product out into the market. And I'm very pleased that we did that work, and that really provides us a good platform to move forward from. And certainly in MPE, we've really built off the strong core technology product that we have, really strong feedback from our customers. I've been out to see and spoken to a lot of customers and we've got great testimony, great loyalty, really like the product that we have for them. But at the same time, we've had opportunity to listen to what their needs are and to really make sure that, as we evolve the MPE portfolio that we're building off that strong customer and market success, but at the same time, you know, really enhancing the feature and usability of our platform there. And the other aspect that we spent a lot of time on is operational integrity. As I said earlier, really becoming more predictable and reliable in the work that we're doing internally, really putting in new tools and procedures and processes, and working on strong operational and executional plans. The amount of data, the reporting that we're starting to generate, informs our decision-making better. And overall, when you look at our product lifecycle work, we now have a long sight view of that product's cycle, from Steve's visions and the innovations that we want to make in our product, all the way through to our commercially available, shippable products. So I'm pleased that we've got a lot of additional cadence in that process and strong execution. And one thing that is really helping us in that area is the amount of work that we've done around QNA. We've hired some external partners as well as our own internal test efforts, and that's really allowing us to understand, you know, where our weaknesses are, show those up quickly, and to be able to have performance and integrity in our product, as well as operational efficiency. So we've made some good progress. We've I think turned a very significant corner in the way in which we operate over the last few months, and certainly I see that continuing in a very positive trend. Steve spoke to and alluded to a little bit, a few minutes ago, a little bit to the sort of the appetite for success. And that's one of the things that really improved in our operational abilities and for people to see that, when we're committing to timelines and deadlines and performance, and when we meet those benchmarks and we achieve those milestones, that success is something that starts to breed success. And again I'm pleased to see the smiles and the spring in everybody's step internally. And I think that will continue over the coming months and certainly will bode well as we start to make plans for our fiscal 2016 period. Specifically just on the product, I just did want to highlight a couple of things before I switch things back to Steve and take any questions. But on the Clipstream side, I think I would encourage people to go visit Clipstream.com. We have a 30-day free trial that we've initiated via the website there. And encourage everybody to take a look at where the product is and what it is, give us some feedback. As I said, I think we've made some significant improvement but at the same time we know we've still got aways to go. So I'd encourage anybody and everybody to go take a look at the product. Certainly, you know, the general improvements around our streaming performance and video quality are marketed for sure. Things like our bandwidth detection, you know, really making sure that some of those slower connection speeds don't hinder people's experience. Updated the look and the feel of the player. Device support, so, cross-platform, with player features. As I mentioned, that self-serve 30-day free trial. And integrated some ZenDesk [ph] -- helpdesk operational integration into our offering, so we can ensure that we're engaging and able to onboard customers as quickly and as effectively as we can. And then as we look sort of a little bit further down the line from today, perhaps over the next three to six months, you know, we're going to obviously carry on doing significant improvement both in feature and functionality and performance for Clipstream. Our initial target audience, which we believe certainly resides in the SMB space, organizations, really around a 50 to 500 persons, we believe we have a good strong proposition there. And we continue to see the exponential growth and explosion of video consumption and everything around sort of the online video platform market. We've certainly got an offering that is competitive and has a lot of feature function benefit and uniqueness to it as a technology provider. And for those that want to take a little look or a deeper look into the OVP market, the online video platform market, there's a good Frost & Sullivan report that was published more recently, had some great stats and some outlook for the OVP market. 2013, that market was around $370 million, and they were predicting around a 14% compound annual growth forecast for the next six years, taking us through to 2020. And certainly if we can take our appropriate and fair share of that kind of market as we move forward, and it's almost going to obviously double with that compound annual forecast, then that's an opportunity for us in the shorter term to build traction and build out the viability and operational integrity of Clipstream's proposition. You'll see from us over the coming few weeks a lot of proactive marketing activity around Clipstream, a lot of vertical market advertising campaigns, lead gen activities, some specific ad campaigns around driving existing customers as well as new customers onto the Clipstream platform. So again I'm always very interested to see and listening here to people's feedback and observations around our execution in the sales and marketing environment, so, feel free to ping me an email, feedback on that over the coming weeks and months when you see it. So, really for Clipstream, the next 90-day outlook, we're really going to continue to focus on our feature and function development around quality, performance, and as I said, focus on that OVP SMB market. I think that will provide us with good traction and good evidence of what our proposition can provide. We'll continue to do the feature and function build-out with a summer release, so a version 1.5 if you will in a few months' time, and we'll continue to build out our roadmaps and talk to some of those longer-term views and longer-term opportunities at the next call in a few months' time. Specifically to Play MPE, as I mentioned just now, talking to our various customers around the globe over the last few months, I'm incredibly pleased with their feedback. They really do have a strong loyalty to Play MPE and to Destiny as an organization. They've given me some great feedback around how we support them, the importance of our tool and our service and our application to their business today. But at the same time, really had some great feedback around what they're looking for from us moving forward and how we can add value to the expanding landscape and changing landscape with some of the music business over the coming years. So we are going to align ourselves certainly to fulfill on those needs of our current customers. And Steve alluded to a little bit earlier on about some of the work that we've been doing around business development and sales and marketing in MPE. You may well have seen earlier this year we published a newsletter for the first time, back in January. We've got some great response and very positive feedback around the value and contribution that brings, very much in increasing our profile in the independent market, getting people to understand the value that we bring and not just for us to be reliant upon our major record label relationships but really growing and spreading the breadth of engagement that we have across our independent markets. You may have seen also last week we put out a release around our music blog service. And that is a really great way for independent record labels to reach sort of the influential global music blog environment and really provides those labels the ability to accurately target music blog writers across many different genres, and certainly delivers those recipients' music that's broadcast quality in a digital format. So again another execution that we've been working on over the past few weeks and we've done a great job at bringing that to our prospective customers in a quick, efficient and well-executed way. Fred mentioned the Australian market just now. Again you may have seen recently that we put out some announcement around some work that we're doing in Australia with SGC Media. Steven Green down there has been involved in direct selling and client services and lease [ph] management and lots of work in and around the music industry over the years. And we're very pleased to have Stephen working and representing us down there in the local marketplace, certainly building strong relationships and expanding our market coverage in a way that certainly we wouldn't be able to do from back here in North America. So that's a piece of work that I think over the coming months we'll start to see bear some fruit in terms of the business development and the relationships and the breadth of penetration that we can see in that area of the world. And certainly it's a model that we're looking at very closely to replicate in other areas of the globe specifically as we move a little bit stronger into Europe. Steve, I don't know whether you want to make some comment around some of the work that we've done in Play MPE on the product side?

Yes. So I've been working really closely with our new Director of Development. And one thing that's been really clear is that both record labels and radio stations always want more. You know, we have basically the best system in the world, but they're always coming to us with feature requests. And what we've realized is one of the big drivers of revenue growth is making sure that the experience for the labels using our encoder software and recipients using our player software, is as intuitive and easy to use as possible. So to that end, improvements in the various encoder and player applications are always ongoing. But more specifically, many of these developments are driven by requests from labels and driven by requests from radio, so we're able to build exactly what they need to best fit their workflow, and that's what our little fence is. That's what our competitive advantage is that makes it difficult for somebody to disrupt what we're doing. So our main encoder system is really powerful, but powerful is not always good. What that means is it can be complicated for the casual user. The base encoder system supports the concept of an administrator who gives out rights to various staff members around the world who each have limited rights, for example, to manage lists, to upload audio, to upload video content, to localize releases, or, you know, at a higher level to authorize the send [ph] to actually go out, you know, that would typically be something that a CFO would do. So this works well for content management staff at a major record label but it doesn't work so well for promotions staff at the major record label, it doesn't work so well for independents who don't want to learn a new piece of software. So one of our big initiatives this year has been to build the web-based encoder, which is nearing completion. Completion expected this summer. We think this product will improve revenues but also it'll reduce our costs as we've been using our own staff to do encoding as a service for many of the independents. This will ultimately get easier for us to support alternative input. As an example of that would be tablets, Macs, but also to make it easier for us to translate to alternate languages. So as we go global, people in other countries don't want to encode in English necessarily. We're modernizing the player software to reflect the latest trends in the user interface. One of the things we found for the music industry has been "eye candy" is extremely important. So we're improving the look and feel of what the recipients see. We're also improving the recipient experience, especially for non-radio users who just want to click Clickstream or download a link. They don't want a complicated radio-based interface. We're in the process of building out a second generation of mobile and tablet apps, and we've built in a new U.K. streaming server that's pretty well ready but is yet to launch. So this new U.K. system allows a secondary watermarking system that individually watermark streams real time. What watermarking does is locks it down so that if people pirate the content, we can trace back and see where it came from. And that includes just recording it, you know, recording the stream onto another device, we can track that down. Because that's based in Europe, it's going to provide better performance for European, Asian and African users. And all of these efforts are designed to make the system easier to use. Dale?

Thanks, Steve. Yes. And just generally on the topic of Play MPE and just sort of closing out our remarks there, I've had several people inquire around where we were with our Universal Music relationships. So, just wanted to give people a quick update today on that. As most people may know, we're in a discussion with UMG around the renewal of the agreement that we have with them. Obviously it's an important relationship for us as well as it is for them in the way in which Play MPE is a strong and integral part of their operational workflow and process. So we've been working over the past couple of months with UMG on this renewal. We've made some great progress together. And very specifically, looking at the way in which UMG want to run and operate their business moving forward. And so we've been working with them specifically on how to align their processes and services and the way in which they use our platform internally to the way in which we can construct a new agreement and a license with them. So we are working on a new licensing model with UMG which we're getting to the last strokes on. We have a continuing month-by-month extension with them as regards to our agreement, which may not have been necessarily published or made clear at the turn of the year. So we continue to have a solid working relationship and obviously benefit from the terms and conditions that are in that prior contract. And I think imminently we'll be able to release and publish a successful conclusion to the work that we're doing with them, and look forward to many more years of great relationship with UMG. So overall I think, to sort of summarizing a little bit of operational commentary for everybody, I think we've made some very strong strides as a company since the latter end of 2014. We're going to continue to execute and build off of a solid planning and make sure that everybody both internally and externally understands the value of having those plans, committing to those plans, and executing to our timelines and to our milestones both in terms of product and our operational cadence, simplify and execute well all the things that the organization is learning to do, and evidence of that is in some of the recent release and some of the recent progression that we've made. We will continue in this vein certainly for the next three months and continue to make sure we've got very, very solid foundation and platform to build this business on. I'm very encouraged by the progress and the early traction that we’re starting to see in both of our areas of business as we evolve, and certainly I'm going to be more excited to talk to everybody in around two to three months' time, at the end of Q3, when we've got a lot more detail around our medium to longer-term plans and roadmaps from there. So I'll hand it back to you, Steve.

Thanks, Dale. I think the bottom line is, you know, we need to walk first before we run, but pretty soon we're going to be ready to run. And again I'd like to reiterate that internally a lot is happening behind the scenes and I'd be criticized that we haven't been putting a lot of press releases, but it's intentional. We wanted to spend some time getting the base in place so that when we do kind of go out to the market, that we real things to say. And the news pool that you saw last week, I'm expecting that to continue over the next few months. There is a lot of balls in the air that are going to start to land. In terms of cash flow, we've intentionally allowed investment in people this year to go slightly ahead of expenses, but that was very intentional and locked down for our budgets. And our loss is actually still smaller than a year ago. We're doing this in a very measured rate and we're trying our expenditures based on the successful uptick of our new proactive Play MPE marketing campaign and the Clipstream relaunch. So basically what I'm saying is that, you know, as new Clipstream and MPE revenues justify it, we'll reinvest that back into the business to the advantage of existing shareholders. Many of our growth initiatives are just beginning and there are many variables that we won't be able to quantify. So at this point, you know, as much as I'm going to get asked this in the question period, we will not be making forward-looking projections in either business. That said, I can tell you that we're very excited about our growth prospects for this year and the next several years. On that note, I would like to open the call to questions.

Thank you. [Operator Instructions] Your first question comes from Hubert Mak from Cormark Securities. Please go ahead.

Hey guys. Maybe just a first question here, on the Play MPE, obviously you have talked on forward guidance, but maybe I guess another way of asking, it seems like you guys have a lot of things on the go obviously on the Play MPE, it sounds like there's a wrapping [ph] n quarter that sounds pretty critical here and it looks like it's launching in the summertime here. Can you just give me a little bit more color in terms of what is the difference between what you have today versus this web-based encoder? And secondly, would we, the growth rate in terms of the Play MPE side, like are we talking about sort of – assuming growth rate include these product launches that we'll actually see a little bit of acceleration in terms of the growth profile on the Play MPE side?

I'll let Dale answer the second question and I'll answer the first. So in terms of the first, the existing encoder is Windows-based. The music industry, are creative types, a lot of them on the Mac. But even more so, a lot of them are on tablets and cell phones and everything else. And the existing web-based encoder is incredibly sophisticated, there's nothing else like it out in the world. But sophisticated means complicated. And it's above the ability of independents that don't want to take the time to learn. It's about the ability of promotion staff that would just assume -- send that MP3 file out as an email attachment. So the majors don't allow them to do that. And so if we were to provide a solution that makes it really easy, the administrators at the corporate level would force all their promotions staff to use us. So you asked what the difference is. The difference is that there's a bunch of new revenue streams that we think we can bring online from promotions staff and from independents that currently either don't use us or require us to use our staff to do the encoding, which obviously kind of kills our margins. So I'll let Dale answer the second question.

Yes. I think as Steve alluded to, I don't really want to put any kind of hard-core numbers in terms of projections out on today's call, other than to say obviously we seasonally look at the business and the past couple of months are quieter periods. And so we're coming into a more accelerated and fast period of the year as far as our businesses are concerned. I'm optimistic around the tactical execution that we've been doing in terms of addressing a lot of low-hanging fruit, and I guess that's an advantage of somebody like myself coming into an area of industry like this which I haven't necessarily seen a lot of before and, you know, I may have a different set of eyes on something that other people may not have seen in the past. So we have short-term opportunity that we're looking to take advantage of with those tactical executions, and I'm looking forward to buck in the trend over the last few years.

Okay. And just -- maybe just a quick follow-up on this Play MPE. Obviously you made some changes here on the sales side. When you actually think this sales team will start to be effective here and I guess specifically here you're talking about the low-hanging fruits here, are we talking about 10% of the potential revenue or is this like doubling? Like what do we -- what do you consider that's low-hanging fruit and like what's the impact to the business and how quickly you think you can achieve those given that you've made some changes here on your team here?

Again, a little bit early to say. These changes were only just being put into effect right now. So it wouldn't be appropriate for me to comment on any particular numbers, other than to say, you know, I have a confidence that in our execution now and the team that we have an additional focus in sales and marketing should enable us to have a healthy next three months and help through the end of our current fiscal year.

Okay. And maybe just switching on to Clipstream here, obviously on the technology side, if you can just kind of -- if you can just sort of help us maybe summarize, I think last quarter or even quarters before, there's certainly some technology shortfalls where the Company can really go and market on to the masses here. It sounds like those are fixed and -- like if you can maybe just give us a little bit better color on that on this recent launch last week here, whether some of those key technology gaps that you saw are completed. And secondly, excuse me, secondly, you raised your pricing plan here. It looks like you guys closed the range here or tightened the pricing range. What was behind this sort of change in pricing plans? Like is there customers or -- that you're talking to that suggests, you know, that suggests a pipeline that is building that is having you make that change?

I'll take the second part of that question, and Steve, perhaps you can again talk to some of the product side. I mean as with all things, when you go to a market, you obviously do all of your determination and your analysis of taking in customer feedback, what the competitive landscape looks like, where you believe you have price pressure, where you believe you have clear differentiation in value-add. We took all of those things into consideration and put our pricing plan together. And we believe it's compelling when packaged with the benefits and the differentiation that we bring. It's really just a combination of those things as you would with any new product that you bring to market.

Yes. So in quick answer, Hubert, in previous conference calls we've talked about big companies that have been looking at this, and there's -- it's the same as Play MPE, you know, they have their wish lists on what they want and what they need for it to go through a product. But yes, we have a lot of opportunities, a lot of people sniffing. But it wouldn't be appropriate for us to talk about it on this conference call. One of the things we talked about internally, I keep saying we're not doing forward-looking statements, we're hoping that by next conference call that we can do some forward-looking statements. And the reason is we'll have another three months of Clipstream behind us. In terms of Play MPE, the thing that I want to remind everybody of is that most of our costs are fixed, and every once and a while the fixed costs increase. So if we suddenly go into Russia and now we've got to have somebody that speaks Russian to do Russian support, and you've additional marketing costs. But in terms of the bulk of what our expenses are, which are servers and bandwidth and software development, those costs are all really fixed. So it doesn't take much on the Play MPE side to rapidly increase Play MPE profits. And what I want to remind everybody of is we haven't really done anything significant except, you know, small placements since 2007. And so for, you know, the last eight years, Play MPE has been paying the bills. And so what we're sitting on is what we think, I'm not going to use the word disruptive, I'm told I shouldn't use that, but we're sitting on something that can benefit a multi-billion-dollar business that's growing at a huge compound annual rates at least until 2020. It's all paid for. The R&D is all paid for. So, overlooking that going forward is sales and marketing. Dale and the team that Dale's built have not only experience with sales and marketing but they have experience of success where they've built big businesses that have worked. And so, you know, we have no data points. And so we can't really answer your question. But maybe three months from now we will be able to. And Dale kind of alluded to that.

Okay. And then -- and just in terms of the technology again, your product launch last week, is that --

Yes. So in terms of Clipstream, it's done. The bugs are all fixed. It works for most people. We didn't mention it, but we actually used our market research customers and we actually hired them as suppliers. We did a whole bunch of market research campaigns where we actually had anywhere from 100 to 400 people try to play our video. And so we're now dealing with some real concrete, hard data points with countries all over the world, with operating systems all over the place, and we have a real good idea of where we work and where we don't. And we're actually pleasantly surprised how well the technology works. Most people are either getting the top-quality, second-quality or, in worse case, third-quality, whereas a year ago people were getting as low as the fifth-quality. But going forward, there's always things that you can add. Ten years from now, if we're still doing this, we'll still be adding features. But what we're looking at adding between now and June, June is our next big release, is more, you know, more bells and whistles. The core is there. So I think Dale referred to it as [inaudible] I forget the phrase, Dale, that you used, but this is the minimum version that we could actually sell, and we're going to start selling it.

Okay. So I just want to -- yeah, that's what I was going to ask or certainly clear here. So, technology-wise, from what you guys done in terms of QNA, this product launch that you just did is sufficient for you to go in and sell into the small, medium -- I think you suggested 50 to 500 employees type customers. So that is sufficient platform for you to go and start selling as of today?

Yeah. One of the things I should talk about is Clipstream is an engine. And so if you think about your car engine, you can put it on a motorbike, you can put it in a lawnmower, you can put it in a car, there's all kinds of products that you can put the engine into. And the same applies for Clipstream. So we're pretty satisfied with the engine right now. It's kind of rock-solid. We've launched our first product which is the cloud and our second product which is the market research. We're looking at building out other products that Dale can probably speak to more with some of the stuff after the ad industry. But we're always going to be building. But in terms of the cloud, the cloud's going to be much better in June with the June release than it is now. But what we have now is very competitive and we think it's something that we can start selling.

Yeah. That's what I want to get to -- get at. Okay. And then maybe just lastly here for me. Maybe you can just touch on your capital situation. I think you sort of alluded, talked about that. But looking at cash balance here, you lost I guess $600,000, $700,000 here, in the bank here. You guys at free cash flows negative here of $200,000. So, how do we think of this, the capital flexibility here? Obviously you guys are going to continue investing in sales and marketing. I think there was a comment made about OpEx going down for the remainder of the year. I'm not sure if I heard that correctly. But how do I think about this on the expense side given that you guys still have outflow and given your balance sheet here, so, can you just kind of walk us through that?

Yeah, I could speak to that. So we have a pretty hard budget. One of the things that Dale's brought to the table is being kind of rock-solid upfront. So last year we set a real hard budget. And we actually have a spot [ph] that we're going to be hiring a few more people in development, we're going to be hiring a few more people to sales and marketing. There's a little bit of CapEx, but not much. So we are growing the expenses side. But we're also growing the revenue side. So both the Clipstream and Play MPE are growing. And so our balance sheet, we don't have any debt, we have access to lending from the bank. We also have a few hundred thousand that we have that mortgage in Australia. So I'm actually kind of comfortable with the balance sheet. But in terms of if we were to ever do a raise or anything, that would be a decision for the directors and that's not something that's being agreed to at this point.

Okay. All right, thanks. I'll pass the line.

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

Thank you. First, a tangential question. This week, a company called Digimarc announced they had an agreement with -- to use watermarking on music with SourceAudio, the leading music licensing search and distribution platform, blah, blah, blah, blah, to advance digital identification to enable music rights holders to verify the playing of their music. How does your watermarking, you may not be intimately aware of their watermarking, or how do you not compete with them?

Yes. So I'm quite familiar with Digimarc; it's a good company. They've got a real nice patent portfolio. In terms of the approach that they take to watermarking, it's a little bit different than ours. There's a ton of other watermarking companies out there besides us, and on day one, I would have just licensed somebody else's watermark if I thought it would have worked. But the record labels came to us and they said, "Well, you know, we want a watermark that you can't get rid of. We want a watermark that doesn't screw up the sound of the music." And so what all these other watermarking technologies do is they basically add hidden frequencies to the song. And so there's a concept that, think of it like an equalizer, you know, a music -- like a, you know what I mean, where you get little dials we can set up to different frequencies. If there's a really loud frequency, there's a belief that it creates a shadow where you can hide frequencies that human ears can't hear; the problem is that belief is not quite true. And people that have good ears can actually hear those hidden frequencies. And so what most watermarking does is actually kind of screw up the quality of the music because they're adding all of these frequencies that weren't there originally. The other problem is they're really easy to get rid of. All you have to do is do a low-pass filter that gets rid of all the small frequencies, and it makes music sound cleaner, and all the watermarks are gone. So we took a completely different approach where it's almost kind of like integration where we kind of looked at the -- if you think of the graph of being energy, we work directly with the raw energy of the audio file. And energy is kind of like volume and the human ear is not very sensitive to volume. And so what it means is we can change the shape of the energy of the music and it doesn’t affect the audio quality, nobody hears it. But what it also means is you can't filter it out. You can't get rid of it. And we tied that in with some really incredible -- really robust error correction. And so we've done -- we've done samples where they've basically down-sampled 90%, we're still able to recover the watermark. And so far we're 100%. And we've done head-to-head comparisons with some of the best audio engineers in the business, AB, and they can't tell which one's watermarked and which one isn't. So because it's so unique and it's different than every other watermarking technology, that's why we've been successful in getting so many patents. So I mentioned we got the Canadian patent last week, you know, we announced it last week. We've already got two U.S. patents, we've got international patents. We've got a third U.S. patent coming. And so far we haven't had the time or energy to go out and try and market it as its own product, but we think it's something really unique and really valuable as a standalone technology.

Okay. And then just getting on to the business, the general overview we are supposed to come away with about the -- and it's very comforting or feels very good to hear about all the changes in management and the upgrading of quality of systems and people, but the key obviously is revenues going forward and the revenues these people can generate, is that as we go through the coming 12 months, not we go through the current calendar year you can sort of pick your fiscal year, whatever else you want to look at, that we should see an acceleration -- this quarter your revenue was flattish, up slightly before currency translation. Before currency translation going forward, you would expect we should see a gradual ramp in the near term and an accelerating ramp as we go further into this year and to next year on the revenue side, without making a projection with any specificity?

So I'm going to let Dale answer this one, but before he answers, I want to say that last year, before we hired Dale, Fred and I and the directors, and the senior team, we looked at this and we said, "Damn, we got the widget, so what's the problem?" We've got widgets that are really valuable, what are we missing? What we miss -- what we're missing is that professional, experienced business development person that can take a family company, what I mean by family is not literally family, but call it 50 employees where everybody knows everybody, to that next level where we have an opportunity to be something really big here. And so Dale and the people that he's hiring have the discipline to make that happen. So that's where I'm coming from. So I'll let Dale answer in more detail here.

Actually I was going to keep the [inaudible] because I think the simple answer to your question is this --

Sorry, that's my dog.

Simple question to your answer is yes. I mean just to give you a little bit of background, I mean we may have had -- I think all of us would assume and see to be a bit of a slowish quarter, but at the same time, one of the decisions that we did make coming through the tail end of 2014 and 2015 is that we were going to shut the tap off of some of our selling and marketing activity because we just didn't have -- or I absolutely categorically was not comfortable with the product quality and some of our deliverables. So if you want to assume that we return that tap on and we have good plans and execution over the coming three to six months, then I think that your commentary around your expectation will be borne out over the next three, six, nine, twelve months.

Okay. Thank you.

Thank you. [Operator Instructions] We do have a question. Your next question comes from Andy Schutyapp [ph], private investor. Please go ahead.

Hi, gentlemen. Steve, just have a quick question. Previously Destiny has been trying to get a reseller in Japan to some extent. It's met with a little bit of positive, a little bit, you know, and then some negative. Is there any aspect to further that at all?

Yes. So we actually did have a reseller in Japan. We brought them on a few years ago. And I've done multiple trips there, as some of the other staff. They did a really good job of building the groundwork for us, but that relationship kind of broke up, not because of any animosity between the companies, they just went a different way. They're more into promotions. And so since then we've been marketing directly. On the radio side, we need to get the majors first. And so Universal is doing quite a bit in Japan. They're starting to see that market. We really need two or three majors to get independents excited about our radio. In Japan they've got a couple of big independents there that are like majors that we need to get onboard. But on the other side of it, we're coming at it almost kind of from the backend with this music blog service. So we think the music blog service is going to get us international really quickly because the names on that blog are all over the world. So, geographically, if you pick country bloggers, you're getting country bloggers from everywhere in the world. So in a lot of markets we're expecting to go directly. Japan I'm thinking is probably one where we will go directly. Other markets like Australia we'll be signing up resellers. Dale alluded to it. There's another market that we might do something short term. But we're going to -- with both Clipstream and MPE, we're going to do a dual strategy whereas, you know, sometimes we use partners and sometimes we go direct.

Okay, okay. That's fair. Now just on the G2 side, just as an investor, I mean I happen to read some message boards, whether or not they're accurate or BS is a different story, but is there -- does the technology work on every device or are there still some devices that are still being worked on which I think that you had spoken or discussed in this conference call that would be done by June where maybe full screen is an issue?

Yeah. Yeah, there are some weaknesses. Full screen, we don't have to wait till June. There's a standard for going full screen that we use. It doesn't work on some iOS, it doesn't work on some Android. So we have a workaround, I'm not going to give you date, but we're expecting the workaround pretty quick. It's one of the very top priorities. In terms of browsers, we're weak on some versions of Oracle -- or sorry -- of Opera, where we don't support IE8 or IE9. But we support way more than anybody else. When we did our surveys, we're looking at about 90% on first try getting access to the video, which is way more than you get with like H.264 for example.

I think one other aspect I just want to add to that, I mean there's obviously an ever-changing landscape when it comes to device support, especially obviously in the mobile world. I mean we always try to maximize our device coverage and our device play and everything else, but at the same time, like most organizations, the base level is kind of the 80/20 rule, is making sure that you've got 80% of device in the market coverage and you work hard to catch up on the other 20. And certainly that's something that we've adopted in the last few months to ensure that we perform very well on the 80% and then we will continue to be very diligent around the 20%. But as I'm sure you're fully aware, it's a very dynamic landscape that you have to often try to play catch-up with.

And further to that, if somebody comes out with something brand-new, and so let's say somebody comes out with a web browser for your refrigerator or for your car or something, as long as they support the HTML5 standards, we'll play fine. We only have problems when the device or the browser doesn't support the standards that we have to do some workarounds. But unlike all the other technologies, we're future-proof. So, think of H.264, you got an old H.264 chip in your phone, H.265 comes out, you're already kind of obsolete, whereas Clipstream will still work in the future as long as the browsers are compatible with the standards.

Okay. No, that's great. I appreciate that. Thank you very much.

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

Yeah. Again this is a bit longer call than normal, but I appreciate everybody's time. I know a lot of times people have questions that they're thinking of asking in the conference call, a little nervous, whatever. We completely appreciate and encourage investors to contact us. You can contact Fred, Dale or myself directly by email. If you want to set up a conference call, you would do that through Three Part Advisors. Three Part is also more than willing to answer questions. And I encourage people to reach out and not wait three months to get answers if there's something that you're wondering about. But anyway, on that note, I appreciate your time, and I thank you for the call, and look forward to talking to you in three months.

Ladies and gentlemen, this concludes your conference call today. We thank you for participating and ask that you please disconnect your lines.