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

Revenue

Revenue continued to grow during our fourth quarter and was again the highest in the Company's history. Our fourth quarter revenue grew by more than 33% from our third quarter to approximately $490,000 on the strength of our twelfth straight quarter of revenue growth in our Play MPEä system, which grew by 35%. Revenue for both ClipstreamŽ and for MPEŽ increased during the quarter. Overall revenue has grown every quarter over the last two years and has grown by an average over that period of 15% per quarter.

The continued quarterly growth has lead to an annual growth of 80% over fiscal 2007 to $1,578,888 (2007 - $875,544). Revenue from our MPEŽ technology continues to improve with a large percentage jump of approximately 150% to approximately $1,250,000 in 2008 (from $507,000 in 2007). The growth in MPEŽ revenue is due primarily to the acceptance of our Play MPEŽ (www.plaympe.com) product in the United States and expansion into Europe. Play MPEŽ is the global leader which dominates an evolving business and leads the transformation of the way in which record labels distribute pre-release music. While the industry is adjusting from other distribution methods , whether that is the manufacturing and mailing of CD's or emailing lower quality and unsecured MP3's, on both the sender (record labels) and the receiving side (radio personnel, media reviewers etc), 2008 saw some significant and encouraging changes for our Play MPEŽ business which saw the beginnings of a change in the way the industry does prerelease distribution.

During our second quarter we signed a distribution agreement with EMI, our second major label contract (after Universal Music Group), for access to our Play MPEŽ service and began billing in January 2008.

Concurrently, we phased out all independent label trial distributions and began signing contracts with independent record labels, management companies and promoters. We continue to sign new contracts and we have seen growing revenue in this segment throughout the year. Our fourth quarter revenue from the independent group of customers represents approximately 24% of our total Play MPEŽ revenue and has grown approximately 400% over the fourth quarter of fiscal 2007. Our independent music label customers include numerous large major independent record labels, management companies and promoters such as Curb Records, Koch Entertainment, Robbins Entertainment, Rounder Records, New Line Records, Ultra Records, Shangri-la Music, Nettwork, Sub-pop, In2une Music, and CO5 Music to name only a small fraction of our clients. These clients represent a broad range of music formats, movie soundtracks and countless big name artists. Effective April 1, 2008, we extended and expanded our commercial agreement with Universal Music Group ("UMG") to distribute their music in Canada, the United States and Mexico through the Play MPEŽ system.. The press release issued by UMG announcing this agreement can be found at (http://new.umusic.com/News.aspx?NewsId=629). This agreement is effective from March 31, 2008 through March 31, 2010 and includes monthly minimum revenue amounts which increase in the second year of the agreement. The agreement grants the Company the exclusive right to distribute UMG's music on a company-wide basis and calls for UMG to encourage all of its controlled record labels to use the MPE system as their sole method for online distribution.

Our expansion into Europe resulted in our first commercial agreements in June with the signing of contracts with major label subsidiaries; Sony BMG Sweden, Universal Music Sweden and Warner Music Sweden which are all effective June 1, 2008. Warner Sweden was subsequently expanded to include Norway and Denmark.

Effective July 1, 2008, we reached an interim agreement with Warner Music Group for distribution access to our Play MPEŽ system. Effective November 1, 2008, this interim agreement and our agreements with other Warner Music Group subsidiaries outside the United States was replaced by a contract for worldwide distribution.

We have several agreements with subsidiaries of Sony BMG and several additional labels operate on a pay-as-you-go basis.

While this market development is still at an early stage, the value propositions of the Play MPEŽ system are both compelling and numerous and we have found we compete well against existing or traditional methods of dissemination as well as alternatives in the market. Our product provides significant advantages such as reducing the costs and lead times, and providing feedback on usage to the record labels. Further, the added benefit of being environmentally friendly appeals to all considered. We compete favorably against the distribution of MP3's by the superior sound quality of files in our system, the security, the reporting (feedback) and the network of recipients using our system. Play MPEŽ provides many significant advantages over competing solutions such superior sound quality, superior security, constructive business

While having the best product does not guarantee success, management believes that this, coupled with having the largest portion of the market, our progress in expanding globally, our partners, and value propositions mentioned above, will lead to continued growth in revenue for an extended period of time.

Our revenue model is based on invoicing on a price per "send". In October 2008, we reached new milestones having delivered more than 100,000 individual songs in more than 100 million transactions with over 23,000 users. We refer to a "transaction" as one song which is made available to one recipient. For revenue purposes, fees are based on "sends" as defined in their respective agreements, and could include a single transaction or group of transactions. A "send" is a song, bundle of songs, album, box set, or video, authorized to be sent to a particular recipient. The revenue associated with each "send" will be on a sliding scale depending on the size of the particular send. The system provides each label under contract to manage their own lists of recipients and directly encode and distribute their songs. This added ability provided to our clients substantially eliminates the strain on our own internal resources that can be seen in competing solutions and allows for high growth potential.

For customers where it is not appropriate to enter into a formal contract we provide access to the Play MPEŽ system through www.myplaympe.com.

The MPEŽ security engine also powers our online music store software suite (www.podds.ca) which provides for the remainder of MPEŽ revenue.

Approximately 19% of our revenues are derived from sales of our ClipstreamŽ software which declined from the previous year by 11%. This reflects a management strategy of focusing sales, marketing and support resources on MPEŽ until the new automated system for ClipstreamŽ is available. We hope to increase sales of ClipstreamŽ licenses through our hosted solution, which should be available later in this year, and other license opportunities.

Radio Destiny sales represent 2% of our total revenue.

Operating Expenses

Overview

As our technologies and products are developed and maintained in-house, the majority of our expenditures are on salaries and wages and associated expenses; office space, supplies and benefits. During the past year we expanded our spending on marketing, traveling, advertising and associated expenses with the global expansion of Play MPEŽ. While these costs will be incurred in the future, they are more discretionary in nature and will be incurred as appropriate. The remainder of our costs are professional fees and those generally associated with a public company. As a company with operations primarily conducted in Canada, the majority of our costs are incurred in Canadian dollars while the majority of our revenue is in US dollars. Thus, the results of operations are impacted to the extent they are not hedged by the rise and fall of the relative values of the US and Canadian currencies. During 2008 we saw the US dollar fall in value relative to the Canadian dollar and our costs have been adversely impacted for this reason. We anticipate an opposite impact for 2009.

Overall expenditures in the fourth quarter have decreased by 15% over the third quarter as we move to a more sustainable level of expenditures for the current stage of our business. Expenditures during the fourth quarter were also 22% lower than the same quarter in the previous year.

At the end of the second quarter of fiscal 2007 we positioned ourselves to market and support the Play MPEŽ line of services internally. This required hiring additional staff in Play MPEŽ management and support and additional software development staff. This shift began in March 2007 and has been the most significant impact to the increase in current expenditures in fiscal 2008.

Additionally, we began targeted marketing and advertising campaigns to develop the market for Play MPEŽ. There have been modest increases in technical costs like internet bandwidth, equipment etc. since that time. During the latter half of fiscal 2007 and throughout fiscal 2008, we have been servicing a fully operational Play MPEŽ system as our clients continued to use our system extensively. This allowed us to expand the use at both radio and record labels and to establish the Play MPEŽ network.

At the end of fiscal 2007 we moved offices due to a proposed rent increase and to accommodate anticipated growth in staff. We were able to secure approximately double the square footage for approximately the same cost as the proposed rent increase. The new space is sufficiently large and efficient to accommodate our growth while providing some space to sublease. The rent expense of $320,176 is offset by our sub-lease rental income of $111,741 which is included in "Other income'' in the Statement of Operations.

General and administrative       31-Aug       31-Aug        $           %
                                  2008         2007       Change      Change

     Wages and benefits           408,902     332,418      76,484      23.0%
     Rent                          59,893      27,066      32,827     121.3%
     Telecommunications            19,674      13,303       6,371      47.9%
     Bad debt                      54,094        (361 )    54,455         NM
     Office and miscellaneous     193,662      54,274     139,388     256.8%
     Professional fees            312,468     244,611      67,857      27.7%
                                1,048,693     671,311     377,382      56.2%

Our general and administrative expenses consist primarily of salaries and related personnel costs including overhead, professional fees, and other general office expenditures.

The increase in salaries and wages is due primarily to additional staff. The increase in professional fees is due to a greater volume of legal work associated with securities, litigation, contracts, patents and trademarks. Office and miscellaneous costs have increased as a result of a stock exchange listing application and investor relations fees.

Sales and marketing               31-Aug        31-Aug          $           %
                                   2008          2007         Change      Change

     Wages and benefits            639,408       414,584      224,824      54.2%
     Rent                           89,575        31,269       58,306     186.5%
     Telecommunications             29,424        15,368       14,056      91.5%
     Meals and entertainment        19,590         4,391       15,199     346.1%
     Travel                         84,805        65,906       18,899      28.7%
     Advertising and marketing     635,220       819,840     (184,620 )   (22.5% )
                                 1,498,022     1,351,358      146,664      10.9%

Sales and marketing expenses consist primarily of salaries and related personnel costs including overhead, sales commissions, advertising and promotional fees, and travel costs. The majority of this increase was due to additional staff to further the distribution and acceptance of the Play MPEŽ distribution system. We realized a reduction in advertising and marketing through reductions in expenses with various suppliers which were required to promote the Play MPEŽ business. During fiscal 2008 we focused our spending on magazine advertising and trade show attendance. This reflected a progression in the awareness of our Play MPEŽ system and the increased effectiveness of various viral marketing techniques which are designed to increase and maintain awareness of the system and reduced costs.

During the year, marketing efforts included attending various conventions to promote Play MPE™ as follows:

September 26-28, 2007: Exhibitor at the combined Radio & Records/National Association of Broadcasters Radio Show Convention in Charlotte, North Carolina (including several advertisements).

October 5-10, 2007: Billboard Dance Music Summit in Las Vegas, Nevada.

November 1, 2, 2007: The Hollywood Reporter, Billboard Film & TV Music Conference in Los Angeles, California.

November 15, 16, 2007: Radio & Record Christian Summit in Nashville, Tennessee.

November 28-30, 2007: Billboard R&B Hip Hop Conference in Atlanta, Georgia.

November 30-December 2, 2007: Billboard I Rock the Mic events in Miami, Florida.

November 28-30, 2007: Billboard R&B Hip Hop Conference in Atlanta, Georgia.

January 9, 2008: Billboard Digital Music Conference in Los Angeles, California.

March 4-8, 2008: Country Radio Broadcasters Seminar, Nashville, Tennessee.

March 18 -20, 2008: City of Hope, New York, New York.

March 26-29, 2008: 20th Annual Urban Network Convention, Newport Beach, California.

April 26-30, 2008: Musexpo in Los Angeles, California.

June 9-12, 2008: Dean went to Nashville, Tennessee

June 25-28, 2008: Conclave convention, Minneapolis, Minnesota

September 17-19, 2008: NAB Radio Show 2008, Austin, Texas

Our staff have toured extensively throughout the United States meeting with major market radio networks expanding the knowledge and acceptance of our Play MPE™ system. Greater detail on our marketing efforts can be found at http://www.dsny.com/news/ .

As part of our ClipstreamŽ marketing we also attended:

October 5, 2007: Counsel of American Survey Research Organization's (CASRO) 32nd Annual Conference in Scottsdale, Arizona.

October 29 -November 1, 2007: VON Fall Expo in Boston, Massachusetts.

Research and development        31-Aug       31-Aug        $           %
                                 2008         2007       Change      Change

     Wages and benefits        1,165,463     809,022     356,441      44.1%
     Rent                        170,708      65,871     104,837     159.2%
     Telecommunications           56,074      32,375      23,699      73.2%
     Repairs and maintenance           -       1,773           -          -
                               1,392,245     909,041     484,977      53.4%

Research and development costs consist primarily of salaries and related personnel costs including overhead and consulting fees with respect to product development and deployment. The increase reflects increased staffing used in the development of new and improved versions of our products as discussed in greater detail above.

Amortization

Amortization expense arose from fixed assets and other assets. Amortization decreased to $44,861 for the fiscal year ended August 31, 2008 from $62,902 for the fiscal year ended August 31, 2007, a decrease of $18,041 or 28.68% .

Other earnings and expenses

Interest and other expense increased to $24,945 for the fiscal year ended August 31, 2008 from $13,289 for an increase of $11,656 as a result of increase credit card service fees associated with our increase in sales. During the year we had sublease income of $111,741.

Our net loss for the fourth quarter dropped by 56% over the previous quarter to approximately $212,000 as we move to a level of expenditures appropriate for the current business plan and on the strength of continued growth in revenue. For the year, our loss from operations has increased to $2,404,933 from $2,119,068 for the year ended August 31, 2007, representing an increase of $285,865. Our net loss increased to $2,293,178 for the year ended August 31, 2008 from $2,096,974 for the year ended August 31, 2007, representing an increase of $196,204 or 9.36% . As outlined in greater detail above, the primary reason for the increase in loss is due to increase in staffing levels to service and market the Play MPEŽ system as the industry standard across the globe. We anticipate expanding the use of our system by existing customers, expanding globally and expanding our service offerings.

Our revenue has increased significantly and we hope to continue this progress by way of increased revenue generating contracts for Play MPEŽ, an expansion into Europe and Australia and more use by existing customers. However, as we have increased staff and marketing expenditures our losses have increased.

LIQUIDITY AND FINANCIAL CONDITION

We had cash of $91,369 as at August 31, 2008 compared to cash of $1,215,183 as at August 31, 2007. We had a working capital deficiency of $192,772 as at August 31, 2008 compared to a working capital surplus of $1,229,357 as at August 31, 2007.

Cash Flows

Net cash used in operating activities increased to $1,707,169 for the year ended August 31, 2008 compared to $1,642,770 for the year ended August 31, 2007, representing an increase of $64,400 or 4%. The increase is mainly due to increased staff costs associated with the expansion of the Play MPEä system. The cash used in operating activities was in part off-set by net cash provided by financing activities in the amount of $568,048 for the year ended August 31, 2008 compared to $2,630,996 for the year ended August 31, 2007. During the year we completed a successful private placement of $263,484 and received cash proceeds of $260,412 from the exercise of stock options.

We have financed our operations to date primarily through the sale of equity securities and borrowings from shareholders. When possible, we have issued common stock for services and debt settlement. We continued these financing activities through the year ended August 31, 2008 as our revenues to date have provided insufficient funding for our working capital requirements and the aggressive implementation of our business plan. We expect revenues, and cashflows, to improve into fiscal 2009. We are encouraged by our revenue growth in fiscal 2008 as our record label clients incorporate Play MPEŽ into their work flow.

Going Concern

To date, we have experienced recurring net losses (2008 - $2,293,178) and currently have a stockholders' deficiency of $132,609 and a working capital deficit of $192,772. During the year ended August 31, 2008, we have aggressively implemented our business plan of transitioning new and existing customers ("record labels") to transactional based contracts through the full commercial deployment of our "Play MPE"™ system. Our revenue has increased quarter over quarter, every quarter for the past two years, while expenditures required to service this revenue growth have curtailed significantly over the latter half of 2008. We anticipate continued growth in revenue and improvements to our cash flow.

We will need to raise additional funds to complete our business plan due to our significant working capital deficiency. Our goal is to obtain these funds through internal and external financing opportunities including cash flows from operations, strategic partnerships, equity financings and shareholder loans. There are no assurances that we will be successful in achieving these goals.

In view of these conditions, our ability to continue as a going concern is in doubt. Our financial statements do not give effect to any adjustments which would be necessary should we be unable to continue as a going concern and therefore be required to realize our assets and discharge our liabilities in other than the normal course of business and at amounts different from those reflected in the accompanying financial statements.

None.

CRITICAL ACCOUNTING POLICIES

We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States, and make estimates and assumptions that affect our reported amounts of assets, liabilities, revenue and expenses, and the related disclosures of contingent liabilities. We base our estimates on historical experience and other assumptions that we believe are reasonable in the circumstances. Actual results may differ from these estimates.

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

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

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

RECENT ACCOUNTING PRONOUNCEMENTS

In September 2006, FASB issued SFAS 157 'Fair Value Measurements'. This Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. This Statement applies under other accounting pronouncements that require or permit fair value measurements, the Board having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, this Statement does not require any new fair value measurements. However, for some entities, the application of this Statement will change current practice. This Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Company will adopt SFAS 157 effective September 1, 2008 and does not expect the adoption to have a material impact on the Company's financial statements.

In February 2007, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 159 "The Fair Value Option for Financial Assets and Financial Liabilities - including an amendment of FASB Statement No. 115" ("SFAS No. 159") which permits entities to choose to measure many financial instruments and certain other items at fair value. This statement is effective for fiscal periods beginning after November 15, 2007. The Company will adopt SFAS 157 effective September 1, 2008 and does not expect the adoption to have a material impact on the Company's financial statements.