FORWARD LOOKING STATEMENTS

The following discussion should be read in conjunction with the accompanying financial statements and notes thereto included within this Quarterly Report on Form 10-QSB. In addition to historical information, the information in this discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements involve risks and uncertainties, including statements regarding the Company's capital needs, business strategy and expectations. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements.

In some cases, you can identify forward-looking statements by terminology such as "may", "will", "should", "expect", "plan", "intend", "anticipate", "believe", estimate", "predict", "potential"or "continue", the negative of such terms or other comparable terminology. Actual events or results may differ materially. In evaluating these statements, you should consider various factors described in this Quarterly Report, including the risk factors accompanying this Quarterly Report, and, from time to time, in other reports the Company files with the Securities and Exchange Commission. These factors may cause the Company's actual results to differ materially from any forward-looking statement. The Company disclaims any obligation to publicly update these statements, or disclose any difference between its actual results and those reflected in these statements. The information constitutes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

OVERVIEW AND CORPORATE BACKGROUND

Destiny Media Technologies Inc. ("Destiny Media") is a holding company which owns 100% of the outstanding shares of Destiny Software Productions Inc. and MPE Distribution, Inc. The "Company", "Destiny"or "we"refers to the consolidated activities of all three companies.

Destiny develops software tools and provides services which enable content owners to distribute their digital media globally using the internet. All Destiny technologies are developed by internal staff, are proprietary and are owned by the company.

Content can be accessed in either a transient manner (TV, radio) or it can be owned locally by the consumer (DVD's, CD's). Destiny provides media owners both approaches over the internet through two product lines:

A) Clipstream ® Product Line

Clipstream® enables audio or video content to be "streamed"so that the audio or video plays instantly and automatically. This is analogous to TV or radio. Creating streaming video content with other technologies can be a complicated process and in many cases, users are required to purchase and maintain streaming servers. With Clipstream®, content owners simply encode the content into the Clipstream format, then upload to an existing website. Clipstream® is a standards based technology built around Sun Microsystem's Java engine. Because Java is included in most operating systems and browsers, Clipstream® encoded content will play instantly. This means that a much higher percentage of potential viewers successfully see the content by using Clipstream® than with other solutions. Clipstream® users are not required to download third party player software which can create instabilities and allow unsafe external access to the user's computer.

Clipstream® products include:

Clipstream®: embeds high fidelity audio and video on demand into web pages and emails
http://www.clipstream.com

Clipstream® Live: embeds live video stream into web pages and emails http://live.clipstream.com
Clipstream® IPTV: users can view TV and change channels remotely http://live.clipstream.com
Clipstream® Audiomail: converts audio left on a telephone answering machine into an audio clip
http://www.audio-mail.com
Clipstream® Survey Solutions: secure video questionnaires prevent piracy and feature high view rates
http://www.surveyclip.com
Clipstream® Advertising Solutions: TV style video commercials and rich media banner ads
http://www.clipstreamad.com
Clipstream® Server Solutions: servers to power hosted sites http://www.clipstreamserver.com
Radio Destiny: Software to broadcast internet radio from a home computer http://www.radiodestiny.com

B) MPE® Product Line

MPE® enables the secure download of audio or video to a user's computer. Content is protected from unauthorized distribution through two patent pending technologies. The first recognizes a user device as being unique, then encrypts the content to lock to that particular machine. The second patent pending technology embeds a digital trace or "watermark"into unlocked content, so that copies can be traced back to the owner of the original file.

MPE® products include:

Play MPE™: over 1,000 record labels use this service to deliver pre-release music and music videos to trusted recipients including radio station program directors, music buyers, record label staff and the media. Over 86,000 songs have been sent through this system. http://www.plaympe.com

MyPlayMPE: a self service system for smaller independents to distribute music and music videos through Play MPE™; http://www.myplaympe.com

PODDS: a complete software suite to set up to securely sell music online. Includes encoding modules, accounting modules and the player software. This software can be utilized in an OEM agreement to set up third party online music stores. In addition, Destiny has set up its own store to sell music to commercial users in Canada (DJ's, online jukeboxes, etc.) Destiny has an encoded catalog of 12,000 songs and album artwork under license from the four major record labels in Canada. http://www.podds.ca

Destiny Media Technologies, Inc. was incorporated in August 1998 under the laws of the State of Colorado.

We carry out our business operations through our wholly owned subsidiary, Destiny Software Productions Inc., a British Columbia company that was incorporated in 1992, and MPE Distribution, Inc. a Nevada company that was incorporated in 2007.

Our principal executive office is located at #800-570 Granville Street, Vancouver, British Columbia V6C 3P1. Our telephone number is (604) 609-7736 and our facsimile number is (604) 609-0611.

We are a publicly traded company. Our common stock trades on the OTC Bulletin board under the symbol "DSNY"and on various German exchanges (Frankfurt, Berlin, Stuttgart and Xetra) under the symbol "DME"935 410.

Our corporate website is located at http://www.dsny.com.

RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED MAY 31, 2008

Revenue

Overall revenue grew for the sixth consecutive quarter with the eleventh consecutive quarter of growing Play MPE™ system access fees.

Our revenues for the quarter increased to $369,098 which represents an increase of more than 42% over the same period in the prior year and exceeds our previous record, set only in the previous quarter of this year. The increase is driven by a 95% increase to Play MPE™ system access fees over the same period last year.

Approximately 20% of our revenues are derived from sales of our Clipstream® software which decreased for the nine months ended May 31, 2007 by 19%. We hope to increase sales of Clipstream® 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.

Effective December 31, 2007, we ceased to provide trial access to the Play MPE™ system for all independent record labels and promoters across all formats. Since that time, we have signed in excess of 100 contracts with independent labels and promoters representing significantly more labels and sub-labels. The interest in signing on has extended across formats and has extended beyond the United States.

Effective April 1, 2007, we extended and expanded our commercial agreement with Universal Music Group ("UMG") http://new.umusic.com/News.aspx?NewsId=629 to distribute their music in Canada, the United States and Mexico through the Play MPE™ system (http://www.plaympe.com). The agreement is effective from March 31, 2008 through March 31, 2010. The agreement includes monthly minimum revenue amounts which ensure that quarterly revenue from UMG will be at least as high as any previous quarter. 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.

On December 18, 2007, we signed a North America wide content distribution contract with EMI Music North America covering all sub-labels of the EMI group. Though the agreement with EMI Music North America was effective November 1, 2007, the full rollout internally amongst all labels of EMI Music North America remains underway and thus revenue associated with this contract represents less than 5% of our revenue for the quarter. We anticipate this revenue to grow significantly as they complete their transaction to digital delivery throughout the next several quarters.

During the quarter we were also very successful in signing agreements with several major independent labels such as Curb Records, Koch Records, Robbins Entertainment, Rounder Records, New West Records to name only a few.

Play MPE™ is the only system which delivers such recent high profiles releases for artists such as this season's American Idol winner David Cook, Mariah Carey, Madonna, Coldplay, Carrie Underwood, Timbaland, Rihanna, Chris Brown, Usher, Lil Wayne, Flo Rida, Alicia Keys, Fergie, Radiohead, Miley Cyrus, Jordin Sparks, 3 Doors Down, Taylor Swift, Maroon 5, Leona Lewis, Weezer and Sara Bareilles.

Our expansion into Europe now includes signed agreements with SONY BMG Sweden, Universal Music Sweden in addition to Warner Music Sweden which are all effective June 1, 2008 (after the current quarter).

We believe this represents a significant endorsement and another milestone in the road to establishing Play MPE™ as the global leader in the secure distribution of pre-release music to radio.

Overall expenditures have decreased by approximately 25% over the previous quarter as a result of a decrease one time listing application costs, a reduction in marketing and advertising spending, a reduction in salaries and wages, and a reduction in professional fees associated with various trademark applications. Expenditures during the quarter were also slightly lower than the same quarter in the previous year.

At the end of the second quarter of last year we positioned ourselves to market and support the Play MPE™ line of services internally. This required hiring additional staff in Play MPE™ management and support and additional software development staff. This shift began in March 2007 and has been the most significant impact to current expenditures. Our staffing has remained substantially the same since April 2007. As such, we have higher expenditure levels from the third quarter of fiscal 2007 through to the current quarter.

Additionally, we began targeted marketing and advertising campaigns to develop the market for Play MPE™ . There have been modest increases in technical costs like internet bandwidth, equipment etc. over this same time period. During the latter half of fiscal 2007 and throughout fiscal 2008, we have been servicing a fully operational Play MPE™ 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 MPE™ network. Management is currently reviewing ways to become more efficient and costs are not anticipated to grow in the near future.

General and administrative        May 31         May 31          $           %
                                   2008           2007        Change      Change
                                (9 months)     (9 months)

     Wages and benefits            312,260        259,994      52,266       20.1%
     Rent                           42,973         21,244      21,729      102.3%
     Telecommunications             14,041         10,267       3,774       36.8%
     Bad debt                        6,748         (1,316 )     8,064     (612.8% )
     Office and miscellaneous      186,459         42,849     143,610      335.2%
     Professional fees             275,904        156,618     119,286       76.2%

                                   838,385        489,656     348,729       71.2%

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 the increase in 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 listing application, investor relations fees, and foreign exchange losses.

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 sub-lease. The rent expense listed above is offset by our rental income which is included in "Other income"in the Statement of Operations.

Sales and marketing                May 31         May 31          $          %
                                    2008           2007        Change      Change
                                 (9 months)     (9 months)

     Wages and benefits             510,775        269,202     241,573      89.7%
     Rent                            67,460         20,051      47,409     236.4%
     Telecommunications              22,041          9,690      12,351     127.5%
     Meals and entertainment         17,805          2,512      15,293     608.8%
     Travel                          66,805         32,610      34,195     104.9%
     Advertising and marketing      560,034        556,002       4,032       0.7%

                                  1,244,920        890,067     354,853      39.9%

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 MPE™ distribution system. The increase in advertising and marketing is due primarily to a rise in marketing fees associated with our MPE® system. As a result of this increased marketing expenditure, adoption and usage of the Play MPE™ system increased significantly during the quarter.

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 7-16 -South by South West Conference, Austin, Texas.

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

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

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 Clipstream® 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         May 31         May 31          $           %
                                  2008           2007        Change      Change
                               (9 months)     (9 months)

     Wages and benefits           947,779        551,522     396,257       71.8%
     Rent                         130,433         45,065      85,368      189.4%
     Telecommunications            42,617         21,779      20,838       95.7%
     Repairs and maintenance            -          1,740      (1,740 )   (100.0% )

                                1,120,829        620,106     500,723       80.7%

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 is mainly due to increased staff.

Amortization

Amortization expense arose from fixed assets and other assets. Amortization decreased to $33,326 for the nine months ended May 31, 2008 from $43,591 for the nine months ended May 31, 2007, a decrease of $10,265 or 24%.

Other earnings and expenses

Other income increased by $73,499 for the nine months ended May 31, 2008 and reflects rent collected from sub-leases of our office space.

Interest income decreased to $15,451 for the nine months ended May 31, 2008 from $18,525 for the nine months ended May 31, 2007, a decrease of $3,074.

Interest expense increased to $18,480 for the nine months ended May 31, 2008 from $10,362 for the nine months ended May 31, 2007, an increase of $8,118.

Our loss during the quarter decreased by approximately 38% from the previous quarter (and approximately 21% from the same quarter in the prior year) due to the increase in revenue experienced during the quarter along with a 25% reduction in costs. Further reductions in the loss are anticipated.

Over the nine month period ended May 31, 2008, our loss from operations increased to $2,151,905 from $1,444,214 over the same period in the previous year. 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 MPE™ system as the industry standard across the globe. We anticipate expanding the use of our system by existing customers. Additionally we are in active contract negotiations with most major record labels in Europe, Asia and Australia.

Our revenue has increased significantly and we hope to continue this progress by way of increased revenue generating contracts for Play MPE™ , 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 $141,659 as at May 31, 2008 compared to cash of $1,215,183 as at August 31, 2007. We had a working capital deficiency of $185,032 as at May 31, 2008 compared to a working capital surplus of $1,339,722 as at August 31, 2007.

Working Capital

The decrease in our working capital is substantially attributed to the use of cash in operating activities of $1,542,910.

The change in non-cash working capital was $323,246 for the nine months ended May 31, 2008, primarily as a result of delaying payment on accounts payable and accrued liabilities. Our accounts payable and accrued liabilities increased to $618,036 as at May 31, 2008 from $325,442 at August 31, 2007, representing an increase of $292,594 or 90%.

CASHFLOWS
Operating

Net cash used in operating activities increased to $1,542,910 for the nine months ending May 31, 2008, compared to $921,791 for the nine months ended May 31, 2007.

Investing

Net cash used in investing activities decreased to $43,861 for purchasing equipment during the nine months ended May 31, 2008, as compared with $46,448 investing activities for the nine months ended May 31, 2007.

Financing

Net cash provided from financing activities decreased to $434,007 during the nine months ended May 31, 2008, as compared to $2,645,183 over the same period in the prior year.

During the nine months ended May 31, 2008, the Company completed a private placement which consisted of the issuance of 470,500 common shares for net cash proceeds of $258,775.The private placement also included the issuance of 235,250 warrants exercisable into common shares at $0.60 expiring November 30, 2009. Also, 86,400 stock options were exercised for cash proceeds of $41,200.

During the nine months ended May 31, 2008, we are aggressively implementing our business plan of transitioning new and existing customers ("record labels") to transactional based contracts through the full commercial deployment of its "Play MPE"™ system. We are pursuing transaction fee based agreements with other large record labels and have developed an "Indie Uploader"system for smaller labels available on www.myplaympe.com. During the nine months ended May 31, 2008, we continued to utilize cash in operations ($1,542,910 for the nine months ended May 31, 2008), however, we expect revenues, and cashflows, to improve for the remainder of fiscal 2008. Depending on our ability to grow sales and related cash flows, we may need to raise additional funds to complete our business plan due to our significant working capital decrease. Our goal is to obtain these funds through an optimal mix of internal and external financing opportunities including cash flows from operations, strategic partnerships and equity financings.

There are no assurances that we will be successful in achieving these goals. In view of these conditions, our ability of the Company to continue as a going concern is not certain. Our interim 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 interim financial statements.

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.

• 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.

• 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.