UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q


QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934


For the quarterly period ended: February 28, 2015


TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE EXCHANGE ACT

For the transition period from ________ to ________


Commission file number: 333-85072

DBMM GROUP

DIGITAL BRAND MEDIA & MARKETING GROUP, INC.

WWW.DBMMGROUP.COM

(Exact name of small business issuer as specified in its charter)


747 Third Avenue, New York, NY 10017

(Address of principal executive offices)


Florida

State of incorporation

59-3666743

IRS Employer Identification No.


(646) 722-2706

(Issuer's telephone number, including area code)


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.                       x  Yes     o No



Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such Files).          x  Yes     o  No


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.



Large Accelerated Filer         o

Accelerated Filer                         o

Non-Accelerated Filer            o

Smaller Reporting Company      x


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)

Yes  o           No x

Indicate the number of shares outstanding of each of the Issuers classes of common stock, as of the latest practicable date:

Date

Shares Outstanding

April 3, 2015

4,314,974,767


 

Page 1 of 28

 


 

 

 

 

 

 

 

 



 

INDEX

 

Page No

PART I. FINANCIAL INFORMATION


 


Item 1. Financial Statements

3

Consolidated Financial Statements (Unaudited)


Balance Sheets

F-1

Statements of Operations

F-2

Statements of Cash Flows

F-3

 


Notes to Unaudited  Consolidated Financial Statements

6

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

12

Item 3. Quantitative and Qualitative Disclosures About Market Risk

26

Item 4. Controls and Procedures

26

 


PART II. OTHER INFORMATION


 


Item 1. Legal Proceedings

27

Item 1A. Risk Factors

27

Item 2. Unregistered Sale of Equity Securities and Use of Proceeds

27

Item 3. Defaults Upon Senior Securities

27

Item 4. Submission of Matters to a Vote of Security Holders

27

Item 5. Other Information

27

Item 6. Exhibits

27

SIGNATURES

28

Page 2 of 28

 

 


DIGITAL BRAND MEDIA & MARKETING GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS








February 28,


August 31,



2015


2014



(Unaudited)


 

ASSETS






CURRENT ASSETS





Cash


$

30,519


$

52,747

Accounts receivable, net


90,182


74,511

Prepaid expenses and other current assets


1,376


1,481

     Total current assets


122,077


128,739






Property and equipment - net


6,993


6,223






      TOTAL ASSETS


$

129,070


$

134,962






LIABILITIES AND STOCKHOLDERS' DEFICIT






CURRENT LIABILITIES





  Accounts payable and accrued expenses


$

383,893


$

377,765

  Accrued interest


94,942


65,152

  Accrued compensation


547,116


470,640

  Loans payable


240,800


218,300

  Derivative liability


349,416


305,207

  Convertible debentures, net


795,034


552,063






         TOTAL CURRENT LIABILITIES


$

2,411,201


$

1,989,127






STOCKHOLDERS' DEFICIT





  Preferred stock, Series 1, par value .001; authorized 2,000,000





      shares; 1,970,185 and 870,185 shares issued and outstanding


1,970 


870 

  Preferred stock, Series 2, par value .001; authorized 2,000,000





      shares; 0 and 0 shares issued and outstanding



  Common stock, par value .001; authorized 10,000,000,000





      shares; 4,314,974,767 and 3,613,790,986 shares issued





      and outstanding


4,314,974 


3,613,790 

  Additional paid in capital


5,445,116 


6,114,623 

  Other comprehensive loss


3,521 


(12,796)

  Accumulated deficit


(12,047,712)


(11,570,652)






      TOTAL STOCKHOLDERS' DEFICIT


$

(2,282,131)


$

(1,854,165)






      TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT


$

129,070 


$

134,962 






See Notes to Unaudited Consolidated Financial Statements

Page 3 of 28

F-1

 

 

 

 

 

 

 

 

 

 

 

 

 DIGITAL BRAND MEDIA & MARKETING GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS










For the Three Months  Ended February 28,


For the Six Months Ended February 28,


Unaudited






2015


2014


2015


2014









SALES

$

109,688 


$

109,763 


257,192 


$

212,439 









COST OF SALES

78,288 


53,833 


164,625 


104,542 









GROSS PROFIT

31,400 


55,930 


92,567 


107,897 









COSTS AND EXPENSES








General and administrative

40,160 


54,205 


136,975 


100,715 

Compensation expense

69,000 


93,643 


120,000 


289,628 

Legal and professional fees

44,231 


31,516 


131,468 


123,686 









TOTAL OPERATING EXPENSES

153,391 


179,364 


388,443 


514,029 









OPERATING LOSS

(121,991)


(123,434)


(295,876)


(406,132)









OTHER INCOME (EXPENSE)








Interest expense

(61,827)


(163,642)


(195,976)


(395,569)

Gain/ Loss on derivative liability


(442,279)


14,791 


(468,706)









TOTAL OTHER INCOME (EXPENSE)

(61,827)


(605,921)


(181,185)


(864,275)









NET LOSS

$

(183,818)


$

(729,355)


(477,061)


$

(1,270,407)









OTHER COMPREHENSIVE LOSS








Foreign exchange translation

(5,726)


117 


16,317 


(904)

COMPREHENSIVE LOSS

$

(189,544)


$

(729,238)


(460,744)


$

(1,271,311)









NET LOSS PER SHARE








   Basic and diluted

(0.00)


(0.00)


(0.00)


(0.00)









WEIGHTED AVERAGE NUMBER OF SHARES








   Basic and diluted

4,245,900,983 


472,665,592 


3,983,118,526 


409,901,142 









See Notes to Unaudited Consolidated Financial Statements

Page 4 of 28

F-2

 

 

 

DIGITAL BRAND MEDIA & MARKETING GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS






For the Six Months  Ended February 28,


Unaudited


2015


2014

CASH FLOWS FROM OPERATING ACTIVITIES




Net loss

$

(477,061)


$

(1,270,407)





Adjustments to reconcile net loss to net cash used in




 operating activities:




  Fair value of preferred shares issued for services

5,834 


144,985 

  Interested related to modification of conversion price of debt


47,029 

  Depreciation

2,235 


1,113 

  Amortization of debt discount

160,354 


296,443 

  Gain on derivative liability

(14,791)


468,706 





Changes in operating assets and liabilities:




  Accounts receivable

(15,671)


(41,576)

  Prepaid expenses and other current assets

105 


4,536 

  Accounts payable and accrued expenses

38,081 


33,286 

  Accrued interest

31,348 


49,373 

  Accrued compensation

76,476 


83,103 





NET CASH USED IN OPERATING ACTIVITIES

(193,090)


(183,409)





CASH FLOWS FROM INVESTING ACTIVITIES




  Purchase of equipment

(2,321)


(493)





NET CASH USED IN INVESTING ACTIVITIES

(2,321)


(493)





CASH FLOWS FROM FINANCING ACTIVITIES




  Bank overdraft


(23,150)

  Proceeds from convertible debentures

160,000 


27,000 

  Proceeds from loan payable

29,500 


237,600 





NET CASH PROVIDED BY FINANCING ACTIVITIES

189,500 


241,450 





NET INCREASE (DECREASE) IN CASH

(5,911)


57,548 





EFFECT OF VARIATION OF EXCHANGE RATE OF CASH




HELD IN FOREIGN CURRENCY

(16,317)


(904)





CASH - BEGINNING OF PERIOD

52,747 


18,015 





CASH - END OF PERIOD

$

30,519 


$

74,659 





Supplemental disclosures of cash flow information:




  Cash paid for interest

$


$





Non-cash investing and financing activities:








Conversion of convertible notes payable into common stock

$

18,383 


$

279,395 

Embedded conversion features

$


$

385,000 

Conversion of loan payable into common stock

$

7,000 


$

Conversion of Series 1 preferred stock into common stock

$

110 


$

26,956 

Conversion of accrued interest and fees to common stock

$

1,410 


$





See Notes to Unaudited Consolidated Financial Statements

Page 5 of 28

F-3



 



DIGITAL BRAND MEDIA & MARKETING GROUP, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 ORGANIZATION, BASIS OF PRESENTATION AND GOING CONCERN

Nature of Business and History of the Company

Digital Brand Media & Marketing Group, Inc. (f/k/a RTG Ventures, Inc.) is an OTC:PK listed company. The Company was organized under the laws of the State of Florida on September 29, 1998.

The Company also strategically focuses on developing the business of its wholly owned and revenue generating online marketing services company, Digital Clarity. With deep DNA in its operating market, blending the services of an experienced professional workforce leveraging a technology offering would position the company in a strong, forward looking structure. Digital Clarity operates in the growing area of digital marketing that helps companies make the most the digital economy focusing on areas such as Search Engine Marketing (Google, Yahoo! & Bing), Social Media (Twitter, Facebook & LinkedIn) and Internet Strategy Planning including Design, Analytics and Mobile Marketing.

During the last quarter of fiscal 2012, the Company entered into an agreement with BrandEntertain. Digital Brand Media & Marketing Group, Inc. (f/k/a RTG Ventures, Inc.) and Brand Entertain agreed to restructure their agreement retroactively to June 11, 2012. BrandEntertain is a partnership and there were certain issues with partnership financials which suggested the business combination be construed as a collaboration/cooperative venture, rather than an acquisition.  Upon analysis, one year following the initial transaction, the agreement was rescinded and no consideration was received by BrandEntertain.

On March 5, 2013, Digital Brand Media & Marketing Group, Inc. filed a Certificate of Amendment to its Articles of Incorporation to change its name from RTG Ventures, Inc. to Digital Brand Media & Marketing Group, Inc. In connection with the name change, the Companys trading symbol changed from RTGV to DBMM (the Symbol Change). The Amendment was effective as of March 20, 2013. The Name Change and Symbol Change have been reflected in the Companys ticker symbol as of April 8, 2013.

Also on March 5, 2013, a 100 to 1 reverse stock split went effective. All reference to Common Stock shares and per share amounts have been retroactively restated to effect the reverse stock split as if the transaction had taken place as of the beginning of the earliest period presented.

A summary of the business is: DBMM Group crafts, designs and executes digital marketing strategies across multiple ad platforms and social media networks for a broad array of clients to help each of them establish a uniform brand identity across the digital universe. The product offering is a unique value proposition of intelligent analytics provided by an experienced digital marketing and technology team. Therefore DBMM Group is a blend of data, strategy and creative execution.

Going Concern

The accompanying unaudited consolidated financial statements have been prepared on a going concern basis. The Company has an accumulated deficit of approximately $12 million and a working capital deficiency at February 28, 2015 of approximately $2.3 million. The Company has incurred a net loss of approximately $477,000 for the six months ended February 28, 2015. The Company's ability to continue as a going concern is dependent upon its ability to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due, and to generate profitable operations in the future. Management plans to continue to provide for its capital requirements by seeking long term financing which may be in the form of additional equity securities and debt. The outcome of these matters cannot be predicted at this time and there are no assurances that if achieved, the Company will have sufficient funds to execute its business plan or generate positive operating results.

These matters, among others, raise substantial doubt about the ability of the Company to continue as a going concern. These unaudited consolidated financial statements do not include any adjustments to the amounts and classification of assets and liabilities that may be necessary should the Company be unable to continue as a going concern.

Basis of Presentation

The interim consolidated financial statements of Digital Brand Media & Marketing Group, Inc. (we, us, our, DBMM or the Company) are unaudited and contain all adjustments (consisting primarily of normal recurring accruals) necessary for a fair statement of the results for the interim periods presented. Results for interim periods are not necessarily indicative of results to be expected for a full year or for previously reported periods due in part, but not limited to, availability of capital resources, the timing of acquisitions, and the sensitivity of our business to economic conditions.

The accompanying unaudited consolidated financial statements have been prepared, in accordance with accounting principles generally accepted in the United States (U.S. GAAP) and pursuant to the rules and regulations of the Securities and Exchange Commission (the SEC). The accompanying unaudited consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany transactions have been eliminated in consolidation. You should read these interim financial statements in conjunction with the consolidated financial statements and notes thereto included in the Companys Annual Report on Form 10-K/A for the year ended August 31, 2014.


Page 6 of 28



NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

Basis of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary RTG Ventures (Europe), Ltd. All significant inter-company transactions are eliminated.

Cash and Cash Equivalents

Cash and cash equivalents consist primarily of cash in banks. The Company considers cash equivalents to include all highly liquid investments with original maturities of three months or less to be cash equivalents.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are recorded at the invoiced amount and do not bear interest. Accounts receivable are presented net of allowance for doubtful accounts.

The Company has a policy of reserving for uncollectible accounts based on its best estimate of the amount of probable credit losses in its existing accounts receivable. The Company periodically reviews its accounts receivable to determine whether an allowance is necessary based on an analysis of past due accounts and other factors that may indicate that the realization of an account may be in doubt. Account balances deemed to be uncollectible are charged to the bad debt expense after all means of collection have been exhausted and the potential for recovery is considered remote. The Company did not recognize an allowance for doubtful accounts as of November 30 and August 31, 2014, respectively.

Property and Equipment

Property and equipment is stated at cost, less accumulated depreciation. Depreciation is provided using the straight-line method over the estimated useful lives of the related assets (primarily three to five years).

Revenue Recognition

The Company follows the guidance of ASC Topic 605, formerly, SAB 104 for revenue recognition. In general, the Company records revenue when persuasive evidence of an arrangement exists, services have been rendered, the sales price to the customer is fixed or determinable, and collectability is reasonably assured.

Revenues from services are recognized when the services are performed, evidence of an arrangement exists, the fee is fixed and determinable and collectability is probable.

 

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Reclassifications

Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation.

 

Page 7 of 28

 

Income Taxes

The Company accounts for income taxes utilizing the liability method of accounting. Under the liability method, deferred taxes are determined based on differences between financial statement and tax bases of assets and liabilities at enacted tax rates in effect in years in which differences are expected to reverse. Valuation allowances are established, when necessary, to reduce deferred tax assets to amounts that are expected to be realized.

Earnings (loss) per common share

The Company utilizes the guidance per FASB Codification ASC 260 "Earnings Per Share". Basic earnings per share is calculated on the weighted effect of all common shares issued and outstanding, and is calculated by dividing net income available to common stockholders by the weighted average shares outstanding during the period. Diluted earnings per share, which is calculated by dividing net income available to common stockholders by the weighted average number of common shares used in the basic earnings per share calculation, plus the number of common shares that would be issued assuming conversion of all potentially dilutive securities outstanding, is not presented separately as it is anti-dilutive. Such securities have been excluded from per share computations as of February 28, 2015 and 2014.  The anti-dilutive securities amounted to 5,879,735,616 and 60,607,503 as of February 28, 2015 and August 31, 2014.

Derivative Liabilities

The Company assessed the classification of its derivative financial instruments as of February 28, 2015, which consist of convertible instruments and rights to shares of the Companys common stock, and determined that such derivatives meet the criteria for liability classification under ASC 815.

ASC 815 generally provides three criteria that, if met, require companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments. These three criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument subject to the requirements of ASC 815. ASC 815 also provides an exception to this rule when the host instrument is deemed to be conventional, as described.

During the six-month period ended February 28, 2015 and 2014, the Company had notes payable outstanding in which the conversion rate was variable and undeterminable. Accordingly, the Company has recognized a derivative liability in connection with such instruments. The Company uses judgment in determining the fair value of derivative liabilities at the date of issuance at every balance sheet thereafter and in determining which valuation is most appropriate for the instrument (e.g., Binomial method), the expected volatility, the implied risk free interest rate, as well as the expected dividend rate.

Fair Value of Financial Instruments

Effective January 1, 2008, the Company adopted FASB ASC 820-Fair Value Measurements and Disclosures, or ASC 820, for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition for fair value to be applied to existing generally accepted accounting principles that require the use of fair value measurements establishes a framework for measuring fair value and expands disclosure about such fair value measurements. The adoption of ASC 820 did not have an impact on the Companys financial position or operating results, but did expand certain disclosures.

ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below:

Level 1

Observable inputs such as quoted market prices in active markets for identical assets or liabilities

Level 2

Observable market-based inputs or unobservable inputs that are corroborated by market data

Level 3

Unobservable inputs for which there is little or no market data, which require the use of the reporting entitys own assumptions.

The Company did not have any Level 2 or Level 3 assets or liabilities as of February 28, 2015, with the exception of its derivative liability which are valued based on Level 3 inputs.


Cash is considered to be highly liquid and easily tradable as of February 28, 2015 and therefore classified as Level 1 within our fair value hierarchy.

In addition, FASB ASC 825-10-25 Fair Value Option, or ASC 825-10-25, was effective for January 1, 2008. ASC 825-10-25 expands opportunities to use fair value measurements in financial reporting and permits entities to choose to measure many financial instruments and certain other items at fair value. The Company did not elect the fair value options for any of its qualifying financial instruments.

 

Page 8 of 28

Convertible Instruments

The Company evaluates and accounts for conversion options embedded in its convertible instruments in accordance with professional standards for Accounting for Derivative Instruments and Hedging Activities.

Professional standards generally provides three criteria that, if met, require companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments.

These three criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.  Professional standards also provide an exception to this rule when the host instrument is deemed to be conventional as defined under professional standards as The Meaning of Conventional Convertible Debt Instrument.

The Company accounts for convertible instruments (when it has determined that the embedded conversion options should not be bifurcated from their host instruments) in accordance with professional standards when Accounting for Convertible Securities with Beneficial Conversion Features, as those professional standards pertain to Certain Convertible Instruments. Accordingly, the Company records, when necessary, discounts to Convertible Debentures for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their earliest date of redemption. The Company also records when necessary deemed dividends for the intrinsic value of conversion options embedded in preferred shares based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note.

ASC 815-40 provides that, among other things, generally, if an event is not within the entitys control could or require net cash settlement, then the contract shall be classified as an asset or a liability.

Stock Based Compensation

We account for the grant of stock options and restricted stock awards to employees in accordance with ASC 718, Compensation-Stock Compensation. ASC 718 requires companies to recognize in the statement of operations the grant-date fair value of stock options and other equity based compensation.

Foreign Currency Translation

Assets and liabilities of subsidiaries operating in foreign countries are translated into U.S. dollars using both the exchange rate in effect at the balance sheet date or historical rate, as applicable. Results of operations are translated using the average exchange rates prevailing throughout the year. The effects of exchange rate fluctuations on translating foreign currency assets and liabilities into U.S. dollars are included in a separate component of stockholders equity (accumulated other comprehensive loss), while gains and losses resulting from foreign currency transactions are included in operations.

Business Combinations

In accordance with Accounting Standards Codification 805, "Business Combinations" ("ASC 805") the Company records acquisitions under the purchase method of accounting, under which the acquisition purchase price is allocated to the assets acquired and liabilities assumed based upon their respective fair values. The Company utilizes management estimates and, in some instances, may require an independent third-party valuation firm to assist in determining the fair values of assets acquired, liabilities assumed and contingent consideration granted. Such estimates and valuations require us to make significant assumptions, including projections of future events and operating performance.

Recently Issued Accounting Pronouncements

A variety of accounting standards have been issued or proposed by FASB that do not require adoption until a future date. We regularly review all new pronouncements that have been issued since the filing of our Form 10-K for the six-month period ended February 28, 2015 to determine their impact, if any, on our financial statements. The Company does not expect the adoption of any of these standards to have a material impact once adopted.



Page 9 of 28




NOTE 3 - PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:


February 28, 2015


August 31, 2014


(Unaudited)



Estimated life:     

3 to 5 years




Computer and office equipment   

$

17,783 


$

15,462 

Less: Accumulated depreciation   

(10,790)


(9,239)

 

$

6,993 


$

6,223 


Depreciation expense amounted to $ 2,235 and $1,113 for the six-month periods ended February 28, 2015 and 2014, respectively.


NOTE 4 - LOANS PAYABLE


February 28, 2015


August 31, 2014


(Unaudited)



Loans payable

$240,800


$218,300

   

Loans payable

The loans payable are due on demand, are unsecured, and are non-interest bearing.

During the six-month period ended February 28, 2015 and 2014, the Company modified terms with existing or new lenders for loans payable aggregating $0 and $385,000, respectively.  Substantially all modifications consist in adding conversion terms to such notes.

During the six-month period ended February 28, 2015, the Company issued 200,000,000 shares of its common stock, to satisfy principal obligations aggregating $7,000.

During the six-month period ended February 28, 2015 and 2014, the Company generated proceeds of $29,500 and $252,600 from loans payable, respectively.

 

NOTE 5 CONVERTIBLE DEBENTURES

At February 28, 2015 and August 31, 2014 convertible debentures consisted of the following:


February 28, 2015


August 31, 2014


(Unaudited)



Convertible Debentures

$

830,368 


$

688,751 

Unamortized debt discount

(35,334)


(136,688)

Total

$

795,034 


$

552,063 


The Convertible Debentures mature through May 2015, some of which are payable on demand and bear interest at ranges between 6% and 15%.  The convertible promissory notes are convertible at ratios varying between 50 and 55% of the closing price at the date of conversion through, at its most favorable terms for the holders, the average of the three lowest closing bids for a period of 5 days prior to conversion.  As of February 28, 2015, an aggregate of $482,571 of convertible promissory notes have matured.

During the six-month period ended February 28, 2015 and 2014, the Company modified terms with existing or new lenders for loans payable aggregating $0 and $385,000, respectively.  Substantially all modifications consist in adding conversion terms to such notes.

During the six-month period ended February 28, 2015 and 2014, the Company issued 662,982,983 and 622,531,098 shares of its common stock, respectively, to satisfy its obligations under principal repayments aggregating $18,383 and $279,395, respectively. Additionally, the Company issued 38,200,798 shares of its common stock to satisfy interest pursuant to certain convertible promissory notes during the six-month period ended February 28, 2015.  The fair value of the shares of common stock amounted to $1,411 during such period and has been recorded as interest expense.

During the six-month period ended February 28, 2015 and 2014, the Company generated proceeds of $160,000 and $27,000, respectively, from the issuance of convertible promissory notes payable.



Page 10 of 28

 



NOTE 6 - DERIVATIVE LIABILITIES

Changes in the derivative liabilities during the six-month periods ended February 28, 2015 and 2014 are as follows:

Balance at August 31, 2014

$305,207 

Embedded conversion features at issuance

    59,000 

Changes in fair value of derivative liabilities

   (14,791)

Balance, February 28, 2015

 $349,416




NOTE 7 COMMON STOCK AND PREFERRED STOCK

Preferred Stock- Series 1 and 2

The designation of the Preferred Stock- Series 1 is as follows:  Authorized 2,000,000 shares, par value of $0.001.  One share of the Companys Preferred Stock- Series is convertible into 53.04 shares of the Companys common stock, at the holders option and with the Companys acquiescence, and has three votes per share.  

The designation of the Preferred Stock- Series 2 is as follows:  Authorized 2,000,000 shares, par value of $0.001.  One share of the Companys Preferred Stock- Series is convertible into one share of the Companys common stock, at the holders option and with the Companys acquiescence, and has no voting rights.  

During July 2014, the Company increased its number of authorized shares of common stock to 10,000,000,000. Its preferred stock remains at 4,000,000, authorized shares both with $0.001 par value.

On March 5, 2013, Digital Brand Media & Marketing Group, Inc. received approval from the Financial Industry Regulatory Authority (FINRA) for its 100 to 1 reverse stock split. All shares have been retroactively adjusted to reflect the 100 to 1 reverse stock split.

During the year ended August 31, 2014, and 2013, the Company issued 3,198,858,428 and 2,027,975 shares, respectively, of its common stock to satisfy its obligations under conversion features of convertible debt aggregating $484,145 and $67,022, respectively.  Additionally, the Company issued 349,906,974 shares of its common stock to satisfy interest pursuant to certain convertible promissory notes.  The fair value of the shares of common stock amounted to $78,404, which has been recorded as interest expense.

In November 2012, 41,995 shares of Preferred Stock-Series 1 Designation were issued for an accrual to satisfy a debt. These shares are valued at $2,673.

In November 2012, 433,637 shares of Preferred Stock-Series 1 Designation were issued to four officers of the Company. These shares are valued at $27,600.

In October 2013, 385,000 shares of Preferred Stock-Series 1 Designation were issued to three officers of the Company. These shares are valued at $144,985, based on the trading price of the common shares into which the preferred shares are convertible. This amount was recorded as compensation expense.

In October 2014, 1,100,000 shares of Preferred Stock Series 1 Designation were issued to three officers of the Company. These shares are convertible at a ratio of 1 preferred share to 53.04 common shares. These shares are valued at $5,834 based on the trading price of the common shares of $0.0001 into which the preferred shares are convertible. This amount was recorded as compensation expense.


NOTE 8 - FOREIGN OPERATIONS

As of February 28, 2015, all of our revenues and a majority of our assets are associated with subsidiaries located in the United Kingdom. Assets at February 28, 2015 and revenues for the six-month period ended February 28, 2015 were as follows:

  

United States

Great Britain

Total

Revenues

 -

$257,192

 $257,192

Total revenues

 -

 $257,192

 $257,192

Identifiable assets at February 28, 2015

    $4,083

 $124,987

 $129,070


As of August 31, 2014, all of our revenues and a majority of our assets are associated with subsidiaries located in the United Kingdom. Assets at August 31, 2014 and revenues for the year ended August 31, 2014 were as follows:

  

United States

Great Britain

Total

Revenues

-

 $417,607

 $417,607

Total revenues

-

 $417,607

 $417,607

Identifiable assets at August 31, 2014

$4,564

 $130,398

 $134,962


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Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

Readers are cautioned that certain statements contained herein are forward-looking statements and should be read in conjunction with our disclosures under the heading "Forward-Looking Statements" above. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. This discussion also should be read in conjunction with the notes to our consolidated financial statements contained in Item 8. "Financial Statements and Supplementary Data" of this Report.

Background

DBMM is an OTCPK listed company. Subsequent to the close of the fiscal year 2011 following substantial investment, the Company conducted a structural review of its total product and services offering. The review was carried out by the Board of Directors. The result was to bring technology development being outsourced directly into the Company to steward on a daily basis and any activities which were not revenue generating in the near term were eliminated. It was unanimously agreed that the company would adopt a lean approach that focused on the relationships and partnerships. To that end, the Company has added significant partnerships through Letters of Intent, Joint Ventures and various collaborative structures involving revenue sharing arrangements.

Operations Overview/Outlook

Operationally, 2015 has been important in continuing the direction of the Company and steering it toward a scaled, sustainable growth plan. The model developed in fiscal 2014 has been reinforced and is differentiating to clients, therefore, the model will continue into fiscal 2015.

Entertainment/Fashion/Sports/Automotive/Ecommerce Solutions

DBMM is taking its strengths including its relationships to build its business focus on a wide array of industries. The Company, under very competitive global market conditions and growing development needs, continues to identify partnership opportunities. Utilizing successful models with existing clients, the outlook remains strong for the future.

The heart of the business is the marketing consultancy. Understanding each client and developing the model to individualize the outlook has been essential. This kind of close relationship with the client resulted in Digital Clarity being considered a close professional advisor.

In fiscal year 2015, the Company will continue to focus on the positive results of the last year and use that model to expand geographic reach with existing and new partners.

 

Digital Marketing Services

As forecast, there is exponential growth in the adoption of Social Media as communication, marketing and engagement avenues. An acceptance of change is driving revenue. The future growth in mobile search is one of the fastest growing ancillary businesses. It was clear that the direction, talent and growth of the Company is in its human capital and outside relationships which must be proactive in order to differentiate itself from competition

The clear opportunity is at the foundation of the Company, namely the need to expedite and encourage development in the digital marketing services sector. The marketing services product is labor intensive and thus the Company must jumpstart the growth by significant capital infusion in fiscal year 2015 to grow simultaneously in multiple geographies.

As a foundation, the financial review showed that Digital Clarity continued to be revenue generating and remained cash flow positive.

Key Milestones

DBMM has established a strong foundation to make inroads into established and emerging markets. In the latter part of 2014, American Green (OTC:PK:ERBB) became a new client as a market leader as one of the fastest-growing companies in the marijuana industry.

American Green was the first publicly-traded company medical marijuana dispensary brand in the world and currently has over 50,000 shareholders. It is now embarking on the strategy to become a major participant in the expanding medical and adult use cannabis market on a national scale.

American Green continues to offer retailing, branding and cultivating strategies in conjunction with its ongoing business with various licensed medical marijuana medical and retail dispensaries. The company has consulted with dispensary operators in California, Colorado, Washington and Arizona. Being located in Arizona, a very effectively regulated medical marijuana (MMJ) market, American Green is focusing on providing goods and services that operators of licensed non-profit MMJ dispensaries in regulated environments require. This strategy will allow American Green to further penetrate the market and to leverage its existing brands, products and services. As a result, the ZaZZZ network is being adapted to sell non MMJ products to customers of MMJ dispensaries; lines of non-MMJ, hemp-based products are in development; online communities, products and services are being created; and consulting opportunities involving compliance, business development and financial services have been identified.

American Green Clothing: The Company is currently selling clothing and accessories under the American Green brand. The Company is working toward developing a full line of clothing and accessories under the American Green brand for traditional brick and mortar sales, as well as through ZaZZZ and MMJ dispensary networks. All products are available through web-based purchase at www.AmericanGreen.com.

Another example is representative of the diversity of client base, DBMM's approach using a client's analytics, and executing an individualized model to increase ROI as the prime objective.


 

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Tutti Dynamics developed an interactive media player that enables audiences to engage with the world's masters in the arts and sciences. Tutti represents the future of next-generation media. More information about Tutti's immersive media player can be found at www.tuttidynamics.com.

In 2013, DBMM identified a collaboration with Video Media Holdings, Inc. (VMS) to become its reseller in Europe with other revenue streams being explored as well. The value proposition for VMS strengthens DBMM's offering to its clients. VMS Holdings, Inc. develops a mobile application for sharing videos. Its mobile application allows companies and users to send and receive video content to and from a mobile phone; subscribe for a favorite celebrity, actor, TV channel, or team and get video updates; and create your own channel and become a broadcaster, as well as serves as a tool for mobile marketing and sales. The company's mobile application is available for Android, BlackBerry, iPhone, and Symbian devices. It distributes its mobile application through distributors, and mobile device and application stores in Africa, Europe, Asia, North America, and South Africa. It serves mobile operators and media companies, government organizations and law enforcement agencies, premium content providers and retailers, sports clubs, and celebrities worldwide.

DBMM finalized an agreement with New York based digital marketing automation platform, BRANDmini LLC, to strategically broaden BRANDmini's delivery of its Saas (Software as a Service) application; primarily looking after those larger clients seeking to leverage a more bespoke digital marketing service abroad. BRANDmini is a transactional marketing automation platform for creating, serving, and measuring marketing campaigns across multiple online channels and mobile devices. Our platform is integrated with leading ad networks, publishers, mobile platforms and social sites. BRANDmini's innovative In-Page technology empowers brands to engage and transact with consumers while they are browsing. Now anyone can build branded transactional ads, gadgets, social landing pages and run campaigns anywhere your customers are.

These client relationships illustrate the execution of DBMM's strategic direction which strengthens then the Company through its revenue-sharing strategic alliances resulting in additional revenue streams.

Many clients such as Mercedes Benz, UK, Wharfside and Duvet & Pillow Warehouse have experienced increases in revenue and increases in conversion as a result of Digital Clarity's strategic direction. These case studies are excellent resources for new clients and illustrate the mantra of "ROI is our DNA".

DBMMs Digital Clarity Selected to Conduct Survey Results Reported by BBC & Huffington Post Huffington Post Article Entitled: Internet Addiction Disorder Yes, Its a Real Thing. (http://huff.to/1rSyzSX)


 

Digital Clarity Named in Top Ten Best Social Media Marketing Firms in the UK for 2013

Topseos.co.uk , an independent research firm, revealed the listing of the top 10 best social media marketing agencies in the UK based on their strength and competitive advantage. Social media marketing companies are put through a methodical analysis to ensure the rankings contain the absolute best companies the search marketing industry has to offer.

Digital Clarity was awarded a spot in the top 10. The process for researching and declaring social media marketing agencies in the UK is based on the use of a set of analysis criteria and learning more about their solutions and their communications with their customers through references. The teso.co.uk independent analysis team communicates directly with the clients in order to inquire about the solutions and achievement from the clients perspective.


Key Differentiators

DBMM has stablished a strong foundations by continuing to streamline operations and assessing activities on a cost benefit basis while developing new client relationships and revenue streams to be a differentiating digital marketing and technology provider. This focus has allowed the Company to enhance brand value for its clients. 2015 will continue to be about growth and outreach utilizing five key differentiators:

1. Brand enhancement

2. Search

PPC

SEO

3. Design

 

4. Social media

 

5. Analytics

 

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1.  STRENGTHS: BRAND ENHANCEMENT 

Digital Clarity is an evolving Strategic Brand Consultancy that crafts, designs and executes digital marketing strategies across multiple ad platforms and social media networks for a broad array of clients to help each of them establish a uniform brand identity across the digital universe.

As the online world becomes more sophisticated and complex, Digital Clarity concentrates on core areas that help business navigate through an often confusing mosaic choice of systems and platforms. Focusing on the areas of Search, Social Media and Design, all of Digital Clarity work is underpinned by a unique understanding of Analytics. This aspect is often a missed piece of the jigsaw that makes up the digital marketing mix. The five differentiators, presented to clients as an integrated model, result in being selected over competition in the majority of presentations.



CORE AREAS:

[f201510qfebruary28040715001.jpg]

 


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2.  STRENGTHS: SEARCH:

PPC

Definition:

PPC stands for Pay-per-Click Advertising. It is an abbreviation for a number of search advertising platforms, of which the mostly widely used is Google AdWords. PPC is one of the most effective online marketing services available, generating instant activity and instant results for new or existing websites.

The real beauty of PPC is that you only pay for an ad when a potential customer clicks on it, meaning you can bring people to your site for mere pennies while ensuring your traffic is relevant and targeted at people who are looking for your service or product. Additionally, PPC is highly measurable and can be closely monitored, allowing your business to keep a close eye on return-on-investment (ROI).

The major platforms used for PPC are:

·

Google AdWords (Global)

·

Microsoft Bing (Yahoo & Bing)

·

Yandex (Russia)

·

Baidu (China)

·

AdWords Audit

Key Areas of Service:

·

Budget Management

·

Keyword Research

·

Conversion Rate Optimization

·

Bid Optimization

·

Dedicated PPC Management

As an elite consultancy, Digital Clarity has extensive experience of running PPC management and implementation ranging from small independent businesses with one or two ad campaigns to multi-national ecommerce websites which utilize hundreds of ads and thousands of keywords. Whatever the nature and size of the account, Digital Clarity understands the importance of utilizing a programmatic, well-defined approach:

Strategy. By understanding your business, demographics and audience, Digital Clarity can help to make sure that campaigns hit the ground running from day one.

Implementation. Digital Clarity uses experience to put in place the best structure, keywords, ad copy and bidding strategies to maximize the effectiveness of your account.

Optimization. Digital Clarity rigorously interrogates and checks our client accounts to ensure optimal performance, with regular reviews of all aspects of your campaigns.

Reporting. By defining and explaining the numbers of your account, Digital Clarity provides the information needed to steer things in the right direction for business.

 

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2.  STRENGTHS: SEARCH:

SEO

Definition:

When customers look for service on Google or another search engine, they might find a client companys business or they might find a competitor. SEO (Search Engine Optimization) is the process by which you can help ensure that your site appears first in the rankings. These rankings are determined by the search engines algorithms: programs which trawl the internet indexing details about each site, in order to deliver relevant results when people search. If your website does not perform well according to the algorithms criteria, your rank will be lower, and people will not be able to find your site; this is what makes partnering with the right SEO agency such a crucial part of your digital marketing activity.

Digital Clarity is at the vanguard of this sector, having implemented countless SEO plans for a broad array of clients in a number of different industries. These plans included:

·

Onsite Technical Audit

·

Quality Content Creation

·

Meta, Tags & Technical Optimization

·

Website Structure

·

Use of Optimum Keywords

·

Link Building & Referrals

·

Social Media Integration

Search Algorithms

SEO strategy is changing all the time, and the rate of change has picked up dramatically in the last 12-18 months. Changes to the Google algorithm in particular have shifted the landscape of search optimization, including named updates such as Penguin, Panda, and Hummingbird. These changes can have huge consequences: well-performing sites can lose visibility and poor performers can gain it, literally overnight. It is therefore absolutely essentially that a websites SEO is closely curated and managed, making sure one is always ahead of the curve.

SEO Can Deliver Results for Business

By applying website optimization to your site for better search engine performance, you will gain more traffic and brand recognition as more and more people are able to find you online. This in turn allows more sales and conversions, leading to higher profits and better return on your digital investment. Contact our team today to find out how we can improve your performance.

[f201510qfebruary28040715002.jpg]

 

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3.  STRENGTHS: DESIGN:

Definition:

Web design encompasses many different skills and disciplines in the production and maintenance of websites.

A site can be the most functional, user-friendly and search-optimized in the world; if people don't like the look of it, they will bounce off your page and never come back.  Making sure a site looks good and that it reflects your brand company identity is the difference between success and failure, and having a good web design agency on your side is more important than ever.

Web Design Services:

·

e-Commerce

·

Device Compatibility

·

Web Development

·

Mobile Compatibility

·

Process & Planning

·

Content Management System (CMS)

·

Version Control

Changes in the Last Few Years

With the rise of mobile devices and tablets, the game has changed. Its no longer enough for your site to look great on a PC; it has to be able to scale from a widescreen view of a modern flat screen monitor to the narrow portrait of an Android mobile screen; it has to spin and rotate with the movements of an iPad. This aspect of website design is called responsiveness, and in the last few years has gone from being nice to have to absolutely essential, necessitating a complete website redesign in many cases. Digital Clarity have years of experience in building functional, beautiful websites which work across all devices.

Digital Claritys Unique Proposition

Specialist creative agencies are great at making things pretty and applying their own methodologies and ideas to client websites. Digital Clarity takes a different approach: combining a clients ideas, vision and brand identity with our experience and expertise to produce sites which perfectly blend form and functionality. Additionally, Digital Clarity does not design in a bubble; the sites built integrate seamlessly with PPC campaigns, SEO activity, and are fully optimized to perform as part of a greater whole. Digital Clarity does not just build websites; the companys role as a website design agency is part of a holistic approach which will help achieve the overall business goal.

4.  STRENGTHS: SOCIAL MEDIA:

Definition

Social media refers to sites where users interact with each other on a large scale, including Facebook, Twitter, LinkedIn, Pinterest, Imgur, Tumblr and many others. Begun as a social phenomenon, the growth in use of social media sites over the past decade has made it impossible to ignore for any brand or business.

·

Social Media Audit

·

Content Creation

·

Social Media Management

·

Social Media Set Up

·

Reporting

·

Blog Writing

·

Content Strategy

·

Reputation Management

·

Social Media Advertising

The Need for Social

Social media can help achieve business goals by allowing greater engagement with your customer base, audience and stakeholders. Your company doesnt just need a brand anymore: it needs a face, a voice, and maybe even a heart. As well as being a central component of how your customers see you, it can also yield other opportunities: Promotions, customer feedback, and even just having a little fun can all be used to bring you closer to your clients and users, informing strategy, guiding your product offering and in the long term, increasing sales and profits.

Digital Claritys Proposition

As a Digital Marketing and Technology Agency, Digital Clarity has been helping brands manage their social presence since before social media had been coined as a phrase. Using our holistic methodology, we will incorporate your social presence as part of an overall offering, utilizing the platforms which are most appropriate to your business in the best possible way. Whether you need from-scratch implementation, or just want a social media audit to benchmark your activity, Digital Clarity have the expertise to deliver the results you need.

Digital Clarity have a strong track record of increasing membership numbers, creating deeper engagement, and measuring the success of your activity to help inform social media marketing strategy and guide development.


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The Market for Growth in Social 

[f201510qfebruary28040715003.gif]

·

Social-media advertising spend will grow rapidly through 2018. Its up 40% this year and will top $8.5 billion, growing to nearly $14 billion in 2018, a five-year compound annual growth rate (CAGR) of 18%.

·

Social media ad spend has reached the mobile-tipping point. Spending on mobile social-media ads, including mobile app-install ads, will surpass non-mobile spend by the end of this year in the US. In 2018, two-thirds of social-media ad spend will go to mobile, creating a $9.1 billion social-mobile market.

Mobile app-install ads and programmatic buying are also growth drivers. Analyses suggest that mobile app-install ads could account for anywhere from one-quarter to more than one-half of Facebooks mobile ad revenue.

Prices are increasing as performance and targeting improve, even as ad loads stay steady on the established platforms. Facebook, for example, is not likely to increase the amount of in-feed native ads an average user will see.

The market is expanding with the introduction of paid ad units at Pinterest and Instagram.



 

5. STRENGTHS: ANALYTICS

Definition:

Analytics is the act of analyzing data from your website, marketing campaigns and user activity. It can include everything from what time of day people are most likely to click on your PPC ads, right down to how long users are spending on individual pages on your site. Analytics can help you locate problems, find areas for improvement, form projections for the future and help you get the best out of your marketing budget.

·

Google Analytics

·

Goal Setting

·

Tag Management

·

3rd Party Analytics

·

Funnel Planning

·

Attribution Modelling

·

Path Analysis

·

Link Testing

Why Analytics Are Important

Knowing how to identify trends and interrogate data is of paramount importance to any marketing department. Analytics gives you answers to some of the most important questions you should be asking about your campaigns, maximizing effectiveness when things go well and providing solutions when things go wrong. Without this information, what appears to be a successful campaign could be failing to achieve its full potential, and there may be critical problems of which many companies may not be aware.

 

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Digital Claritys Unique Proposition

What really sets Digital Clarity apart is the companys ability to translate numbers into action. Analytics is extremely important, but for many, it is difficult to draw meaningful conclusions from the data, or to know how to act on the knowledge gained from this analysis. Online marketing is a sea of numbers, data and statistics; Digital Clarity turns this information into actionable insights for business.

[f201510qfebruary28040715004.jpg]

Digital Claritys knowledge of analytics methodologies puts us at the forefront of our industry. We can use this experience to help guide strategy and deliver action points with recommendations, rather than just presenting you with meaningless statistics. With this knowledge in hand, you can implement solutions which will help you get the most out of your online presence. Digital Clarity also offers Google Analytics training to help businesses get the most out of this powerful tool independently.

Source:

SEMPO State of Search Report 2014

As the internet and mobile arena continues to mature, the need to make sense of and manage companies through this often complex market is clearly an area of massive growth. The company is confident that the talent and experience within the digital marketing team is poised for a major springboard in 2015, but must be expanded significantly in order to support the global reach intended.

Artist Collaboration, driven by Co-Chief Operating Officer and Head, US Operations, Steve Baughman, is an area that will see exponential growth in the coming 12 months and beyond. Artists and brands that look to leverage their celebrity status will look to companies such as Digital Clarity to help drive and develop their brand in the growing and complex arena of social media.

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[f201510qfebruary28040715005.jpg]



 

Market Reach

The Company has reach and experience across a large number of vertical markets including, but not limited to: Entertainment/ Fashion/ Sports/ Automotive/ Ecommerce.

Relationships and Industry Contacts

The team at Digital Clarity have professional and personal contacts, including some long-term relationships, at companies such as Google, Microsoft and Facebook, often being invited to attend strategic market briefings and insights.

Partnerships, strategic alliances and agency management have allowed Digital Clarity to work on some of the biggest brands, sitting behind the agencies as a support and resource to deliver very high quality service and results to their clients.

TEAM EXPERTISE

COMPANY KEY ASSETS

[f201510qfebruary28040715006.jpg]

Examples:

·

PPC campaign experience especially Google AdWords existed

·

SEO evolution from aggressive link building and onsite SEO through to strategic marketing and integration of inbound marketing

·

Website design and development based on results driven design and planning

·

Brand consultancy

·

Social media management and advertising. Several clients have been won directly via Digital Claritys internal social media strategy

·

Sales and account management experience from multi-disciplined backgrounds

 

Page 20 of 28

 

 

 

Evolution and Flexibility

The market is continually changing. Digital Clarity has always remained ahead of the curve and given their clients peace of mind by remaining a true strategic partner.

Creative, Individualized Solutions and Customer Service

Case Studies and testimonials reflect the client-centric approach of Digital Clarity. Being selected over larger more established firms, support that we provide the client with skills that are differentiating. The Digital Clarity Brand is being established positively.

Growth Opportunities in the Market

As the use of web mobile sites and applications grow, so do the complexities and challenges of using these sites and platforms commercially. Digital Clarity directs business through the maze of an often confusing and sophisticated set of barriers, to create a clear path for the customer to our clients product or service. As this market matures, the need for companies to rely on the services from Digital Clarity can only grow. Specifically, B2B relationships represent 69% of all U.S. e-commerce transactions (Forrester 2013). Here we look at some of the growth areas in Digital Claritys arsenal integrating the key trends for 2015:

1. More Mobile

2. More Social

3. More Informed

4. More Experiential

5. More Real-Time

6. More Global

7. More Multichannel

These trends translate to being always on.

Growth & Opportunities in Search

Search remains the foundation of digital marketing. Businesses now spend 24% of total marketing budget on paid search.

·

The North American Search industry grew from $19 bn in 2011 to $27 bn in 2013 SEMPO

·

Revenue from Localized Mobile Ads to Reach $5.8 Billion in U.S. by 2016 BIA/Kelsey

·

U.S. search spend grew by 11 percent Year over Year, while ROI improved by 26 percent Adobe

·

72% of Consumers Want Mobile-Friendly Sites Google Research

·

2 million search queries are made on Google, every minute Google

·     Growth in Corporate Search 50% of Fortune 100 Companies have a Google Plus Account

Growth & Opportunities in Social Media

Social Media is a great platform for getting the word out and generating leads. Active listening and data analytics can help companies find out what customers want, not just from products or services, but also in terms of an ongoing relationship.

Cap Gemini 2014 Generation Connected

The algorithms developed by Digital Clarity include all social media platforms as they develop, and technology partners coupled with the clients analytics provide ROI positive results within a quarter.

Social media platforms have more user accounts than ever before:

·

284 million Twitter accounts

·

1.35 billion Facebook accounts

·

70 million Pinterest accounts

[f201510qfebruary28040715007.jpg]

 

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The need for DBMM to reach Global Markets

In 2015, it is expected that the U.S. economy will continue its recovery while the global economy is lagging behind. As the markets remain volatile, the opportunity for a company like DBMM to approach new business with its proven track record increases. The core markets remain US and English speaking European markets. Emerging markets are a target for 2015. BRIC countries (Brazil, Russia, India and China) will be key targets from the emerging markets.

Internet usage is poised for explosive growth across Asia, driving massive consumer demand for digital content and services. The biggest challenge for businesses hoping to meet this demand is how to make money while creating low-cost content. According to McKinsey & Co, India and China are driving an emerging digital revolution via new mobile devices.

The Company intends to further extend its services in the Middle Eastern market initially then review the successes using a lean methodology and continuous improvement along the way, and then roll out to the BRIC markets.

US

The US remains the center of the entertainment, technology and digital industries and as such the emphasis looking forward to 2015 and building on the recent success in the last quarter of the 2014 calendar year means that DBMM and its agency Digital Clarity are perfectly positioned to spring board into this market using the successful models established over the last two years.

The digital market continues to be focused on London, New York and Los Angeles; therefore, DBMMs same triangle of London/New York/LA is strategically sound. We are establishing a strong digital marketing presence in the Los Angeles area to cover the entertainment and music market and then plan to have the same model in New York. Our corporate offices are located in New York, however Los Angeles remains a key regional base from which to build and expand relationships, while a New York presence is equally important to serve and build relationships in the largest advertising market in the US.

The Asian-American Market - An Unusually Attractive Opportunity

·

Fast Growing: -Current Population - 13+ Million - 49% population growth 1990-2000; 29% growth 2000-2008. More Asians are emigrating to the U.S. than any other ethnic group.

·

Educated & Affluent: -44% holding BA degree - vs. 28% of Non-Hispanic Whites -Median HH income almost $10K greater than Non-Hispanic Whites

·

Geographically Concentrated: -More than 50% reside in 3 states alone: CA, NY, and TX.

·

Money to Spend: $509 billion in annual purchasing power.

·

Entrepreneurial and Driven -Own and operate 1.1 million business nationally, generating $343 billion in annual revenue.

·

Cost Efficient Reach -Almost 1,000 targeted media outlets reaching Asians nationally, with lowest CPMs of all consumer segments.

Europe

As the current operations base of the digital marketing agency is in London England, it is perfectly placed to reach out to the broader European market to replicate the Companys model in the stronger economies in this region. As with the relationships mentioned in the US, opportunities were advanced with US partners to leverage Digital Claritys reach in this region and help take established US agencies into the European region.

2014 saw new clients emerge from Europe, as well as expansion of global reach of new U.S. clients.

In 2013, the execution of this aspect of the business plan is illustrated by the agreements with VMS and Brandmini to represent them outside the United States, initially in Europe.

Middle East

The Middle East is a fertile market for heritage based US and European brands looking for entry into this lucrative market. The fastest area for growth in this sector is to leverage on the luxury arena. Digital Clarity has developed new business in a number of different luxury brands.

Given the complexity of the region as well as the enormous potential, it is important that Digital Clarity aligns itself with established players in local markets. With this in mind, Digital Clarity will look to collaborate with some digital agency partners where there is already a relationship and  create a strategy that allows  the company to look at the breakdown of current digital competence of these brands focusing on various touch points such as tablets, sites, mobile & social reach in the Middle East.

Our value proposition is very much about creating digital penetration of the Middle Eastern market for a particular group and how those brands would be positioned to create brand value a byproduct of which would be sales.

Support for growth in the Middle East

Worldwide luxury goods continues double-digit annual growth; global market now tops 200 billion

·

Dubai commands around 30 per cent of Middle East luxury market and around 60 per cent of the UAEs luxury market

·

The Dubai Mall accounts for around 50 per cent of Dubais luxury purchases

·

Each year, more HENRYs(High Earnings, Not Rich Yet) become potential customers, with ten times as many HENRYs as ultra-affluent individuals

·

The rise of the middle class in emerging countries is polarizing the competitive arena, becoming a new baby-boom sized generation for luxury brands to target.


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Financial Overview/Outlook

DBMM began the 2015 fiscal year with significant challenges, all of which were addressed and became a strong foundation for future growth. The focus remains on the growth of digital marketing services and technology driven through Digital Clarity. DBMM is a marketing services company which is labor intensive in order to provide a differentiating product to its clients. As such, it is imperative to raise a significant amount of capital to hire professionals who can deliver profit to the Company within a quarter. The proven model carried in our financials is each new hire/client averages a margin of 35%-55%, straight line and simple. On that basis, our target is to recruit 10-20 new staff to represent a critical mass and scale up our revenues proportionately. We have begun that trajectory upward in the 1Q 2015.

Digital Clarity has a differentiating approach to its products and services by providing brand enhancement and increased ROI through a strategic alignment with its clients from content design through execution and stewardship. By providing a 360-degree product, we reinforce the relationship with the clients and become key advisors a seat at the table, as it were. That translates to a consistent 35-55% margin and long-term clients.

However, the weakened share price remains a challenge to the Company. On that basis, in the last two years having revenues of approximately $400,000 to $500,000 would suggest a conservative market multiple of x10-x16, the latter being the manufacturing average, the market cap of DBMM should be a minimum of $5,000,000. The multiples for media tend to be at the higher end of the spectrum; therefore, compared to other companies in this sector, DBMM is significantly undervalued. The issue will be addressed as a priority early in the 2015 fiscal year as it continues to be challenge.

In summary, DBMMs financing efforts have always been in short term, small amounts of working capital. That is changing in 2015. Going forward, DBMM intends to embark on a significant capital raise to allow the Company to scale up geographically and maximize our global reach through strategic relationships. This model is the most efficient and effective path to grow DBMM quickly into multiple revenue streams. We have proven the model in the last two years. Our marketing services offering is a labor intensive endeavor, wherein human capital is a key differentiator of knowledge and/or relationships. What we have discussed here is organic growth which will be conducted in conjunction with concluding an acquisition in the digital technology/marketing services sector.

After a very difficult year, fraught with challenges and hurdles, we see 2015 as poised for growth on multiple fronts. With capital infusion, which will allow us to bring in new clients, grow existing successful clients and service them accordingly, coupled with an offer of a deferred tax asset to attract partners with significant revenue and expansion patterns, we will have a model in place which will be sustainable.


Off-Balance Sheet Arrangements

We are not currently a party to, or otherwise involved with, any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Recently Issued Accounting Pronouncements

Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, could have a material effect on the accompanying financial statements.

Significant and Critical Accounting Policies

Our discussion of the financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States. The preparation of our consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosure of any contingent assets and liabilities at the date of the financial statements. Management regularly reviews its estimates and assumptions, which are based on historical factors and other factors that are believed to be relevant under the circumstances. Actual results may differ from these estimates under different assumptions, estimates or conditions.

Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and potentially result in materially different results under different assumptions and conditions. See Notes to Consolidated Financial Statements for additional disclosure of the application of these and other accounting policies

LIQUIDITY AND CAPITAL RESOURCES   

We are concentrating on activities which will grow Digital Clarity organically and by acquisition. We have spent the last two fiscal years establishing a client model for existing and new customers which can be exported geographically.



Page 23 of 28







SIX-MONTH PERIOD ENDED FEBRUARY 28, 2015

We had approximately $30,000 in cash and our working capital deficiency amounted to approximately $2.3 million at February 28, 2015.

During the six-month period ended February 28, 2015, we used cash in our operating activities amounting to approximately $197,000. Our cash used in operating activities was comprised of our net loss from continuing operations of approximately $477,000 adjusted for the following:

·

Amortization of debt discount of $160,000;

·

Additionally, the following variations in operating assets and liabilities impacted our cash used in operating activity:

·

An increase in our accounts payable and accrued expenses of approximately $34,000

·

An increase in our accrued salaries of approximately $76,000

During the quarter ended February 28, 2015, we generated cash from financing activities of $189,500, which consist of the proceeds from the issuance of convertible debentures.


SIX-MONTH PERIOD ENDED February 28, 2014

We had approximately $75,000 in cash and our working capital deficiency amounted to approximately $2.7 million at February 28, 2014.

During the six-month period ended February 28, 2014, we used cash in our operating activities amounting to approximately $183,000. Our cash used in operating activities was comprised of our net loss from continuing operations of approximately $1.3 adjusted for the following:

·

Fair value of preferred shares issued of $145,000

·

Change in fair value of derivative liability of $469,000

·

Amortization of debt discount of $296,000

Additionally, the following variations in operating assets and liabilities impacted our cash used in operating activity:

·

An increase in our accounts payable and accrued expenses of approximately $166,000, resulting from slower payment processing due to our financial condition

·

An increase in accounts receivables of approximately $42,000, primarily due to timing of certain revenues during the quarter ended February 28, 2014

During the six-month period ended February 28, 2014, we generated cash from financing activities of $241,450, which primarily consists of the proceeds from the issuance of loans and convertible debt aggregating $279,600 offset by principal repayments of loans payable of $15,000 and payment of the bank overdraft of approximately $23,000.

 

Page 24 of 28



RESULTS OF OPERATIONS

Comparison of the Results for the Three-month periods Ended February 28, 2015 and 2014


Unaudited Consolidated Operating Results

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  For the Three Months  Ended February 28,

 

For the Six Months  Ended February 28,

 

 

 

 

 

Increase/

 

Increase/

 

 

 

 

 

Increase/

 

Increase/

 

 

 

 

(Decrease)

 

Decrease

 

 

 

 

 

(Decrease)

 

Decrease


2015


2014


$ 2015 vs 2014


% 2015 vs 2014


2015


2014


$ 2015 vs 2014


% 2015 vs 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SALES

$

109,688 

 

$

109,763 

 

$

(75)

 

0%

 

$

257,192 

 

$

212,439 

 

$

44,753 

 

21%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COST OF SALES

78,288 

 

53,833 

 

24,455 

 

45%

 

164,625 

 

104,542 

 

60,083 

 

57%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GROSS PROFIT

31,400 

 

55,930 

 

(24,530)

 

-44%

 

92,567 

 

107,897 

 

(15,330)

 

-14%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COSTS AND EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative

40,160 

 

54,205 

 

(14,045)

 

-26%

 

136,975 

 

100,715 

 

36,260 

 

36%

Compensation Expense

69,000 

 

93,643 

 

(24,643)

 

-26%

 

120,000 

 

289,628 

 

(169,628)

 

-59%

Legal and professional fees

44,231 

 

31,516 

 

12,715 

 

40%

 

131,468 

 

123,686 

 

7,782 

 

6%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL OPERATING EXPENSES

153,391 

 

179,364 

 

(25,973)

 

-14%

 

388,443 

 

514,029 

 

(125,586)

 

-24%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING LOSS

(121,991)

 

(123,434)

 

(1,443)

 

-1%

 

(295,876)

 

(406,132)

 

(110,256)

 

-27%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER INCOME (EXPENSE)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

(61,827)

 

(163,642)

 

(101,815)

 

-62%

 

(195,976)

 

(395,569)

 

(199,593)

 

-50%

Gain/ Loss on derivative liability

 

(442,279)

 

(442,279)

 

-100%

 

14,791 

 

(468,706)

 

(483,497)

 

-103%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL OTHER INCOME (EXPENSE)

(61,827)

 

(605,921)

 

(544,094)

 

-90%

 

(181,185)

 

(864,275)

 

(683,090)

 

-79%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET LOSS

$

(183,818)

 

$

(729,355)

$

(545,537)

 

-75%

 

$

(477,061)

 

$

(1,270,407)

 

$

(793,346)

 

-62%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NM: Not meaningful

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 






















Page 25 of 28



We currently generate revenue through our Pay-Per-Click Advertising, Search Engine Marketing, Search Engine Optimization Services, Web Design, Social Media, Digital analytics and Advisory Services.

For the three and six-month period ended February 28, 2015 our primary sources of revenue are the Per-Click Advertising, Web Design and Search Engine Optimization Services. These primary sources amounted to 93% and 96% of our revenues during the three and six month period ended February 28, 2015. Our secondary sources of revenue are our Social Media and Email Media. These secondary sources amounted to approximately 3% of our revenues.  

We recognize revenue upon the completion of our performance obligation, provided that: (1) evidence of an arrangement exists; (2) the arrangement fee is fixed and determinable; and (3) collection is reasonably assured.

During the three-month period ended February 28, 2015, the increase in our revenues, was at comparable levels when compared to the prior year period. During the six-month period ended February 28, 2015, our revenues for that period increased when compared to the prior year period primarily as a result of increased sales related to Per-Click Advertising.

During the three and six-month period ended February 28, 2015, our cost of sales increased primarily from increases in media

The decrease in general and administrative during the three-month period ended February 28, 2015 is primarily due to a decrease in travel expenses during the second quarter of fiscal 2015, when compared to the second quarter of fiscal 2014.  The increase in general and administrative expenses during the six-month period ended February 28, 2015, when compared to the prior year period, primarily results from professional fees incurred related to our public filings offset by the decrease in aforementioned travel expenses.

The decrease in payroll during the three and six-month period ended February 28, 2015 is primarily attributable to a grant of preferred shares to certain of its officers which occurred during the first quarter of fiscal 2014 and which amounted to $ 144,985.

The legal and professional fees during three and six-month period ended February 28, 2015 when compared to the comparable prior year periods are at comparable levels in volume and nature.


Interest expense, which include interest accrued on certain notes, as well as amortization of debt discount and the fair value of shares issued pursuant to reset provisions of certain convertible promissory notes, decrease during the three-month period and six-month period ended February 28, 2015 is primarily attributable to the amortization of debt discount which was lower during the three-month period ended February 28, 2015, when compared to the comparable prior year periods.  The decrease in amortization debt discount is primarily due to the lesser issuance of convertible debt with beneficial conversion features and embedded conversion features during the three and six-month period ended February 28, 2015 than the prior year comparable periods.



The gain or loss on derivative liabilities is primarily attributable to a change in fair value of derivative liabilities between measurement dates.


Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

As a smaller reporting company, as defined by Rule 10(f)(1) of Regulation S-K, the Company is not required to provide this information.

 

Item 4. CONTROLS AND PROCEDURES

As of the end of the period covered by this quarterly report, our management evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15(b) promulgated under the Exchange Act. Based upon that evaluation, our management concluded that, as of February 28, 2015, our disclosure controls and procedures were effective in ensuring that material information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commissions rules and forms, including ensuring that such material information is accumulated and communicated to our management, as appropriate to allow timely decisions regarding required disclosure.

Evaluation of Disclosure Controls

We maintain controls and procedures designed to ensure that we are able to collect the information that is required to be disclosed in the reports we file with the Securities and Exchange Commission (the "SEC") and to process, summarize and disclose this information within the time period specified in the rules of the SEC. Our management is responsible for establishing, maintaining and enhancing these procedures. Management is also responsible, as required by the rules established by the SEC, for the evaluation of the effectiveness of these procedures.

Internal Controls

We maintain a system of internal controls designed to provide reasonable assurance that transactions are executed in accordance with management's general or specific authorization; transactions are recorded as necessary to permit preparation of financial statements in conformity with Generally Accepted Accounting Principles ("GAAP") and maintain accountability for assets. Access to assets is permitted only in accordance with management's general or specific authorization.

In conclusion, the disclosure and procedure controls provide for reasonable assurance regarding the reliability of financial reporting and preparation of financial statements for external purposes.  


Page 26 of 28





PART II - OTHER INFORMATION

Item 1. Legal Proceedings

The Company is involved in a litigation, Asher Enterprises, Inc. v. Digital Brand Media & Marketing Group, Inc. and Linda Perry, Index No. 600717/2014, in the Supreme Court of the State of New York, sitting in the County of Nassau. The Plaintiff alleges $337,500 in damages based on breach of contract allegations arising from the Companys untimely periodic filings in December 2013. On September 18, 2014, the Court declined to grant the plaintiffs application for default judgment.  The cross-motion for the Company was granted and the lender was directed to file a verified answer in the form submitted within 20 days.  The Company plans on vigorously defending the litigation.


Item 1A. Risk Factors

As a smaller reporting company as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this item.


Item 2. Unregistered Sale of Equity Securities and Use of Proceeds







Period

Class

Shares

Consideration

Use of Proceeds

Exemption from Registration

2014-2015 Q2

Investors

392,857,143

$13,750

Reduction of Outstanding Debt

§4 (a) (2)



Item 3. Defaults Upon Senior Securities

None.

 

Item 4. Submission of Matters to a Vote of Security Holders

None.

 

Item 5. Other Information

None.


Item 6. Exhibits

Exhibits

31.1     

Executive Director - Rule 13a-14(a) Certification

32.1     

Executive Director - Sarbanes-Oxley Act Section 906 Certification



Page 27 of 28

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

DIGITAL BRAND MEDIA & MARKETING GROUP, INC.

 

 

Date: April 10, 2015

By: /s/ Linda Perry

 

Linda Perry

Executive Director

 

 

Page 28 of 28






Exhibit 31.1


CERTIFICATION OF EXECUTIVE DIRECTOR

UNDER SECTION 302 OF THE SARBANES OXLEY ACT OF 2002


I, Linda Perry, Executive Director, of Digital Brand Media & Marketing Group, Inc., certify that:


                1. I have reviewed this Quarterly Report on Form 10-Q of Digital Brand Media & Marketing Group, Inc.;


2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


a)

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b)

designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c)

evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d)

disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


a)

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: April 10, 2015

By:

/s/ Linda Perry

 

Name:

Linda Perry

 

Title:

Executive Director






Exhibit 32.1


CERTIFICATION OF EXECUTIVE DIRECTOR

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


In connection with the Quarterly Report of Digital Brand Media & Marketing Group, Inc. (the “Company”) on Form 10-Q for the period ending February 28, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Linda Perry, Executive Director of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:


1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and


2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


 

 

 

 

Date: April 10, 2015

/s/ Linda Perry

 

Linda Perry

 

Executive Director






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