UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)

þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 000-50621

DOLPHIN DIGITAL MEDIA, INC.

(Exact name of registrant as specified in its charter)

Nevada (State or other jurisdiction of incorporation or organization)		86-0787790 (I.R.S. Employer Identification No.)
804 Douglas Road, Executive Tower Bldg., Ste. 365, Miami, Florida (Address of principal executive offices)		33134 (Zip Code)

Registrant’s telephone number (305) 774-0407

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Name of each exchange on which registered
None		None

Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.015 par value
(Title of class)

Indicate by a check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. o Yes þ No

Indicate by a check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. o Yes þ No

Indicate by a check mark if 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. þ 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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). o Yes o No

Indicate by a check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by a 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. (Check one):

Large accelerated filer o		Accelerated filer o		Non-accelerated filer o		Smaller reporting company þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act.) o Yes þ No

Issuer’s revenues for the year ended December 31, 2010, were $0.

The aggregate market value of the voting and non-voting common equity held by nonaffiliates computed by reference to the price at which the common equity was last sold, as of the last business day of the registrant’s most recently completed second fiscal quarter is: $11,397,816.

Indicate the number of shares outstanding of the registrant’s common stock as of March 31, 2009 is 60,717,499.

DOCUMENTS INCORPORATED BY REFERENCE—NONE

 

 

TABLE OF CONTENTS
FORM 10-K

		Page
Part I
Item 1. BUSINESS			1
Item 1A. RISK FACTORS			6
Item 2. PROPERTIES			9
Item 3. LEGAL PROCEEDINGS			9
Item 4. (REMOVED AND RESERVED)			10
Part II
Item 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES			10
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS			11
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA			15
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE			15
Item 9A(T). CONTROLS AND PROCEDURES			16
Item 9B. OTHER INFORMATION			16
Part III
Item 10. DIRECTORS, EXECUTIVE OFFICERS, CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT			16
Item 11. EXECUTIVE COMPENSATION			17
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS			18
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS			18
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES			20
Item 15. PRINCIPAL ACCOUNTING FEES AND SERVICES			21
Exhibit 4.6
Exhibit 4.7
Exhibit 4.8
Exhibit 4.9
Exhibit 4.10
Exhibit 31
Exhibit 32

PART I

ITEM 1.		BUSINESS.

Introduction

Dolphin Digital Media, Inc. is dedicated to the cause of online safety for children. By creating and managing child-friendly social networking websites utilizing state-of the-art fingerprint identification technology, Dolphin Digital Media has taken an industry-leading position with respect to internet safety, as well as digital entertainment.

Our goal is to become the leader in social network and digital offerings to children both through organic growth and by effecting strategic acquisitions of unique e-commerce and security related companies with niche market opportunities and innovative technologies.

Business Model

We are focused on alleviating the safety concerns of parents whose children explore and communicate via the Internet. It is a widely held belief that mothers make most family decisions involving the expenditure of money on children. We believe that our model monetizes this parental need for safety and control, while also attracting children and teens to the exciting content and safe social interaction with peers provided by our products.

Need for Internet Security

Although the Internet was originally conceived of, and designed, as a research and education network, it is being utilized today in radically different ways. The Internet has become a home for private and commercial communication, as well as expanding areas of commerce and public service, all the time allowing for direct personalized communication through chat rooms and e-mails. Along with the convenience and easy access to information come new risks in the form of unauthorized intruders. Intruders come in many forms: an adolescent curious about what he or she can do on the Internet; a college student who has created a new software tool; an individual seeking personal gain; or a predator seeking unthinkable gratification. Our solutions prevent these wrongdoers from getting to your children online.

Our Product

Dolphin Secure is easy-to-use software that downloads onto any computer in a child’s life, and gives parents the ability to guide where their children can go, and who they can talk to, while online.

Safer Surfing with Dolphin Secure:

During a registration process that takes less than 10 minutes, parents receive a “master white list” of pre-determined age-appropriate web sites for their child to visit. The Dolphin Secure “master white list” of pre-approved sites is updated daily, and ensures that children are free to explore and learn online more safely without the risk of stumbling onto pornography, inappropriate content or other illicit material. Parents can also customize the specific “white list” for each individual child, including the opportunity to add to, or delete from, the Dolphin Secure “master white list.” So, a parent could add or allow specific sites for her teenager that would remain blocked for her younger children. With Dolphin Secure, children can only visit sites on their specific “white list,” as customized (or not) by their parent.

Safer Chat with Dolphin Secure:

For the first time, parents have the option to set the boundaries of who their child can speak to, or who they can be approached by to speak with, online. Upon registration, parents have a wide variety of options to customize these parameters, from general groups to specific individuals, including:

	•		Everyone within the Dolphin Surf social network.
	•		Only children of a specific gender.
	•		Only other children within a specific age range chosen by the parent.
	•		Only a select group of hand-picked friends.
	•		No one at all.

All other chat applications otherwise installed on the applicable computer are blocked from a child’s use, thereby ensuring that everyone that could approach the child with an IM request needs to be registered with Dolphin Secure.

How “Dolphin Secure” Works: Fingerprint Log-In

In a truly revolutionary offering, and one of the major aspects that makes Dolphin Secure a unique service, a child may fully utilize the “Dolphin Surf” social network and communicate with their friends only following Dolphin Secure fingerprint identification. Upon registration, a new user scans their finger using the Dolphin Secure UPEK fingerprint reader. The scanned fingerprint is then converted into a number and stored in a protected, remote database.

The child’s account details (e.g. parental settings and personal preferences) are associated with this number, which is created by an irreversible algorithm. A copy (or a “print”) of any user’s actual fingerprint is never taken, let alone stored anywhere within the Dolphin Secure system. Only the unique number created by any user’s unique fingerprint is kept.

After registration, each time an internet browser or an IM application is attempted to be used on the computer that is Dolphin Secure, a log-in page is triggered. Children simply enter their user name and scan their fingerprint. Dolphin Secure then verifies the child’s identity by matching the unique number created by this fingerprint scan with the number associated with the child’s user name in the Dolphin Secure database.

Once a match has been created, the Dolphin Secure system promptly loads each child’s personal, customizable home page within Dolphin Surf. That child is now free to surf to websites, and free to seek other children to be friends with, that are within the controls established by the parent. When parents or other adults in the household want to use the same computer, a master username and password can be entered, which unlocks the computer and allows them to freely access the Internet. Once the parent logs out, Dolphin Secure is automatically back in place for the next session.

“Dolphin Surf”

“Dolphin Surf” is a social network featuring the advanced functionality associated with the leading online communities and virtual worlds. Kids have the opportunity to create a profile, IM with approved friends, search for new friends, upload photos, send e-mails and customize a homepage that includes a widget library of content, friend updates and much more, all under the protection of the Dolphin Secure system. Children can set their own site themes, backgrounds and add or delete widgets on their homepage, making their Dolphin Surf experience totally unique to them.

“Dolphin Surf” will be the online destination for children to create, explore, interact and play, with the assurance that access to their account is available only to them — unlike other social networking sites where users, and their personal content, are vulnerable to anyone who knows, or can guess, their password.

It is the sharing of passwords among the overwhelming majority of children that exposes them to so many dangers of cyber-bullying, including online impersonation (e.g. when a classmate or “friend” who knows their password goes into their social network account and sends out an embarrassing e-mail, photo or IM to their entire address book, pretending to be them while also switching their password so that they can’t even access their account after the fact to try and limit the damage).

“Dolphin Groups”

The launch of Dolphin Groups in February 2010 allows all children’s organizations (e.g. schools, little leagues, after-school programs, charitable organizations, etc.) to create their own mini-sites within Dolphin Surf.

Any group will have the ability to upload content such as videos and photos to the group page, send out messages to the whole group, write on an individual member’s “wall,” create a calendar, schedule events, and much more. Of course, the group sites have the full instant messaging capability that is a revolutionary aspect of Dolphin Secure, thereby allowing the children to chat live with each other while viewing the group’s site. For the first time, a children’s organization can safely create their own environment with full online interactivity occurring by their children.

Dolphin Surf offers different levels of privacy for any group, including: (1) Open: where any child within Dolphin Surf can join (e.g. a “fan club” started by a child in support of a favorite television show), or (2) Semi-Private: where a group administrator can set parameters for who can join their group, such as age range or gender (e.g. a particular Little League Division only open to boys and girls twelve and under), or (3) Private: where a group administrator will have to review and approve each individual who requests to join the group (e.g.: a specific Little League team).

The Need for “Dolphin Secure”

Many parents want to protect their children online without feeling like they are spying on them. Spyware is difficult to use in the best of circumstances, but it has two even more fundamental problems. First, it is oftentimes reactive. It only tells a parent which sites their child has visited, and who their child has chatted with, after the damage has already been done. Secondly, by its very definition, spyware assumes the parent has the time to constantly review and monitor their children’s online activities.

Dolphin Secure was born out of a decision to provide a proactive solution for parents concerned with the online safety of their children. Busy parents need an easy-to-use system which gives them peace of mind that their rules for internet safety are being followed even when they are not around. Now, a mother busy doing the five hundred tasks in her typical day, usually all at once, doesn’t have to stop to worry that her 8 year-old daughter is receiving an instant message from someone that she doesn’t know, or that her 11 year-old son has incorrectly spelled the name of a new game and has wound up on a pornography site.

Pricing & Availability

An annual child membership to Dolphin Secure costs $59.95 per year (approx. $5 per month) plus an additional one-time fee of $15.00 for a fingerprint reader. Each additional child membership is $29.95 per year; a parent account is free. As of March 2010, a monthly subscription can be purchased for $5.95 per month for the first child, and $2.95 per month for each additional child in the household. Parents pay per child on their family account, not per software download. This way, a family can download Dolphin Secure onto every computer in the home for no additional charge. Extra fingerprint readers can be purchased for $24.95 each.

Dolphin Secure currently works for PCs using Windows XP or Vista operating systems, as well as Mac computers using the Safari operating system.

Target Market

Our primary initial target market is North America. This market represents 43.85 million girls and boys aged 5-15. This number breaks down as follows:

•		In Canada, there are 3.71 million girls and boys aged 5-15. This represents 11.19% of the Canadian population.
•		In the United States, there are 40.13 million girls aged 5-15. This represents 13.21% of the US population.

Licensing & Branding

We hold a multiyear exclusive licensing agreement with Dolphin Entertainment (“DE”), a Miami-based, Emmy-award nominated production and distribution company of hit television programs for children, most notably Nickelodeon’s top-rated series Zoey 101 and hit show Ned’s Declassified School Survival Guide, among many others. Under the terms of our 10 year agreement, DE will work with us to create and manage several social networking websites which will be themed around DE’s own branded properties.

Dolphin Entertainment

Dolphin Entertainment, founded in 1996 by our Chairman, C.E.O. and President, Bill O’Dowd, is one of the world’s leading entertainment companies specializing in children’s and young adult live-action programming, with divisions dedicated to Television Production, Feature Film Production, International Distribution, and Merchandising and Licensing. DE served as Executive Producer to Nickelodeon’s Emmy™-nominated hit series Zoey 101 and Ned’s Declassified School Survival Guide, as well as eight different television movies that have premiered on Nickelodeon in the past two years. DE enjoys worldwide distribution of its programs, with sales in over 100 countries (reaching almost 300 million homes) for its current children’s properties, including Mexico, Italy, France, Spain, the United Kingdom, Germany, Canada, Australia, New Zealand, Brazil, and South Africa, among many others. DE has successfully launched international merchandising lines for its children’s properties in nearly every consumer category, including publishing, apparel, sleepwear, accessories, and cosmetics.

Approach to Market

We have retained the services of Manning, Salvage & Lee, headquartered in New York. MS&L has 54 offices throughout North America, Latin America, EMEA and Asia-Pacific, as well as an extensive global affiliate network. The agency meets the needs of global and local clients by providing best-in-class services in consumer marketing PR, healthcare PR, corporate communications and technology communications, as well as industry-leading work in digital communications. MS&L won PR Week’s Best Use of Internet/New Media Award in both 2006 and 2007. Clients include several of the world’s largest and most complex organizations including Procter & Gamble, Philips, Eli Lilly, General Motors, Hoffmann-La Roche, Allergan, Heineken, Best Buy, The Home Depot and Nestle.

We have also retained the services of Moxie Interactive, based in Atlanta, Georgia. Moxie Interactive is one of the industry’s leading interactive agencies, specializing in digital advertising and strategy, website design and development, eCRM programs, video production, and any and all digital-related activities. Top clients include Verizon Wireless, Coca-Cola, Home Depot, and Blockbuster.

Additional Revenue Streams

In February 2010, we announced a strategic partnership with the United Way of Miami-Dade to promote Dolphin Secure. The United Way of Miami-Dade is committed to helping Dolphin Digital Media in raising awareness around the importance of internet safety for children and the benefits of Dolphin Secure. Through this strategic partnership, the United Way of Miami-Dade will work with Dolphin Digital Media to expand its reach into key markets and audiences.

The first results of this strategic partnership were recognized later in February with the announcement that Dolphin Digital Media and the United Way of Miami-Dade had entered into an alliance with the Miami-Dade County Public Schools to promote Dolphin Secure. Miami-Dade County Public Schools is the fourth-largest public school system in the country, with a diverse enrollment of more than 342,000 students from over 100 countries at its 392 schools. Miami-Dade County Public Schools also has 50,271 employees, including 22,006 teachers. In addition to the safety benefits of Dolphin Secure, all parties are excited about utilizing Dolphin’s biometric authentication to help deliver on the promise of “virtual schooling,” including online classes available to all students, as well as live chat for homework help and tutoring.

In March 2010, we entered into a partnership with the Girl Scout Council of Tropical Florida to promote Dolphin Secure and to utilize Dolphin Secure’s group functionality. The campaign, “SOS: Speak Online Safely,” began March 25, 2010. The Girl Scout Council of Tropical Florida has over 700 troops and over 16,000 members between Miami-Dade County and Monroe County. Each troop will have their own group within Dolphin Surf, open only to their members, while the Council as a whole with have a group open to all 16,000 Girl Scouts in Miami-Dade and Monroe counties. Also, the Girl Scout Council of Tropical Florida will start other groups for additional programs they offer, all open only to the girls that participate in those programs, as well as groups open to all girls, whether they are current Girl Scouts or not. This partnership is a wonderful example of the clear benefits that the group functionality within Dolphin Secure offers to all children’s organizations, large or small.

Corporate History

Dolphin Digital Media, initially known as Rising Fortune Incorporated, was incorporated in the State of Nevada on March 7, 1995. We were inactive between the years 1996 and 2003.

On December 5, 2003, we amended our Articles of Incorporation to change our name to Maximum Awards Inc, Inc. in connection with the acquisition of all outstanding shares of Maximum Awards. Maximum Awards was an Australian company engaged in the business of operating a consumer rewards program through which consumers earned points by purchasing products and services offered by the company and its program partners.

On June 1, 2004, we acquired 100% of the issued and outstanding shares of Travel Easy Holidays Pty Ltd (“TEH”) and Global Business Group Pty Ltd (“GBH”) from Maxwell Thomas and Michael Sullivan. These corporations were involved in the travel industry and mail order industries and were acquired to add to our rewards program operations by providing an in-house travel agency and a consumer products retailer.

In June 2004 we acquired Global Business Group Pty Ltd, an Australian proprietary limited corporation, organized under the law of the Province of Queensland, Australia in June 2003. Global Business did business under the name Easy Shopper Direct and was engaged in the business of selling consumer goods on-line and through published catalogs.

On May 29, 2007, we amended our Articles of Incorporation to change our name from Maximum Awards Inc. to Logica Holdings, Inc.

On July 9, 2007, we acquired (i) Plays On The Net Plc and its subsidiary, Plays On The Net Inc., which provide a web based platform for writers to share their work, to communicate with fellow dramatists and to explore new ideas, which includes an extensive retail site for book, audio downloads and all-round theatre information; (ii) Curtain Rising Inc., which provides an online database for theatres and a bi-weekly online theatre magazine; and (iii) Anne’s World Limited, a company that holds the license for a secure social networking website for children, providing an interactive virtual world for young people, secured with cutting-edge biometric technology in the form of a personal fingerprint reader. We issued 12,000,000 shares of our common stock as consideration in the acquisitions. The acquisitions resulted in a change of control and were accounted for as a reverse merger.

On August 7, 2007, we amended our articles of incorporation to change the par value of our common stock from $0.001 per share to $0.015 per share.

On September 30, 2007, we sold 100% of our Australian subsidiaries; Maximum Awards Pty Limited, Travel Easy Holidays Pty Ltd and Global Business Group Pty Ltd to Elko Group Pty Limited, an Australian company controlled by Maxwell A. Thomas, a former executive officer of the Company.

On May 28, 2008, we entered into a Social Network Platform License Agreement with Dolphin Entertainment, Inc., a Florida corporation, and its affiliated companies, pursuant to which we granted to Dolphin Entertainment a three (3) year exclusive license to utilize our proprietary social network creation platform and visitor identification, authentication and authorization technology to create and operate several subscription-based social networking websites themed around Dolphin Entertainment’s premium family entertainment brand properties. This alliance permits the creation of highly secure social networking websites for children and young adults with the strong attraction of premium family entertainment brands, an Internet first. Dolphin Entertainment is wholly owned by William O’Dowd, IV, who became our majority shareholder, Chief Executive Officer and Chairman of the Board of Directors in connection with our acquisition of Dolphin Digital Media, Inc., a Delaware corporation, described below. Under the Social Network Platform License Agreement, we agreed to an even 50%-50% share with Dolphin Entertainment of subscription revenues generated by Dolphin Entertainment’s or its affiliates’ operation of social networking websites created with the platform, and to additional revenue shares to be determined by the parties in the event additional revenue streams other than subscription revenues (such as advertisement sales, merchandising and sublicensing) might be generated and received.

On June 23, 2008, we obtained an exclusive license to Dolphin Entertainment’s family entertainment brand properties through the acquisition of 100% of the capital stock of Dolphin Digital Media (“DDM”), a newly formed Delaware corporation wholly owned by Mr. O’Dowd. In consideration of the acquisition, we issued 24,063,735 shares of our common stock (constituting fifty-one percent of our issued and outstanding common stock) to Mr. O’Dowd, and appointed Mr. O’Dowd our Chief Executive Officer and Chairman of the Board of Directors. At the time of the acquisition, DDM was the grantee of an exclusive ten-year worldwide license from Dolphin Entertainment, dated as of the date of the closing of the acquisition, to use Dolphin Entertainment’s family entertainment brand properties. This license was the sole asset of DDM at the time of the acquisition, and DDM had not yet commenced planned principal operations. Under the license, we are authorized to use Dolphin Entertainment’s brand properties in connection with the creation, promotion and operation of subscription based Internet social networking websites for children and young adults. The license requires that we pay to Dolphin Entertainment royalties at the rate of fifteen percent of our net sales from performance of the licensed activities. As Mr. O’Dowd is considered a related party under applicable accounting rules, we recorded the assets of DDM at their historical cost.

On July 29, 2008, we amended our Articles of Incorporation to change our name from Logica Holdings, Inc. to Dolphin Digital Media, Inc.

Corporate Offices

Our corporate headquarters is located 804 Douglas Road, Executive Tower Building, Suite 365, Coral Gables, Florida 33134. Our telephone number is (305) 774-0407.

ITEM 1A.		RISK FACTORS.

We are a development stage company and we have limited historical operations. We urge you to consider our likelihood of success and prospects in light of the risks, expenses and difficulties frequently encountered by entities at similar stages of development. The following is a summary of certain risks we face. They are not the only risks we face. Additional risks of which we are not presently aware or that we currently believe are immaterial may also harm our business and results of operations. The trading price of our common stock could decline due to the occurrence of any of these risks, and investors could lose all or part of their investment. In assessing these risks, investors should also refer to the other information contained or incorporated by reference in our other filings with the Securities and Exchange Commission.

Certain Risk Factors Relating to our Business

We may need to raise additional capital in the near future, and, if we are unable to secure adequate funds on acceptable terms, we may be unable to support our business plan and be required to suspend operations.

We may need to raise additional capital in the near term, and may seek to do so by conducting one or more private placements of equity securities, selling additional securities in a registered public offering, or through a combination of one or more of such financing alternatives. There can be no assurance that any additional capital resources will be available to us as and when required, or on terms that will be acceptable to us.

The following terms of our October 2007 financing will make obtaining additional financing with acceptable terms more difficult and/or expensive: (i) no dividends may be paid with respect to common stock while the Preferred Stock is outstanding, unless said dividends are paid pro rata to the holders of the Preferred Stock; (ii) as long as the Preferred Stock is outstanding, the Company may not, without the approval of the holders of the Preferred Stock, authorize or create authorize or create any class of stock ranking as to dividends or distribution of assets upon a liquidation senior to or otherwise pari passu with the Preferred Stock, or any preferred stock possessing greater voting rights or the right to convert at a more favorable price than the Preferred Stock; (iii) the Preferred Stock is entitled to a $1.00 per share preferred distribution, prior to any distribution to holders of common stock, upon a liquidation of the Company; (iv) for a period of 5 years post closing, the Company is prohibited from effecting or entering into an agreement to effect any subsequent financing involving a transaction in which the Company issues or sells any debt or equity securities that are convertible into, exchangeable or exercisable for, or include the right to receive additional shares of common stock either (a) at a conversion, exercise or exchange rate or other price that is based upon and/or varies with the trading prices of or quotations for the shares of common stock at any time after the initial issuance of such debt or equity securities, or (b) with a conversion, exercise or exchange price that is subject to being reset at some future date after the initial issuance of such debt or equity security or upon the occurrence of specified or contingent events directly or indirectly related to the business of the Company or the market for the common stock exclusive in all cases of stock splits, stock dividends, recapitalization and other similar rights, or, a transaction in which the Company issues or sells any securities in a capital raising transaction or series of related transactions which grants to an investor the right to receive additional shares based upon future transactions of the Company on terms more favorable than those granted to such investor in such offering; (v) the Company, at any time while the Preferred Stock is outstanding, shall not issue rights, options or warrants to holders of common stock entitling them to subscribe for or purchase shares of common stock at a price per share less than the conversion value of the Preferred Stock; and (vi) the conversion value of the Preferred Stock and the Warrants is subject to a full ratchet adjustment if the Company issues shares of common stock or securities convertible into shares of common stock at an effective price per share that is less than the conversion value of the Preferred Stock (the ratchet with respect to the Preferred Stock is limited to 24 months after closing); and (vii) for a period of two years from the date of the closing, the Investor shall have the right to participate in any subsequent funding by the Company on a pro rata basis at one hundred percent (100%) of the offering price.

If we are unable to raise the capital required on a timely basis, we may not be able to fund our projects and the development of the businesses of our subsidiaries. In such event, we may be required to suspend our plan of operations. Moreover, even if the necessary funding is available to us, the issuance of additional securities would dilute the equity interests of our existing stockholders, perhaps substantially.

Our success depends on the attraction and retention of senior management and technicians with relevant expertise.

Our future success will depend to a significant extent on the continued services of William O’Dowd, IV who conceived the business and overall operating strategy, has been most instrumental in assisting us in raising capital and currently serves as our executive officer. We do not have an employment agreement with Mr. O’Dowd at present. We do not maintain key man life insurance for any executive officer. Our ability to execute our strategy also will depend on our ability to attract and retain qualified technicians and sales, marketing and additional managerial personnel. If we are unable to find, hire and retain qualified individuals, we could have difficulty implementing our business plan in a timely manner, or at all.

Our international operations expose us to risks associated with fluctuations in foreign currencies.

As part of our international operations, from time to time in the regular course of business, we convert dollars into foreign currencies and vice versa. The value of the dollar against other currencies is subject to market fluctuations, and the exchange rate may or may not be in our favor.

We may divest assets to reflect changes in our strategy.

We have begun divesting businesses and assets that we have determined no longer fit our strategy. For example, we sold our interests in three subsidiaries in September 2007. We may undertake divestiture transactions when we believe there is a financial or strategic benefit to us in doing so. Such divestitures, should they occur, may result in losses. There may also be costs and liabilities that we incur or retain in connection with these divestitures.

We may be unable to successfully divest non-strategic assets and, if we incorrectly evaluate the strategic fit and valuation of divested businesses or assets, we may forego opportunities that would otherwise have benefited our business.

A number of factors may cause our consolidated operating results to fluctuate on a quarterly or annual basis, which may make it difficult to predict our future operating results.

We expect our consolidated revenues and expenses to fluctuate, making it difficult to predict our future operating results. Factors that could cause our operating results to fluctuate include:

	•		demand in the markets that we serve;
	•		our ability to define, design and release new products that meet customer needs, and to do so quickly and cost effectively;
	•		market acceptance of new and enhanced versions of our products;
	•		variations in the performance of our businesses;
	•		our ability to forecast demand in the markets that we serve;
	•		general economic conditions in the countries where we operate; and
	•		changes in exchange rates, interest rates and tax rates.

Any of the above factors, many of which are beyond our control, could significantly harm our business and results of operations. The results of a prior quarter or annual period should not be relied upon as an indicator of future operating performance.

Certain Risk Factors Relating to our Common Stock

The market for common stock is limited, and you may not be able to sell the shares of our common stock that you hold.

Our common stock is currently traded on the OTC Bulletin Board, not on a national securities exchange. Therefore, our common stock is thinly traded, the market for purchases and sales of our common stock is limited and the sale of a limited number of shares could cause the price to fall significantly. Accordingly, it may be difficult to sell shares of our common stock quickly without significantly depressing the value of the stock. Unless we are successful in developing continued investor interest in our stock, sales of our stock could continue to result in major fluctuations in the price of the stock.

Stockholder interest in us may be substantially diluted as a result of the sale or issuance of additional securities pursuant to existing commitments and to fund our plan of operation.

Issuances of additional shares of common stock would result in dilution of the percentage interest in our common stock of all stockholders ratably and might result in dilution in the tangible net book value of a share of our common stock, depending upon the price and other terms on which the additional shares are issued. In addition, the issuance of additional shares of common stock upon exercise of the warrants or stock options, or even the prospect of such issuance, may have an effect on the market for our common stock and may have an adverse impact on the price at which shares of our common stock trade.

If securities or industry analysts do not publish research reports about our business or if they make adverse recommendations regarding an investment in our common stock, our stock price and trading volume may decline.

The trading market for our common stock will be influenced by the research reports that industry or securities analysts publish about our business. We do not currently have, and may never obtain, research coverage by industry or securities analysts. If no industry or securities analysts commence coverage of us, the trading price of our common stock could be negatively impacted. In the event, we obtain industry or security analyst coverage, and if one or more of the analysts downgrade our stock or comment negatively on our prospects, our stock price would likely decline. If one or more of these analysts cease to cover us or our industry or fails to publish reports about us regularly, our common stock could lose visibility in the financial markets, which could also cause our stock price or trading volume to decline.

We may be the subject of securities class action litigation due to future stock price volatility.

Our common stock price has fluctuated significantly and may continue to do so in the future. We expect that the market price of our common stock will likely continue to fluctuate significantly and remain highly volatile. We will not have control over the factors that cause such volatility. Historically, when the market price of a stock has been volatile, holders of that stock have often initiated securities class action litigation against the company that issued the stock. If any of our stockholders bring a similar lawsuit against us, we could incur substantial costs defending the lawsuit. The lawsuit could also divert the time and attention of our management from the operation of our business.

We do not intend to declare cash dividends on our common stock.

We will not distribute any cash to our stockholders until and unless we can develop sufficient funds from operations to meet our ongoing needs and implement our business plan. As a result, your only opportunity to achieve a return on your investment in us will be if the market price of our common stock appreciates and you sell your shares at a profit. The future market price for our common stock may never exceed the price that you pay for our common stock.

ITEM 2.		PROPERTIES.

As of the date of this report, we do not own any real property. Our executive offices are now at 804 Douglas Road, Executive Tower Building, Suite 365, Coral Gables, Florida 33134. The Company does not have a lease agreement as it shares its offices with those of Dolphin Entertainment. We believe our current facilities are adequate for our operations for the foreseeable future.

ITEM 3.		LEGAL PROCEEDINGS.

On October 15, 2008, a lawsuit was filed between the Company and Mirador Consulting, Inc., in the United States District Court for the Southern District of Florida. The Plaintiffs are alleging and seeking, among other things, that the Company had breached an agreement to pay Mirador Consulting, Inc., a finder’s fee of $1,000,000 in connection with the Dolphin Digital Media acquisition. The ultimate results of these proceedings against the Company cannot be predicted with certainty. Management has moved for dismissal as they believe the claims are without substance and that the resolution of these matters will not materially affect the accompanying consolidated financial statements.

On October 1, 2009, Dolphin Digital Media, Inc, Dolphin Entertainment, Inc. and Dolphin Entertainment Capital, Inc. brought suit in the U.S. District Court for the Southern District of Florida against Mark Peikin, Joshua M. Gold, Bespoke Growth Partners, Inc., GSquared, Ltd., Carta De Dinero, LLC, Nevada Agency And Transfer Co. and Merrill Lynch Pierce Fenner & Smith Incorporated. The suit seeks recovery of corporate stock and damages occasioned by the misfeasance of Peikin, Gold and the corporate entities over which they presided (Bespoke, GSquared, Carta De Dinero) and employed to divert Plaintiff’s money and opportunities. As alleged in the complaint, Peikin and Gold served as outside and inside counsel to and officers of Plaintiffs in 2008 and 2009, as further alleged. In the course of their affiliation with Plaintiffs, they were able to use their positions of trust to gain access to Plaintiffs’ assets and opportunities and divert same to Bespoke, GSquared and Carta De Dinero. Among their actions, the Company alleged Peikin and Gold improperly directed Nevada Agency And Transfer Co. to issue one million shares of Dolphin Digital Media, Inc.’s stock to Carta De Dinero, who then transferred such shares to its account at Merrill Lynch and sold them on the open market. In this lawsuit, Plaintiffs seek recovery of the damages occasioned by the improper issuance and sale of the Dolphin Digital Media, Inc. stock, as well as the value of the actual funds and opportunities misappropriated by Peikin and Gold.

On November 2, 2009, an action was initiated by Plaintiffs Malcolm Stockdale, the Winterman Group Ltd. and Anne’s Diary, Inc. against Defendants William O’Dowd IV, Dolphin Entertainment, Inc. and Dolphin Digital Media, Inc. in the U.S. District Court for the Southern District of Florida. In their complaint, Plaintiffs alleged that O’Dowd, Dolphin Entertainment and Dolphin Digital Media conspired with the parties’ mutual counsel, Mark Peikin (who is also one of the Defendants in the action styled Dolphin Digital Media, Inc., et al. v. Mark Peikin, et al., Case No. 09-CIV-22964-KING/BANDSTRA) to acquire Logica Holdings, Inc. by fraud in 2008. Notably, Mark Peikin is not named in the suit as a Defendant. According to the complaint, Defendants conspired with Peikin to change the terms of the merger just before its closing, which change benefited O’Dowd by approximately $4,000,000. Thereafter, Plaintiffs allege that O’Dowd stole shares of stock and mismanaged Logica. Causes of action alleging conspiracy, fraud, breach of fiduciary duty and violations of the Racketeer Influenced and Corrupt Organizations Act are alleged. No specific amount of damages sought was alleged in the complaint. On January 19, 2010, Plaintiffs unilaterally and without notice dismissed the lawsuit (without prejudice to their right to re-file the action at a later date, if they choose) and did so without obtaining a settlement of any kind from any of the Defendants.

ITEM 4.		(REMOVED AND RESERVED).

PART II

ITEM 5.		MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Market for Our Common Stock

Our common stock has been traded on the over-the-counter market since November 2, 2006, and is quoted on the OTC Bulletin Board under the symbol “DPDM.OB.” The high and low bid information for each quarter since January 1, 2008, as quoted on the OTC Bulletin Board, is as follows:

Quarter		High Bid				Low Bid
Second Quarter 2010 (through April 12, 2010)		$	0.40			$	0.31
First Quarter 2010		$	0.39			$	0.20
Fourth Quarter 2009		$	0.49			$	0.19
Third Quarter 2009		$	0.51			$	0.30
Second Quarter 2009		$	0.71			$	0.45
First Quarter 2009		$	0.80			$	0.40
Fourth Quarter 2008		$	1.10			$	0.45
Third Quarter 2008		$	1.25			$	0.60
Second Quarter 2008		$	1.00			$	0.30
First Quarter 2008		$	1.69			$	0.75

The quotations above reflect inter-dealer prices, without retail mark-up, markdown or commissions and may not reflect actual transactions.

Holders

As of December 31, 2009, an aggregate of 56,959,454 shares of our common stock were issued and outstanding and were owned by approximately 266 stockholders of record, based on information provided by our transfer agent.

Dividends

We have never paid dividends on our common stock and do not anticipate that we will do so in the foreseeable future.

Equity Compensation Plan Information

The Company does not have any equity compensation plans.

Recent Sales of Unregistered Securities

The Company sold the following unregistered equity securities during 2009. Other unregistered equity securities sold by the Company during 2009 have been previously disclosed in the Company’s quarterly periodic reports on Form 10-Q filed with the SEC during 2009.

On July 27, 2009 the Company issued a total of 500,000 shares of common stock valued at $150,000 ($.39 per share) for services.

On September 18, 2009 the Company issued a total of 79,800 shares of common stock valued at $29,526 ($.37 per share) for services.

On September 18, 2009 the Company issued a total of 136,986 shares of common stock valued at $50,685 ($.37 per share) for services.

On September 18, 2009 the Company issued a total of 68,493 shares of common stock valued at $25,342 ($.37 per share) for services.

During the three months ended December 31, 2009, the Company sold 2,250,000 shares of common stock for $750,000 ($.33 per share). In addition the Company issued 1,125,000 common stock warrants with an exercise price of $1.00 expiring 2 years from the date of issuance.

During the three months ended December 31, 2009, the Company sold 600,000 shares of common stock for $150,000 ($.25 per share).

The issuance of securities described above were exempt from registration under the Securities Act of 1933 in reliance on Section 4(2) of the Securities Act of 1933 as transactions by an issuer not involving any public offering. The purchasers of the securities in these transactions represented that they were accredited investors or qualified institutional buyers and they were acquiring the securities for investment only and not with a view toward the public sale or distribution thereof. Such purchasers received written disclosures that the securities had not been registered under the Securities Act of 1933 and that any resale must be made pursuant to a registration statement or an available exemption from registration. All purchasers either received adequate access, through their relationship with the registrant, to financial statement or non-financial statement information about the registrant or had adequate access, through their relationship with the registrant, to financial statement or non-financial statement information about the registrant. The sale of these securities was made without general solicitation or advertising.

ITEM 7.		MANAGEMENT’S DISCUSSION AND ANALYSIS.

Special Note Regarding Forward Looking Statements

Certain statements in this Form 10-K under “Management’s Discussion and Analysis” constitute “forward-looking” statements within the meaning of the Private Securities Litigation Reform A ct of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such statements are indicated by words or phrases such as “anticipates,” “projects,” “believes,” “intends,” “expects,” and similar words or phrases. Such factors include, among others, the following: competition; seasonality; success of operating initiatives; new product development and introduction schedules; acceptance of new product offerings; advertising and promotional efforts; adverse publicity; availability, changes in business strategy or development plans; availability and terms of capital; labor and employee benefit costs; changes in government regulations; and other factors particular to the Company.

Should one or more of these risks, uncertainties or other factors materialize, or should underlying assumptions prove incorrect, actual results, performance, or achievements of the Company may vary materially from any future results, performance or achievements expressed or implied by such forward-looking statements. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements in this paragraph. The Company disclaims any obligation to publicly announce the results of any revisions to any of the forward-looking statements contained herein to reflect future events or developments.

Results for the year ended December 31, 2009 compared to December 31, 2008

Revenues for the year ended December 31, 2009 decreased by $914,511 from $914,551 for the year ended December 31. 2008. Due to the fact there was no web development services carried out for third parties.

The cost of sales for the year ended December 31, 2009 was $0 opposed to $346,406 for the year ended December 31, 2008. The $346,406 decrease was entirely due to the fact that the Company did not carry out website development for third parties this quarter.

The Company’s general and administration costs increased by $1,686,692 from $1,590,896 for the year ended December 31, 2008 to $3,277,588 for the year ended December 31, 2009 as a result of increased marketing and administrative costs. The Company expects to incur significant marketing expense in preparation for the worldwide launch of Dolphin Secure.

The legal and professional fees decreased by $845,627 from $1,387,040 for the year ended December 31, 2008 to $541,413 for the year ended December 31, 2009. This was as a result of legal cost incurred in the year ended December 31, 2008 for the acquisition of Dolphin Digital Media, corporate finance services and the contracted services of external consultants.

Impairment of intangible assets decreased by $10,913,114 from $11,719,732 for the year ended December 31, 2008 to $806,618 for the year ended December 31, 2009 as a result of decreased legal costs. During the year ended December 31, 2008 the Company impaired the goodwill acquired with the reverse merger of Logica Holdings.

The total expenditure for the year ended December 31, 2008 was $14,984,068 opposed to $4,698,546 for the year ended December 31, 2009. The $10,285.522 decrease was due to during the year ended December 31, 2008 the Company impaired the goodwill acquired with the reverse merger of Logica Holdings valued at $11,719,732.

Liquidity and Capital Resources

For the year ended December 31, 2009 we have relied on advances of $500,619 from our principal founders. We issued $600,000 of convertible notes payable. We sold a total of 6,829,485 shares of common stock for proceeds of $2,298,799 As of December 31, 2009, we had cash of $3,218 and a working capital deficit of $2,890,624.

We are in the process of rolling out Dolphin Secure and expanding our network of strategic partnerships. Our long term growth lies in the generation of subscription fees from memberships in Dolphin Secure. We expect to begin generating revenues from Dolphin Secure in the third quarter of 2010.

Critical Accounting Policies

Principles of Consolidation

The accompanying financial statements represent the consolidated financial position and results of operations of the Company and include the accounts and results of operations of the Company and its wholly owned subsidiary. The accompanying consolidated financial statements include the accounts of Dolphin Digital Media Inc and its subsidiaries Plays On The Net Plc, Dolphin Digital Media (Canada) Inc, Anne’s World Limited, Curtain Rising Inc and Dolphin Digital media Inc. for the period January 1, 2009 to December 31, 2009. Intercompany accounts and transactions have been eliminated in consolidation.

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. These estimates and assumptions also affect the reported amounts of revenues, costs and expenses during the reporting period. Management evaluates these estimates and assumptions on a regular basis. Actual results could differ from those estimates.

Reclassification

Certain prior period amounts have been reclassified to conform to December 31, 2008 presentations.

Revenue Recognition

The Company recognizes the monthly and annual subscription revenues over the service period. Advertising revenue is recognized over the period the advertisement is displayed. Online shopping revenues and affiliate commission income are both recognized when a customer incurs in a purchase.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. At December 31, 2009, there were no cash and cash equivalents. Cash and cash equivalents are defined to include cash on hand and cash in the bank.

Inventories

Inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out method. These inventories consisted of fingerprint readers. At December 31 2009 and 2008, the value of the company’s inventory was $91,980 and $94,048, respectively.

Property and Equipment

Property and equipment is recorded at cost and depreciated over the estimated useful lives of the assets using principally the straight-line method. When items are retired or otherwise disposed of, income is charged or credited for the difference between net book value and proceeds realized thereon. Ordinary maintenance and repairs are charged to expense as incurred, and replacements and betterments are capitalized. The range of estimated useful lives to be used to calculate depreciation for principal items of property and equipment are as follow:

		Depreciation/
		Amortization
Asset Category		Period
Furniture and Fixture		5 Years
Computer equipment		3 Years
Leasehold improvements		5 Years

Goodwill and Intangible Assets

The Company adopted Accounting Standard Codification (“ASC”) Topic 350, formerly, Statement of Financial Accounting Standard (“SFAS “) No 142, Goodwill and Other Intangible Assets, effective July 1, 2002. As a result, the Company discontinued amortization of goodwill, and instead annually evaluates the carrying value of goodwill for impairment, in accordance with the provisions of ACS Topic 350, formerly SFAS No. 142. Goodwill and indefinite-lived intangible represents the excess of the cost of investments in subsidiaries over the fair value of the net identifiable assets acquired. The Company holds licenses and expects both licenses and the cash flow generated by the use of the licenses in order to operate the platform to continue indefinitely due to the likelihood of continued renewal at little or no cost.

Impairment of Long-Lived Assets

The Company accounts for long-lived assets under the FASB Accounting Standards Codification No.’s 350 and 360 Intangibles — Goodwill and Other and Property, Plant and Equipment. In accordance with FASB ASC No.’s 350 and 360, long-lived assets, Goodwill and indefinite-lived intangible assets are reviewed for impairment by applying a fair-value based test on an annual basis or more frequently if circumstances indicate a potential impairment. If it is determined that an impairment loss is recognized for the amount by which the carrying amount of the asset exceeds its estimated fair value and classified as “Impairment” in the consolidated statement of operations. A 100% or $92,111 impairment charge was recorded in 2009 for the Novell access manager acquired during the year 2007 as it was determined by management that the future value was impaired.

Income Taxes

Deferred income taxes are recognized based on the provisions of ASC Topic 740, formerly, SFAS No. 109 , “Accounting for Income Taxes” (“SFAS 109”) for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Other

Comprehensive Income

The Company has adopted ACS Topic 220, formerly SFAS No. 130, “Reporting Comprehensive Income” (“SFAS 130”), which establishes standards for reporting and display of comprehensive income, its components and accumulated balances. The Company is disclosing this information on its Statement of Stockholders’ Equity.

Comprehensive income comprises a gain on foreign translation.

Foreign Currency Translation

The functional currency of the Company is the United States Dollar. The financial statements of the Company’s Canadians subsidiary translated to the United States dollars using the period exchange rates as to assets and liabilities and average exchange rates as to revenues and expenses. Capital accounts are translated at their historical exchange rates when the capital transaction occurred. Net gains and losses resulting from foreign exchange translations are included in the statements of operations and stockholders’ equity as other comprehensive income (loss).

Loss per share

The Company has adopted FASB Accounting Standards Codification No. 260 Earnings Per Share, Loss per common share is computed by dividing loss available to common shareholders by the weighted average number of common shares outstanding during the period. Stock warrants were not included in the computation of loss per share for the periods presented because their inclusion is anti-dilutive.

Recent Accounting Pronouncements

In June 2009, the FASB issued Financial Accounting Standards Codification No. 860 — Transfers and Servicing. FASB ASC No. 860 improves the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial statements about a transfer of financial assets; the effects of a transfer on its financial position, financial performance, and cash flows; and a transferor’s continuing involvement, if any, in transferred financial assets. FASB ASC No. 860 is effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period and for interim and annual reporting periods thereafter. The Company is evaluating the impact the adoption of FASB ASC No. 860 will have on its financial statements.

In June 2009, the FASB issued Financial Accounting Standards Codification No. 810 — Consolidation. FASB ASC No. 810 is effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter. The Company is evaluating the impact the adoption of FASB ASC No. 810 will have on its financial statements.

In June 2009, the FASB issued Financial Accounting Standards Codification No. 105-GAAP. The FASB Accounting Standards Codification (“Codification”) will be the single source of authoritative nongovernmental U.S. generally accepted accounting principles. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. FASB ASC No. 105 is effective for interim and annual periods ending after September 15, 2009. All existing accounting standards are superseded as described in FASB ASC No. 105. All other accounting literature not included in the Codification is nonauthoritative. The adoption of FASB ASC No. 105 did not have a impact on our financial statements.

Off-Balance Sheet Arrangements

As of December 31, 2009, we did not have any off-balance sheet arrangements.

ITEM 8.		FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The financial statements required by this Item 8 are included at the end of this Report beginning on page F-1 as follows:

		Page
AUDITED FINANCIAL STATEMENTS:
Report of Independent Registered Public Accounting Firm(s)			F-1
Consolidated Balance Sheets as of December 31, 2009			F-2
Consolidated Income Statements for the year ended December 31, 2009 and 2008			F-3
Consolidated Statement of Changes Stockholders Deficit for the year ended December 31, 2009 and 2008			F-4
Consolidated Statement of Cash Flows for the year ended December 31, 2009 and 2008			F-5
Notes to Consolidated Audited Financial Statements			F-6

ITEM 9.		CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

ITEM 9A(T).		CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures” as such term is defined in Rule 13a-15(e)under the Securities Exchange Act of 1934. In designing and evaluating our disclosure controls and procedures, our management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Based on his evaluation as of the end of the period covered by this Annual Report on Form 10-K, and with the participation of our consultant who also provides outsourced accounting services to us, our President who also serves as our principal financial and accounting officer, has concluded that our disclosure controls and procedures were effective.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) of the Securities Exchange Act of 1934. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2009. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework. Based on the assessment using those criteria, our management concluded that the internal control over financial reporting was effective at December 31, 2009. This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Our management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.

Changes in Internal Control over Financial Reporting.

There have been no changes in our internal control over financial reporting during our fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B.		OTHER INFORMATION.

None.

PART III

ITEM 10.		DIRECTORS, EXECUTIVE OFFICERS, CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.

Directors and Officers

The Directors and Executive Officers of the Company and the positions held by each of them are as follows. All directors serve until the Company’s next annual meeting of shareholders.

NAME		AGE				PRINCIPAL OCCUPATION
William O’Dowd, IV			40			Chief Executive Officer, CFO and Chairman of the Board of Directors
Michael Espensen			59			Director

Biographical Information

Mr. O’Dowd graduated with honors from Harvard Law School, has received a master’s degree in modern European history from Creighton University, and was named 1st-Team Academic All-American by USA Today while an undergraduate at Creighton. He was appointed Chief Executive Officer and Chairman of the Board of Directors on June 25, 2008. Mr. O’Dowd founded Dolphin Entertainment, Inc. in 1996 and has served as its principal executive officer and chairman since that date. Dolphin Entertainment is an entertainment company specializing in children’s and young adult’s live-action programming.

Mr. Espensen was appointed a Director of the Company on June 25, 2008. Mr. Espensen has been a real estate developer for over thirty years. In that time he has developed over 5,000 multi-family units, twenty-nine office buildings, and over 2,500 residential lots in Texas, Florida, North Carolina, and South Carolina. Aside from real estate development and investment, Mr. Espensen is also involved as a producer and investor in family entertainment for television and feature films. Mr. Espensen attended Trinity University and the University of Texas at Austin. Past titles include: President of the San Antonio Homebuilders Association, Director of the Texas Association of Homebuilders, and Director of the National Title Company. Currently, he is the Director of Keraplast Technologies, LTD.

Code of Ethics

We have adopted a code of ethics for our officers and directors. The Code of Ethics was filed with the SEC on February 11, 2008, as an exhibit to our Form S-1 Registration Statement.

Committees of the Board

Our Board of Directors does not currently have any committees. The roles and responsibilities of an audit committee, nominating committee and compensation committee are conducted by our full Board. Our sole director is not independent.

Compliance with Section 16(a) of the Exchange Act

Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to the Company under Rule 16a-3(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) during the year ended December 31, 2009. Mr. O’Dowd and Mr. Espensen have not filed on a timely basis the reports required by section 16(a) of the Exchange Act.

ITEM 11.		EXECUTIVE COMPENSATION.

Employment Agreements

None.

Summary Compensation Table

														Stock				Option				All Other
						Salary				Bonus				Awards				Awards				Compensation				Total
Name and Principal Position		Year				($)				($)				($)				($)				($)				($)
William O’Dowd, IV, CEO,			2009			$	0				0				0				0				0				0
President and Chairman			2008			$	0				0				0				0				0			$	0

Outstanding Equity Awards at Fiscal Year-End

None of the executive officers named in the table above have any outstanding equity awards.

Director Compensation

We have not paid either of our directors any compensation for serving on our Board of Directors.

ITEM 12.		SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The following table sets forth the beneficial ownership of our common stock as of March 31, 2010 by each person known by us to be the beneficial owner of more than five percent (5%) of our common stock, by each director, by each named executive officer, and by all directors and executive officers as a group.

Except as otherwise indicated in the footnotes to the table, we believe that each of the persons or entities named in the table exercises sole voting and investment power over the shares of common stock that each of them beneficially owns, subject to community property laws where applicable. A person is deemed to be the beneficial owner of securities owned or which can be acquired by such person within 60 days of the measurement date upon the exercise of stock options. Each person’s percentage ownership is determined by assuming that stock options beneficially owned by such person (but not those owned by any other person) have been exercised. The percentages in the table are based upon 60,717,499 shares of our common stock outstanding as of March 31, 2010.

						PERCENTAGE
						OF TOTAL
						SHARES
NAME AND ADDRESS OF OWNER (1)		SHARES				OUTSTANDING
William O’Dowd, IV			24,142,069				39.8	%
Michael Espensen			0				*
T Squared Investments LLC (2)			15,423,366				21.7	%
All Directors and Named Executive Officers as a Group (2 persons)			24,142,069				39.8	%

ITEM 13.		CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

On May 28, 2008, we entered into a Social Network Platform License Agreement with Dolphin Entertainment, Inc., a Florida corporation, and its affiliated companies, pursuant to which we granted to Dolphin Entertainment a three (3) year exclusive license to utilize our proprietary social network creation platform and visitor identification, authentication and authorization technology to create and operate several subscription-based social networking websites themed around Dolphin Entertainment’s premium family entertainment brand properties. This alliance permits the creation of highly secure social networking websites for children and young adults with the strong attraction of premium family entertainment brands, an Internet first. Dolphin Entertainment is wholly owned by William O’Dowd, IV, who became our majority shareholder, Chief Executive Officer and Chairman of the Board of Directors in connection with our acquisition of Dolphin Digital Media, Inc., a Delaware corporation, described below. Under the Social Network Platform License Agreement, we agreed to an even 50%-50% share with Dolphin Entertainment of subscription revenues generated by Dolphin Entertainment’s or its affiliates’ operation of social networking websites created with the platform, and to additional revenue shares to be determined by the parties in the event additional revenue streams other than subscription revenues (such as advertisement sales, merchandising and sublicensing) might be generated and received.

On June 23, 2008, we obtained an exclusive license to Dolphin Entertainment’s family entertainment brand properties through the acquisition of 100% of the capital stock of Dolphin Digital Media (“DDM”), a newly formed Delaware corporation wholly owned by Mr. O’Dowd. At the time of the acquisition, DDM was the grantee of an exclusive ten-year worldwide license from Dolphin Entertainment, dated as of the date of the closing of the acquisition, to use Dolphin Entertainment’s family entertainment brand properties. This license was the sole asset of DDM at the time of the acquisition, and DDM had not yet commenced planned principal operations. Under the license, we are authorized to use Dolphin Entertainment’s brand properties in connection with the creation, promotion and operation of subscription based Internet social networking websites for children and young adults. The license requires that we pay to Dolphin Entertainment royalties at the rate of fifteen percent of our net sales from performance of the licensed activities.

In consideration of the acquisition, we issued 24,063,735 shares of our common stock (constituting fifty-one percent of our issued and outstanding common stock) to Mr. O’Dowd. Additionally, in connection with the acquisition, we appointed Mr. O’Dowd our Chief Executive Officer and Chairman of the Board of Directors. In addition, we granted to Mr. O’Dowd certain anti-dilution protection for five (5) years from the date of the acquisition under which we agreed to issue such number of shares of our common stock as necessary for Mr. O’Dowd to maintain his fifty-one percent ownership any time that we issue additional shares to a party other than Mr. O’Dowd, or upon the exercise by any such party of options, warrants, notes or other securities exercisable or exchangeable for, or convertible into, any share of our common stock. As consideration for the agreement the shareholder has agreed to become the Chairman and CEO of the Company. As the shareholder is considered a related party on SAB 48 the Company has recorded the assets of Dolphin Digital Media, Inc at their historical cost.

Related party transactions with Mr. William O’Dowd IV, CEO of the Company:

On July 8, 2008, Mr. William O’Dowd IV loaned the Company $70,000 at a rate of 10% per annum. It was agreed that the loans would be on demand or converted into common restricted stock at a conversion rate of 50 cents per share. At December 31, 2008 the principle amount had accrued interest amounting to $3,363 and which $2,191 was paid back.

On October 6, 2008, Mr. William O’Dowd IV loaned the Company $250,000 at a rate of 10% per annum. It was agreed that the loans would be on demand or converted into common restricted stock at a conversion rate of 50 cents per share. At December 31, 2008 the principle amount had accrued interest amounting to $5,903.

On December 1, 2008, Mr. William O’Dowd IV loaned the Company $50,000 at a rate of 10% per annum. It was agreed that the loans would be on demand or converted into common restricted stock at a conversion rate of 50 cents per share. At December 31, 2008 the principle amount had accrued interest amounting to $417.

On December 15, 2008, Mr. William O’Dowd IV loaned the Company $200,000 at a rate of 10% per annum. It was agreed that the loans would be on demand or converted into common restricted stock at a conversion rate of 50 cents per share. At December 31, 2008 the principle amount had accrued interest amounting to $889.

Related party transactions with Mr. Malcolm H. Stockdale:

The Company retained Mr. Stockdale as consultant in July of 2007 for 24 months, with monthly compensation of $16,667. The Company granted 203,503 restricted shares to Mr. Stockdale in compensation of the first 12 months fees plus 10% interest. The fees amounted to $200,004, plus $8,509.43 of interest hence the average conversion rate was $1.02 per share.

Related party transactions with Anne’s Diary Inc.:

The Company has a an exclusive 7 year license from Anne’s Diary Inc allowing the Company to exploit technologies for secure biometric log in internet sites as well as any child and young adult related social networking platform.

Also, Anne’s Diary Inc has issued various invoices during 2008 to the Company for upgrades to the biometric login technology on the Dolphin Secure websites.

ITEM 14.		EXHIBITS.

Exhibit No.
	2.1			Exchange Agreement dated December 9, 2003, between Maximum Awards, Inc. and Maximum Awards Pty Ltd. (1)
	2.2			Share Purchase Agreement dated June 1, 2004, between Maxwell Thomas and Michael Sullivan and Maximum Awards, Inc. (for Global Business Group Pty, Ltd.) (2)
	2.3			Share Purchase Agreement dated June 1, 2004, between Maxwell Thomas and Michael Sullivan and Maximum Awards, Inc. (for Travel Easy Pty, Ltd.) (2)
	2.4			Share Exchange Agreement dated July 9, 2007, between Maximum Awards, Inc., Plays on the Net, PLC, Anne’s World Limited, Curtains Rising, Inc., and the Winterman Group Ltd. (3)
	2.5			Stock Purchase Agreement dated September 24, 2007, between Logica Holdings, Inc. and Eko Group Pty Limited (4)
	2.6			Preferred Stock Purchase Agreement dated October 4, 2007, between Logica Holdings Inc., T Squared Partners LLC, and T Squared Investments LLC (5)
	3.1			Articles of Incorporation of Rising Fortune Incorporated, as filed on March 7, 1995 (1)
	3.2			Amendment to Articles of Incorporation, as filed on December 5, 2003 (1)
	3.3			Amendment to Articles of Incorporation, as filed on May 29, 2007 (6)
	3.4			Amendment to Articles of Incorporation, as filed on August 7, 2007 (6)
	3.5			Certificate of Amendment to the Article of Incorporation, as filed on July 29, 2008 (7)
	3.6			Bylaws (1)
	4.1			Registration Rights Agreement dated October 4, 2007, between Logica Holdings and T Squared Partners LLC, and T Squared Investments LLC (5)
	4.2			Certificate of Designations of Series A Preferred Stock, filed October 10, 2007 (5)
	4.3			Common Stock Purchase Warrant A (5)
	4.4			Common Stock Purchase Warrant B (5)
	4.5			Common Stock Purchase Warrant C (5)
	4.6			Letter Agreement with T Squared Investments, LLC, dated July 29, 2009
	4.7			Subscription Agreement with T Squared Investments, LLC, dated July 29, 2009
	4.8			Common Stock Purchase Warrant “D” with T Squared Investments, LLC, dated July 29, 2009
	4.9			Letter Agreement with T Squared Investments, LLC, dated March 10, 2010
	4.10			Common Stock Purchase Warrant “E” with T Squared Investments, LLC, dated March 10, 2010

Exhibit No.
	31			Certification of the Principal Executive Officer and Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	32			Certification of the Principal Executive Officer and Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (This exhibit shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended or otherwise subject to the liability of that section. Further, this exhibit shall not be deemed incorporated by reference into any other filing under the Security Act of 1933, as amended, or by the Security Exchange Act of 1934, as amended.)

ITEM 15.		PRINCIPAL ACCOUNTANT FEES AND SERVICES.

The following table shows the fees that we were billed for audit and other services provided by our independent auditors for the periods set forth.

		Year				Year
		Ended				Ended
		12/31/2009				12/31/2008
Audit Fees		$	40,000			$	37,000
Audited-Related Fees			0				10,000
Tax Fees			0				0
All Other Fees			0				4,000
Total		$	40,000			$	51,000

Audit Fees—This category includes the audit of the Company’s annual financial statements, review of financial statements included in the Company’s Form 10-Q Quarterly Reports and services that are normally provided by the independent auditors in connection with engagements for those fiscal years.

Audit-Related Fees—This category consists of assurance and related services by the independent auditors that are reasonably related to the performance of the audit or review of the Company’s financial statements and are not reported above under “Audit Fees.”

Tax Fees—This category consists of fees billed for professional services rendered by the independent auditors for tax compliance, tax advice, and tax planning. These services include assistance regarding federal, state and international tax compliance, assistance with tax reporting requirements and audit compliance, and mergers and acquisitions tax compliance.

All Other Fees—This category consists of fees for services rendered by the independent auditors in addition to those reported above.

Overview—The Board reviews, and in its sole discretion pre-approves, our independent auditors’ annual engagement letter including proposed fees and all audit and non-audit services provided by the independent auditors. Accordingly, all services described under “Audit Fees,” “Audit-Related Fees,” “Tax Fees” and “All Other Fees” were pre-approved by our Board. The Board may not engage the independent auditors to perform the non-audit services proscribed by law or regulation.

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of
Dolphin Digital Media, Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheets of Dolphin Digital Media, Inc. and Subsidiaries as of December 31, 2009 and 2008 and the related consolidated statements of operations, changes in shareholders’ deficit and cash flows for the two years ended December 31, 2009 and 2008. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provided a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Dolphin Digital Media, Inc and Subsidiaries as of December 31, 2009 and 2008, and the consolidated results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States.

These consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has operating and liquidity concerns, has incurred net losses approximating $27,500,000 as of December 31, 2009. These factors raise substantial doubt about the ability of the Company to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties. In this regard, Management is proposing to raise any necessary additional funds through loans and additional sales of its common stock. There is no assurance that the Company will be successful in raising additional capital.

/s/ Jewett, Schwartz, Wolfe & Associates   Jewett, Schwartz, Wolfe & Associates

Hollywood, Florida
April 15, 2010

200 South Park Road, SUITE 150 • HOLLYWOOD, FLORIDA 33021 • TELEPHONE (954) 922-5885 • FAX (954) 922-5957
MEMBER — AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS • FLORIDA INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS
PRIVATE COMPANIES PRACTICE SECTION OF THE AICPA • REGISTERED WITH THE PUBLIC COMPANY
ACCOUNTING OVERSIGHT BOARD OF THE SEC

DOLPHIN DIGITAL MEDIA INC AND SUBSIDIARIES

		December 31,
		2009				2008
ASSETS
Current
Cash		$	3,218			$	51,014
Inventory			91,860				94,048
Prepaid Expenses			211,128				69
Other Current assets			635				678
Total Current Assets			306,841				145,809
Property, Plant and equipment			—				64,789
Intangible Assets			1,208,268				654,538
Total Assets		$	1,515,109			$	865,136
LIABILITIES
Current
Cash overdraft		$	14,087			$	—
Accounts payable			1,573,028				862,742
Payroll Liabilities			—				10,375
Other current liabilities			315,350				64,532
Advances from Related Parties			1,079,000				578,381
Notes payable (Net of discount of $84,000)			216,000				—
Total Current Liabilities			3,197,465				1,516,030
Long Term Liabilities
Notes payable convertible (Net of discount of $73,032)			230,143				—
Total Long Term Liabilities			230,143				—
Total Liabilities			3,427,608				1,516,030
STOCKHOLDERS’ DEFICIT
Common Share Capital, $0.015 par value, 100,000,000 shares authorized, 56,959,454 issued and outstanding as of December 31, 2009 and 49,236,904 issued and outstanding as of December 31 2008			897,141				738,553
Preferred Share Capital $0.001 par value, 10,000,000 shares authorized, 500,000 shares issued and outstanding			500				500
Additional Paid-In Capital			24,854,441				21,360,530
Accumulated Deficit			(27,529,526	)			(22,609,785	)
Comprehensive Loss / Income			(135,055	)			(140,692	)
Total Stockholders’ Deficit			(1,912,499	)			(650,894	)
Total Liabilities and Stockholders’ Deficit		$	1,515,109			$	865,136

The accompanying notes are an integral part of these consolidated financial statements.

DOLPHIN DIGITAL MEDIA INC AND SUBSIDIARIES

		For the Years ended
		December 31,
		2009				2008
Revenues		$	—			$	914,551
Cost of Sales			—				346,406
Gross Profit			—				568,145
Expenditures:
General and Administrative			3,277,588				1,590,896
Legal and Professional Fees			541,413				1,387,040
Depreciation			23,229				32,328
Impairment of Intangible Assets			806,618				11,719,732
Impairment of Fixed Assets			49,698
Amortization of Stock Compensation			—				254,072
Total Expense			4,698,546				14,984,068
Loss from Operations			(4,698,546	)		$	(14,415,923	)
Other Expenses
Interest Expense			221,195				38,458
Liquidated Damages			—				262,500
Total Other Expenses			221,195				300,958
Net (Loss) / Profit from operations		$	(4,919,741	)		$	(14,716,881	)
Foreign Currency Adjustments			5,637				(40,667	)
Comprehensive (Loss) / Profit		$	(4,914,104	)		$	(14,757,548	)
Basic and Diluted Loss per Share		$	(0.09	)		$	(0.42	)
Basic and Diluted Weighted Average Number of Shares Outstanding during the Period			53,926,712				35,521,287

The accompanying notes are an integral part of these consolidated financial statements.

Dolphin Digital Media Inc and Subsidiaries

																		Additional								Accumulated								Total
		Preferred Stock								Common Stock								Paid-in				Deferred				Comprehensive				Accumulated				Stockholders
		Shares				Amount				Shares				Amount				Capital				Compensation				Loss / Gain				Defecit				Deficit
Balance December 31, 2007			500,000			$	500				20,500,642			$	307,565			$	7,941,022			$	(254,072	)		$	(100,025	)		$	(7,852,237	)		$	42,753
Shares Issued for Cash			—				—				300,000				4,500				25,500				—				—				—				30,000
Shares Issued for Liquidated Damages			—				—				187,500				2,813				259,688				—				—				—				262,501
Shares Issued for Acquisitions			—				—				24,063,735				360,956				10,997,819				—				—				—				11,358,775
Shares issued for Services & Payables			—				—				272,021				4,024				238,693				—				—				—				242,717
Shares issued for cash			—				—				3,913,006				58,695				1,897,808				—				—				—				1,956,503
Deferred Compensation			—				—				—				—				—				—				—				—				—
Amortization of Deferred Compensation			—				—				—				—				—				254,072				—				—				254,072
Comprehensive Loss / Gain			—				—				—				—				—				—				(40,667	)			—				(40,667	)
Net loss for the year ended December 31, 2008			—				—				—				—				—				—				—				(14,757,548	)			(14,757,548	)
Balance December 31, 2008			500,000			$	500				49,236,904			$	738,553			$	21,360,530			$	—			$	(140,692	)		$	(22,609,785	)		$	(650,894	)
Shares issued for Services			—				—				3,743,065				56,146				1,053,347				—				—				—				1,109,493
Shares Issued for Cash			—				—				6,829,485				102,442				2,196,357				—				—				—				2,298,799
Warrants issued for notes payable			—				—				—				—				76,207				—				—				—				76,207
Beneficial conversion on convertible notes			—				—				—				—				168,000				—				—				—				168,000
Comprehensive Loss / Gain			—				—				—				—				—				—				5,637				—				5,637
Net loss for the year ended December 31, 2009			—				—				—				—				—				—				—				(4,919,741	)			(4,919,741	)
			500,000			$	500				59,809,454			$	897,141			$	24,854,441			$	—			$	(135,055	)		$	(27,529,526	)		$	(1,912,499	)

The accompanying notes are an integral part of these consolidated financial statements.

DOLPHIN DIGITAL MEDIA INC. AND SUBSIDIARIES

		2009				2008
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss		$	(4,919,741	)		$	(14,757,548	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation			23,229				32,328
Amortization of debt discount			90,350				—
Impairment of fixed assets			56,602
Impairment of intangibles			99,211				—
Amortization of common stock compensation			—				254,072
Common Stock issued for compensation			1,109,493				—
Shares Issued — Liquidated Damages			—				262,501
Shares Issued — Services Rendered			—				242,717
Impairment of goodwill			—				11,358,776
Changes in operating assets and liabilities:
Increase / (Decrease) in prepaid expenses			(211,059	)			399
Increase / (Decrease) in other current assets			43				11,218
Increase / (Decrease) in Inventory			2,188				(91,819	)
Increase / (Decrease) in accounts payable			710,286				638,850
Increase / (Decrease) in payroll liabilities			(10,375	)			—
Increase / (Decrease) in other current liabilities			250,818				66,870
Net Cash (Used In) Operating Activities			(2,798,955	)			(1,981,636	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of computers			(15,042	)			(3,314	)
Purchase of intangible assets			(652,941	)			(525,403	)
Net Cash (Used In) Investing Activities			(667,983	)			(528,717	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in cash overdraft			14,087				—
Proceeds from convertible notes payable			300,000				—
Proceeds from sale of common stock			2,298,799				30,000
Advances from Related Parties			500,619				578,381
Proceeds from note payable			300,000				1,956,503
Net Cash Provided By Financing Activities			3,413,505				2,564,884
Foreign Currency Adjustments			5,637				(40,667	)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS			(47,796	)			13,864
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD			51,014				37,150
CASH AND CASH EQUIVALENTS, END OF PERIOD		$	3,218			$	51,014
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION:
Interest paid		$				$	38,458
Income taxes		$	—				—
SUPPLEMENTAL DISCLOSURES OF NON CASH FLOWS
INVESTING AND FINANCING ACTIVITIES:
Liquidated Damages		$				$	262,501
Conversion of debt to equity		$	—			$	1,956,503
Conversion of accounts payable to equity		$	—			$	242,717

The accompanying notes are an integral part of these consolidated financial statements.

DOLPHIN DIGITAL MEDIA, INC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008

NOTE 1 — ORGANIZATION AND BASIS OF PRESENTATION:

Basis of Presentation and Organization

Dolphin Digital Media Inc (the “Company”), initially known as Rising Fortune Incorporated, was incorporated in the State of Nevada on March 7, 1995. The Company was inactive between the years 1996 and 2003. On November 19th, 2003, the Company amended its Articles of Incorporation to change its name to Maximum Awards Inc. On July 3 2007 the Company amended its Articles of Incorporation again to change its name to Logica Holdings Inc. On July 29 2008, the Company amended its Articles of Incorporation again to change its name to Dolphin Digital Media Inc

Dolphin Digital Media Inc is a holding company whose primary focus is in the e-commerce and information technology sector.

Plays On The Net Plc was incorporated in London (United Kingdom) on May 23 2006. The company began as an online database for unpublished playwrights. A platform for writers to share their work, to communicate with fellow dramatists and to explore new ideas, it has since grown into an extensive retail site for book and audio downloads and all-round theatre information site.

Dolphin Digital Media (Canada) Inc (Former Plays On The Net Inc) was incorporated in Ontario (Canada) on July 27 2006. It is a fully owned subsidiary of Plays On the Net Plc and is considered as the North American arm of its parent company which also develops from time to time websites for sale to third parties. The Company changes it name on October 28, 2008.

Anne’s World Limited was incorporated in Ontario (Canada) on August 3 2006. The company obtained the license for a secure social networking website for children. The website is an interactive virtual world for young people, secured with cutting-edge biometric technology in the form of a personal fingerprint reader.

Curtain Rising Inc was incorporated in Ontario (Canada) on October 19 2006. The company’s main activity is an online database for theatres and a bi-weekly online theatre magazine. Organized by city, the concept was a user-friendly search engine which would enable theatergoers to locate productions, venues and information with ease.

Dolphin Digital Media Inc (Delaware subsidiary) was incorporated in Delaware in June of 2008. The company owns a 10 year exclusive world-wide license and right to utilize the Property of Dolphin Entertainment Inc but solely upon and in connection the creation, promotion and operation of its Internet social networking websites.

On June 23 2008 the Company purchased 100% of Dolphin Digital Media Inc. The Company issued a total of 24,063,735 of common shares of 51% of its outstanding common stock for the acquisition of Dolphin Digital Media Inc resulting in a change of control. The total amount of issued and outstanding share for the period ended June 30, 2008 was 47,183,793. The acquisition was accounted for as a reverse merger transaction with Logica Holdings. Historical financials are those of Logica Holdings.

NOTE 2 — GOING CONCERN

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America which contemplate continuation of the Company as a going concern. The Company has yearend losses from operations for 2009 and 2008. During the year ended December 31, 2009 the Company recorded an accumulated deficit of approximating $27,0529,526. Further, the Company has inadequate working capital to maintain or develop its operations, and is dependent upon funds from private investors and the support of certain stockholders.

These factors raise substantial doubt about the ability of the Company to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of these uncertainties. In this regard, Management is planning to raise any necessary additional funds through loans and additional sales of its common stock. There is no assurance that the Company will be successful in raising additional capital.

NOTE 3 — SUMMARIES OF SIGNIFICANT ACCOUNTING POLICIES

These financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States of America. Significant accounting policies are as follows:

Principles of Consolidation

The accompanying financial statements represent the consolidated financial position and results of operations of the Company and include the accounts and results of operations of the Company and its wholly owned subsidiary. The accompanying consolidated financial statements include the accounts of Dolphin Digital Media Inc and its subsidiaries Plays On The Net Plc, Dolphin Digital Media (Canada) Inc, Anne’s World Limited, Curtain Rising Inc and Dolphin Digital media Inc. for the period January 1, 2009 to December 31, 2009. Intercompany accounts and transactions have been eliminated in consolidation.

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. These estimates and assumptions also affect the reported amounts of revenues, costs and expenses during the reporting period. Management evaluates these estimates and assumptions on a regular basis. Actual results could differ from those estimates.

Reclassification

Certain prior period amounts have been reclassified to conform to December 31, 2008 presentations.

Revenue Recognition

The Company recognizes the monthly and annual subscription revenues over the service period. Advertising revenue is recognized over the period the advertisement is displayed. Online shopping revenues and affiliate commission income are both recognized when a customer incurs in a purchase.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. At December 31, 2009, there were no cash and cash equivalents. Cash and cash equivalents are defined to include cash on hand and cash in the bank.

Inventories

Inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out method. These inventories consisted of fingerprint readers. At December 31 2009 and 2008, the value of the company’s inventory was $91,980 and $94,048, respectively.

Property and Equipment

Property and equipment is recorded at cost and depreciated over the estimated useful lives of the assets using principally the straight-line method. When items are retired or otherwise disposed of, income is charged or credited for the difference between net book value and proceeds realized thereon. Ordinary maintenance and repairs are charged to expense as incurred, and replacements and betterments are capitalized. The range of estimated useful lives to be used to calculate depreciation for principal items of property and equipment are as follow:

		Depreciation/
		Amortization
Asset Category		Period
Furniture and Fixture		5 Years
Computer equipment		3 Years
Leasehold improvements		5 Years

Goodwill and Intangible Assets

The Company adopted Accounting Standard Codification (“ASC”) Topic 350, formerly, Statement of Financial Accounting Standard (“SFAS”) No. 142, Goodwill and Other Intangible Assets, effective July 1, 2002. As a result, the Company discontinued amortization of goodwill, and instead annually evaluates the carrying value of goodwill for impairment, in accordance with the provisions of ACS Topic 350, formerly SFAS No. 142. Goodwill and indefinite-lived intangible represents the excess of the cost of investments in subsidiaries over the fair value of the net identifiable assets acquired. The Company holds licenses and expects both licenses and the cash flow generated by the use of the licenses in order to operate the platform to continue indefinitely due to the likelihood of continued renewal at little or no cost.

Impairment of Long-Lived Assets

The Company accounts for long-lived assets under the FASB Accounting Standards Codification No.’s 350 and 360 Intangibles — Goodwill and Other and Property, Plant and Equipment. In accordance with FASB ASC No.’s 350 and 360, long-lived assets, Goodwill and indefinite-lived intangible assets are reviewed for impairment by applying a fair-value based test on an annual basis or more frequently if circumstances indicate a potential impairment. If it is determined that an impairment loss is recognized for the amount by which the carrying amount of the asset exceeds its estimated fair value and classified as “Impairment” in the consolidated statement of operations. A 100% or $92,111 impairment charge was recorded in 2009 for the Novell access manager acquired during the year 2007 as it was determined by management that the future value was impaired.

Income Taxes

Deferred income taxes are recognized based on the provisions of ASC Topic 740, formerly, SFAS No. 109, “Accounting for Income Taxes” (“SFAS 109”) for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Other

Comprehensive Income

The Company has adopted ACS Topic 220, formerly SFAS No. 130, “Reporting Comprehensive Income” (“SFAS 130”), which establishes standards for reporting and display of comprehensive income, its components and accumulated balances. The Company is disclosing this information on its Statement of Stockholders’ Equity.

Comprehensive income comprises a gain on foreign translation.

Foreign Currency Translation

The functional currency of the Company is the United States Dollar. The financial statements of the Company’s Canadians subsidiary translated to the United States dollars using the period exchange rates as to assets and liabilities and average exchange rates as to revenues and expenses. Capital accounts are translated at their historical exchange rates when the capital transaction occurred. Net gains and losses resulting from foreign exchange translations are included in the statements of operations and stockholders’ equity as other comprehensive income (loss).

Loss per share

The Company has adopted FASB Accounting Standards Codification No. 260 Earnings Per Share, Loss per common share is computed by dividing loss available to common shareholders by the weighted average number of common shares outstanding during the period. Stock warrants were not included in the computation of loss per share for the periods presented because their inclusion is anti-dilutive. The total potential dilutive warrants and stock options outstanding at December 31, 2009 and 2008, were 7,036414 and 4,100,000 warrants, respectively. There were no dilutive securities outstanding for the period ended December 31, 2009.

Business Segments

The Company operates the following business segments:

	1)		Dolphin Digital Media (USA): The Company’s primary business model is monthly and annual membership fees in the US for subscription to Dolphinsecure.com, DolphinSurf.com and Dolphinsurfkids.com.
	2)		Dolphin Digital Media (Canada): The Company’s primary business model is monthly and annual membership fees in Canada for subscription to Dolphinsecure.com, DolphinSurf.com and Dolphinsurfkids.com. The Company’s secondary business model is web design for third parties.
	3)		Curtain Rising: the Company’s primary business model is advertising in the online by weekly theatre magazine.

Fair Value of Financial Instruments

Fair value of certain of the Company’s financial instruments including cash and cash equivalents, inventory, account payable, accrued expenses, notes payables, and other accrued liabilities approximate cost because of their short maturities. The Company measures and reports fair value in accordance with ASC 820, “Fair Value Measurements and Disclosure” defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value investments.

Fair value, as defined in ASC 820, is 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. The fair value of an asset should reflect its highest and best use by market participants, principal (or most advantageous) markets, and an in-use or an in-exchange valuation premise. The fair value of a liability should reflect the risk of nonperformance, which includes, among other things, the Company’s credit risk.

Valuation techniques are generally classified into three categories: the market approach; the income approach; and the cost approach. The selection and application of one or more of the techniques may require significant judgment and are primarily dependent upon the characteristics of the asset or liability, and the quality and availability of inputs. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. ASC 820 also provides fair value hierarchy for inputs and resulting measurement as follows:

Level 1

Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities;

Level 2

Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities; and

Level 3

Unobservable inputs for the asset or liability that are supported by little or no market activity and that are significant to the fair values.

Fair value measurements are required to be disclosed by the Level within the fair value hierarchy in which the fair value measurements in their entirety fall. Fair value measurements using significant unobservable inputs (in Level 3 measurements) are subject to expanded disclosure requirements including a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (i) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings, and a description of where those gains or losses included in earning are reported in the statement of income.

Concentration of Credit Risk

The Company did not have cash in banks in excess of FDIC insurance limits. During the year ended December 31, 2008, one customer accounted for 99% of the Company’s sales. During the year ended December 31, 2009 the Company did not have any sales.

Recent Accounting Pronouncements

Recent accounting pronouncements that the Company has adopted or will be required to adopt in the future are summarized below.

In June 2009, the FASB issued Financial Accounting Standards Codification No. 860 — Transfers and Servicing. FASB ASC No. 860 improves the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial statements about a transfer of financial assets; the effects of a transfer on its financial position, financial performance, and cash flows; and a transferor’s continuing involvement, if any, in transferred financial assets. FASB ASC No. 860 is effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period and for interim and annual reporting periods thereafter. The Company is evaluating the impact the adoption of FASB ASC No. 860 will have on its financial statements.

In June 2009, the FASB issued Financial Accounting Standards Codification No. 810 — Consolidation. FASB ASC No. 810 is effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter. The Company is evaluating the impact the adoption of FASB ASC No. 810 will have on its financial statements.

In June 2009, the FASB issued Financial Accounting Standards Codification No. 105-GAAP. The FASB Accounting Standards Codification (“Codification”) will be the single source of authoritative nongovernmental U.S. generally accepted accounting principles. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. FASB ASC No. 105 is effective for interim and annual periods ending after September 15, 2009. All existing accounting standards are superseded as described in FASB ASC No. 105. All other accounting literature not included in the Codification is nonauthoritative. The Adpotion of FASB ASC No. 105 did not have a impact on our financial statements.

NOTE 4 — PROPERTY, PLANT AND EQUIPMENT

The Company has fixed assets as of December 31, 2009 and 2008 as follows:

		December 31,				December 31,
		2009				2008
Property, plant and equipment		$	122,042			$	122,042
Accumulated depreciation			(122,042	)			(57,253	)
Total		$	—			$	64,789

Depreciation Expense is $64,789 and $32,328 for December 31, 2009 and 2008, respectively.

NOTE 5 — INTANGIBLE ASSETS

The Company has intangible assets as of December 31, 2009 and 2008 as follows:

		December 31,				December 31,
		2009				2008
Novell access manager		$	—			$	99,211
Other intangible assets			29,924				29,924
Dolphin Secure Websites			1,178,344				525,403
Total		$	1,208,268			$	654,538

A 100% or $92,111 impairment charge was recorded in 2009 for the Novell access manager acquired during the year 2007 as it was determined by management that the future value was impaired.

NOTE 6 — NOTES PAYABLE — CONVERTIBLE

		December 31, 2009
Note Amount		$	300,000
Discount			(84,000	)
Net		$	216,000

In January 2009 the Company received proceeds of $200,000 from a note payable. The note bears interest at a rate of 10% per annum and is convertible at $.50 per share. The note is due two years from the date of issuance. Accrued interest at December 31, 2009 amount to $19,616. The Company recorded beneficial conversion of $112,000. The Company is amortizing the beneficial conversion over the term of the note. Amortization expense at December 31, 2009 amounted to $56,000.

In March 2009 the Company received proceeds of $100,000 from a note payable. The note bears interest at a rate of 10% and is convertible at $.50 per share. The note is due two years from the date of issuance. Accrued interest at December 31, 2009 amount to $7,534. The Company recorded beneficial conversion of $56,000. The Company is amortizing the beneficial conversion over the term of the note. Amortization expense at December 31, 2009 amounted to $28,000.

NOTE 7 — NOTE PAYABLE RELATED PARTY

At December 31, 2009 The Company’s CEO had loaned the Company a total of $1,079,000. This amount has accrued interest at a rate of 10%. The outstanding amount indebted to Mr. William O’Dowd includes accrued interest of $111,278 at December 31, 2009.

NOTE 8 — NOTE PAYABLE — CONVERTIBLE

In July 2009 the Company entered into a convertible promissory note in the amount of $300,000. The Company has agreed to issue 231,000 common stock warrants at an exercise price of $.0001 pursuant to the note agreement. The note is convertible into 769,231 shares of common ($.39 per share) and 384,616 common stock warrants with an exercise price of $.80. The Note is due July 29, 2015. The fair value of the warrants was estimated on the grant date using the Black-Scholes option pricing model with the following weighted average assumptions: expected dividend yield 0%, volatility 121%, risk-free interest rate of 1%, and expected warrant life of 6 months The fair value of the warrants on the date of issuance was $76,207. The Company will amortize the value of the warrants over the term of the note. As of December 31, 2009 the Company recorded amortization expense of $6,350 related to the note.

		December 31, 2009
Note Amount		$	300,000
Discount			(69,857	)
Net		$	230,143

NOTE 9 — LICENSING AGREEMENTS

The Company recognizes a ten year licensing agreement between Dolphin Entertainment Inc. and Dolphin Digital Media Inc. Under the license, the Company is authorized to use Dolphin Entertainment’s brand properties in connection with the creation, promotion and operation of subscription based Internet social networking websites for children and young adults. The license requires that the Company pays to Dolphin Entertainment royalties at the rate of fifteen percent of net sales from performance of the licensed activities. No sales were recorded during the year ended December 31, 2009.

NOTE 10 — STOCKHOLDERS EQUITY

A) Preferred Stock

The Company’s Articles of Incorporation authorize the issuance of 10,000,000 shares of $0.001 par value preferred stock. The Board of Directors has the power to designate the rights and preferences of the preferred stock and issue the preferred stock in one or more series.

a) On October 4, 2007 the Company issued 250,000 preferred shares for a cash consideration of $250,000. These preferred shares are convertible by the investor into 2.5 shares of common stock or $ .40 per share.

b) On November 7, 2007 the Company issued 250,000 preferred shares for a cash consideration of $250,000. These preferred shares are convertible by the investor into 2.0833 shares of common stock or $ .48 per share.

As of December 31, 2007, the Company had 500,000 preferred shares issued and outstanding.

On October 4th 2007, the company entered into a financing agreement whereby Warrants were issued to an investor to purchase the following amounts of common stock:

	a)		650,000 shares of common stock exercisable at $0.72 per share.
	b)		1,500,000 shares of common stock exercisable at $1.00 per share.
	c)		1,500,000 shares of common stock exercisable at $2.00 per share.

The Warrants contain cashless exercise provisions and are exercisable until October 4th, 2011.

B) Common Stock

The company’s Articles of Incorporation authorize the issuance of 100,000,000 shares at $0.015 par value.

The following transactions occurred during 2009 and 2008:

On January 14 2008, the company issued 187,500 common shares as part of a liquidated damages indemnity clause due to late filing of a registration statement. The Dollar value of this transaction was $262,500.

On February 14 2008, the Company sold 300,000 common shares for cash at $ .50 cents per share.

On March 3 2008, the Company sold 1,000,000 common shares for cash at $ .50 cents per share.

On April 29, 2008, the Company sold 2,560 common shares for cash at $ .50 cents per share. Total cash received was $1,260.

On May 1st 2008, the company issued to T Squared Investments LLC 300,000 common shares of Dolphin Digital Media Inc for a consideration of $ .10 per share, the total consideration was $30,000.

On May 1, 2008, the Company issued 25,000 common shares for $ .50 for $12,500 of marketing & consulting services rendered.

On June 6, 2008, the Company sold 25,000 common shares for cash at $ .50 cents per share. Total cash received was $12,500.

On June 6, 2008, the Company issued 43,518 common shares at $ .50 for $21,704 of consulting services rendered to the Company.

On June 17, 2008, the Company issued 203,504 common shares for $1.02 for $208,513 of marketing & consulting services rendered.

On June 19, 2008, the Company sold 557,335 common shares for cash at $ .50 cents per share. Total cash received was $278,668.

On June 23 2008 the Company issued 24,063,735 common shares for the acquisition of Dolphin Digital Media Inc.

On September 30 2008, the Company sold 1,463,922 common shares at $ .50 cents per share. Total cash received was $731,961.

On December 31, 2008, the Company sold 564,188 common shares for $ .50 cents per share. Total cash received was $282,094.

On April 9, 2009 the Company sold 256,410 shares of common for $100,000 ($.39 per share). In addition the Company issued 128,502 common stock warrants with an exercise price of $.80.

On April 9, 2009 the Company sold 67,103 shares of common for $26,170 ($.39 per share). In addition the Company issued 33,552 common stock warrants with an exercise price of $.80.

On April 10, 2009 the Company sold 1,000,000 shares of common for $250,000 ($.25 per share).

On May 20, 2009 the Company sold 128,205 shares of common for $50,000 ($.39 per share). In addition the Company issued 64,103 common stock warrants with an exercise price of $.80.

On June 10, 2009 the Company sold 50,000 shares of common for $19,500 ($.39 per share). In addition the Company issued 25,000 common stock warrants with an exercise price of $.80.

On June 30, 2009 the Company sold 500,000 shares of common for $195,000 ($.39 per share). In addition the Company issued 250,000 common stock warrants with an exercise price of $.80.

On July 2, 2009 the Company sold 120,000 shares of common for $33,600 ($.28 per share).

On August 26, 2009 the Company sold 51,282 shares of common for $20,000 ($.39 per share). In addition the Company issued 25,641 common stock warrants with an exercise price of $.80.

On August 31, 2009 the Company sold 1,000,000 shares of common for $390,000 ($.39 per share). In addition the Company issued 500,000 common stock warrants with an exercise price of $.80.

On September 18, 2009 the Company sold 500,000 shares of common for $195,000 ($.39 per share). In addition the Company issued 250,000 common stock warrants with an exercise price of $.80.

On September 28, 2009 the Company sold 300,000 shares of common for $117,000 ($.39 per share). In addition the Company issued 150,000 common stock warrants with an exercise price of $.80.

During the three months ended December 31, 2009 the Company sold 2,250,000 shares of common for $750,000 ($.33 per share). In addition the Company issued 1,125,000 common stock warrants with an exercise price of $1.00 expiring 2 years from the date of issuance.

During the three months ended December 31, 2009 the Company sold 600,000 shares of common for $150,000 ($.25 per share).

Common stock issued for services

On March 20, 2009 the Company issued a total of 1,350,000 shares of common stock valued at $270,000 ($.20 per share) for services.

On March 20, 2009 the Company issued a total of 500,000 shares of common stock valued at $100,000 ($.20 per share) for services.

On July 10, 2009 the Company issued a total of 86,000 shares of common stock valued at $37,840 ($.44 per share) for services.

On July 10, 2009 the Company issued a total of 1,000,000 shares of common stock valued at $440,000 ($.44 per share) services. The foregoing shares are the subject of ongoing litigation, in which the Company claims that the shares were improperly issued.

On July 27, 2009 the Company issued a total of 21,786 shares of common stock valued at $37.840 ($.44 per share) for services.

On July 27, 2009 the Company issued a total of 500,000 shares of common stock valued at $150,000 ($.39 per share) for services.

On September 18, 2009 the Company issued a total of 79,800 shares of common stock valued at $29,526 ($.37 per share) for services.

On September 18, 2009 the Company issued a total of 136,986 shares of common stock valued at $50,685 ($.37 per share) for services.

On September 18, 2009 the Company issued a total of 68,493 shares of common stock valued at $25,342 ($.37 per share) for services.

During 2007, the Company entered into a consulting agreement with a consultant to provide management and public relations services. The agreement calls for the consultant to provide services for a period of one year and the consultant to receive: 400,000 shares of common stock and warrants to purchase 50,000 shares of common stock at an exercise price of $2.50 for a period of two years, and warrants to purchase 50,000 shares of common stock at an exercise price of $5.00 for a period of two years. The common stock has a fair value of $200,000 based on recent cash offerings and will be amortized over the life of the agreement ($0.50 per share). The fair value of the warrants was estimated on the grant date using the Black-Scholes option pricing model with the following weighted average assumptions: expected dividend yield 0%, volatility 123%, risk-free interest rate of 3.94%, and expected warrant life of two years. The value of the warrants on the date of issuance was $103,686. For the year ended December 31, 2008, the Company has recognized consulting expense of $297,684 under the agreement. During the year 2008 the Company has recorded deferred stock compensation of $254,072.

In June of 2008, the Company obtained an exclusive license to Dolphin Entertainment Inc.’s family entertainment brand properties through the acquisition of 100% of the capital stock of Dolphin Digital Media, a newly formed Delaware corporation wholly owned by William O’Dowd, IV. At the time of the acquisition, Dolphin Digital was the grantee of an exclusive ten-year worldwide license from Dolphin Entertainment, dated as of the date of the closing of the acquisition, to use Dolphin Entertainment’s family entertainment brand properties relating to certain live-action television and film productions, including: Zoey 101, Ned’s De-Classified School Survival Guide, Roxy Hunter, Shredderman Rules, Last Day of Summer, Gym Teacher, Spectacular, Soul Surfer: The Bethany Hamilton Story, and Millennium Kiss. This license was the sole asset of Dolphin Digital at the time of the acquisition, and Dolphin Digital had not yet commenced its planned principal operations. Under the license, the Company is authorized to use Dolphin Entertainment’s brand properties in connection with the creation, promotion and operation of subscription based Internet social networking websites for children and young adults. The license requires that the Company pays to Dolphin Entertainment royalties at the rate of fifteen percent (15%) of our net sales from performance of the licensed activities. Net Sales is defined in the license as meaning the number of units sold by Dolphin Digital arising from the performance of the licensed activities multiplied by Dolphin Digital’s established prices as published on the Dolphin Digital websites or other official Dolphin Digital pricing publications in force at the time of sale. No set-offs, third-party royalties, or deductions of any kind may be taken in the determination of net sales or the royalties due to Dolphin Entertainment.

Also, on June 23 2008 the Company purchased 100% of Dolphin Digital Media Inc. The Company issued a total of 24,063,735 of common shares of 51% of its outstanding common stock for the acquisition of Dolphin Digital Media Inc resulting in a change of control. In addition the Company also agreed to an anti-dilution provision for the shareholder of Dolphin Digital Media, Inc. As consideration for the agreement the shareholder has agreed to become the Chairman and CEO of the Company. As the shareholder is considered a related party on SAB 48 the Company has recorded the assets of Dolphin Digital Media, Inc at their historical cost. The total amount of issued and outstanding share for the period ended June 30, 2008 was 47,183,793. The acquisition was accounted for as reverse merger transaction with Logica Holdings. The acquisition was value at $11,560,029 at a price of $.50 per share the most recent cash sale of common stock.

		June 23, 2008
Cash		$	3,584
Inventory			100,997
Prepaid expenses			572
Other assets			727
Fixed assets			76,868
Intangible assets			132,582
Total assets			315,330
Less: Liabilities and notes payable			(475,033	)
Net liabilities acquired			(159,703	)
Value of stock issued			11,560,029
Liabilities acquired			159,703
Goodwill		$	11,719,732

The goodwill recorded represented the control premium paid in the transaction. As required by ASC 350, the Company assessed the goodwill at December 31, 2008 and based upon this assessment the Company determined there was no future economic value in the goodwill resulting from the reverse merger with Logica Holdings. Accordingly, the Company fully impaired the value as of December 31, 2008.

NOTE 11 — INCOME TAXES

The provision (benefit) for income taxes from continued operations for the years ended December 31, 2009 and 2008 consist of the following:

		December 31,
		2009				2008
Current:			—				—
			—				—
Deferred benefit:		$	1,777,000			$	5,200,000
			1,777,000				5,200,000
Valuation allowance			(1,777,000	)			(5,200,000	)
(Benefit) provision for income taxes, net		$	—			$	—

The difference between income tax expense computed by applying the federal statutory corporate tax rate and actual income tax expense is as follows:

		December 31,
		2009				2008
Combined statutory income tax rate			36.12	%			36.12
Valuation allowance			(36.12	)%			(36.12	)%
Effective tax rate			—				—

Deferred income taxes result from temporary differences in the recognition of income and expenses for the financial reporting purposes and for tax purposes. The tax effect of these temporary differences representing deferred tax asset and liabilities result principally from the following:

		December 31,
		2009				2008
Net operating loss carry-forward							14,400,000
Valuation allowance			(1,777,000	)			(14,400,000	)
Deferred income tax asset		$	—			$	—

The Company has a net operating loss carry-forward of approximately $16,100,000 available to offset future taxable income through 2029.

NOTE 12 — STOCK OPTION PLAN

For the period ended December 31st 2009, the Company had not implemented a stock option plan.

NOTE 13 — COMMITMENTS AND CONTINGENCIES

LEASE COMMITMENTS

The Company headquarters is in Miami, Florida, where it leases office space at $3,237 per month.

NOTE 14 — LITIGATION

Dolphin Digital Media, Inc., et al v. Mark Peikin, et al. - Case No. 09-CIV-22964-KING/BANDSTRA

On October 1, 2009, Dolphin Digital Media, Inc, Dolphin Entertainment, Inc. and Dolphin Entertainment Capital, Inc. brought suit in the U.S. District Court for the Southern District of Florida against Mark Peikin, Joshua M. Gold, Bespoke Growth Partners, Inc., GSquared, Ltd., Carta De Dinero, LLC, Nevada Agency And Transfer Co. and Merrill Lynch Pierce Fenner & Smith Incorporated. The suit seeks recovery of corporate stock and damages occasioned by the misfeasance of Peikin, Gold and the corporate entities over which they presided (Bespoke, GSquared, Carta De Dinero) and employed to divert Plaintiff’s money and opportunities. As alleged in the complaint, Peikin and Gold served as outside and inside counsel to and officers of Plaintiffs in 2008 and 2009. As further alleged, in the course of their affiliation with Plaintiffs, they were able to use their positions of trust to gain access to Plaintiffs’ assets and opportunities and divert same to Bespoke, GSquared and Carta De Dinero. Among their actions, the Company alleged Peikin and Gold improperly directed Nevada Agency And Transfer Co. to issue one million shares of Dolphin Digital Media, Inc.’s stock to Carta De Dinero, who then transferred such shares to its account at Merrill Lynch and sold them on the open market. In this lawsuit, Plaintiffs seek recovery of the damages occasioned by the improper issuance and sale of the Dolphin Digital Media, Inc. stock, as well as the value of the actual funds and opportunities misappropriated by Peikin and Gold.

Malcolm Stockdale, et al. v. William O’Dowd, et al., Case No. 09-23338-CIV-JORDAN

This action was initiated on November 2, 2009. Therein Plaintiffs Malcolm Stockdale, the Winterman GroupLtd. and Anne’s Diary, Inc. sued Defendants William O’Dowd IV, Dolphin Entertainment, Inc. and Dolphin Digital Media, Inc. in the U.S. District Court for the Southern District of Florida. In their complaint, Plaintiffs alleged that O’Dowd, Dolphin Entertainment and Dolphin Digital Media conspired with the parties’ mutual counsel, Mark Peikin (who is also one of the Defendants in the action styled Dolphin Digital Media, Inc., et al. v. Mark Peikin, et al., Case No. 09-CIV-22964-KING/BANDSTRA) to acquire Logica Holdings, Inc. by fraud in 2008. Notably, Mark Peikin is not named in the suit as a Defendant. According to the complaint, Defendants conspired with Peikin to change the terms of the merger just before its closing, which change benefited O’Dowd by approximately $4,000,000.00. Thereafter, Plaintiffs allege that O’Dowd stole shares of stock and mismanaged Logica. Causes of action alleging conspiracy, fraud breach of fiduciary duty and violations of the Racketeer Influenced and Corrupt Organizations Act are alleged. No specific amount of damages sought was alleged in the complaint. On January 19, 2010, Plaintiffs unilaterally and without notice dismissed the lawsuit (without prejudice to their right to re-file the action at a later date, if they choose) and did so without obtaining a settlement of any kind from any of the Defendants.

NOTE 15 — RELATED PARTY TRANSACTIONS

Related party transactions with Mr. William O’Dowd IV, CEO of the Company:

On July 8, 2008, The Company’s CEO loaned the Company $70,000 at a rate of 10% per annum. It was agreed that the loans would be on demand or converted into common restricted stock at a conversion rate of 50 cents per share. At December 31, 2008 the principle amount had accrued interest amounting to $3,363 and which $2,191 was paid back.

On October 6, 2008, The Company’s CEO loaned the Company $250,000 at a rate of 10% per annum. It was agreed that the loans would be on demand or converted into common restricted stock at a conversion rate of 50 cents per share. At December 31, 2008 the principle amount had accrued interest amounting to $5,903.

On December 1, 2008, The Company’s CEO loaned the Company $50,000 at a rate of 10% per annum. It was agreed that the loans would be on demand or converted into common restricted stock at a conversion rate of 50 cents per share. At December 31, 2008 the principle amount had accrued interest amounting to $417.

On December 15, 2008, The Company’s CEO loaned the Company $200,000 at a rate of 10% per annum. It was agreed that the loans would be on demand or converted into common restricted stock at a conversion rate of 50 cents per share. At December 31, 2008 the principle amount had accrued interest amounting to $889.

At December 31, 2009 The Company’s CEO had loaned the Company a total of $1,079,000. This amount has accrued interest at a rate of 10%. The outstanding amount indebted to Mr. William O’Dowd includes accrued interest of $111,278 at December 31, 2009.

Related party transactions with Mr. Malcolm H. Stockdale:

The Company retained Mr. Stockdale as consultant in July of 2007 for 24 months. The agreed monthly compensation was $16,667. The Company granted 203,503 restricted shares to Mr. Stockdale in compensation of the first 12 months fees plus 10% interest. The fees amounted to $200,004, plus $8,509.43 of interest hence the average conversion rate was $1.02 per share.

Related party transactions with Anne’s Diary Inc.:

The Company has a an exclusive 7 year license from Anne’s Diary Inc allowing the Company to exploit technologies for secure biometric log in internet sites as well as any child and young adult related social networking platform.

Also, Anne’s Diary Inc has issued various invoices during 2008 to the Company for upgrades to the biometric login technology on the Dolphin Secure websites.

NOTE 16 — SUBSEQUENT EVENTS

Subsequent to year end the Company sold to two individuals a total of 600,000 shares of common for $150,000 ($.25 per share).

Subsequent to year end the Company sold to nine individuals a total of 1,546,974 shares of common for $510,500 ($.33 per share). In addition the Company issued 773,487 common stock warrants with an exercise price of $1.00.

Subsequent to year end the Company sold to an investor 64,103 shares of common for $25,000 ($.39 per share). In addition the Company issued 64,103 common stock warrants with an exercise price of $.80.

Subsequent to year end the Company issued a total of 250,000 shares of common stock for services.

On March 10, 2010 the Company and T Squared Investments LLC agrees to cancel the following warrants:

•

Warrant “A” for 650,000 shares;

•

Warrant “B” for 1,500,000 shares;

•

Warrant “C” for 1,500,000 shares; and,

•

Warrant “4” for 384,615 shares.

Post such cancellation, the only warrants held by T Squared Investments LLC is their existing Warrant “D” for 231,000 shares with an exercise price of $0.0001 per share and the following warrant below. Pursuant to this agreement the expiration date of Warrant “D” will be reduced from July 28, 2014 to December 31, 2012.

In consideration for the cancellation of such warrants above and for the payment to the DPDM described below, T Squared Investments LLC will be issued a new Warrant “E” for 7,000,000 shares of DPDM with an expiration date of December 31, 2012 and an exercise price of $0.25 per share.

Upon execution T Squared Investments LLC will immediately wire Two Hundred Thousand Dollars ($200,000) to the Company, which will result in the effective reduction of the exercise price of Warrant “E” from $0.25 per share to $0.2214 per share. T Squared Investments LLC can continually pay the Company an amount of money to reduce the exercise price of Warrant “E” until such time as the exercise price of Warrant “E” is effectively $0.0001 per share. Each time a payment by T Squared Investments LLC is made to DPDM, a side letter will be executed by both parties that states the new effective exercise price of Warrant “E” at that time. At such time when T Squared Investments LLC has paid down Warrant “E” to an exercise price of $0.0001 per share or less, T Squared Investments LLC shall have the right to exercise Warrant “E” via a cashless provision and hold for six months to remove the legend under Rule 144.

T Squared Investments LLC may not exercise such warrant if post the exercise, T Squared Investments LLC would be above the 9.99% ownership level of the Company. All terms of this letter and Warrant E (as laid out in the Warrant “E”) are effective upon execution by both parties as of the date written above. T Squared Investments LLC will make a good faith effort to exercise or pay the applicable amount to reduce the exercise price of Warrant “E” by $750,000 by September 30th, 2010.

Immediately upon signing this agreement and wiring DPDM $200,000.00, T Squared Investments LLC will have the following warrants outstanding.

New Warrant “E”:		Amount:				7,000,000 shares
		Exercise price:				$0.2214 per share
		Expiration Date:				12/31/2012
New Warrant “D”:		Amount:				231,000 shares
		Exercise price:				$0.0001 per share
		Expiration Date:				12/31/2012

On April 6, 2010 T-Squared Investments, LLC paid down an additional $200,000 reducing the exercise price on the warrants to $.1928.

The company evaluated subsequent events through the filing date of April, 14 2010.