TUMBLEWEED HOLDINGS, INC. - FORM 10-Q

Attached files

file	filename
EX-32.1 - CERTFICATION OF CEO - TUMBLEWEED HOLDINGS, INC.	f10q0310ex32i_digcreative.htm
EX-31.1 - CERTFICATION OF CEO - TUMBLEWEED HOLDINGS, INC.	f10q0310ex31i_digcreative.htm
EX-31.2 - CERTFICATION OF CFO - TUMBLEWEED HOLDINGS, INC.	f10q0310ex31ii_digcreative.htm
EX-32.2 - CERTFICATION OF CFO - TUMBLEWEED HOLDINGS, INC.	f10q0310ex32ii_digcreative.htm

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2010

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

For the transition period from ________ to ________

Commission file number: 0-22315

DIGITAL CREATIVE DEVELOPMENT CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

Utah		34-1413104
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

720 Fifth Avenue 10th Floor, New York, New York 10019

(Address of Principal Executive Offices)

(212) 247-0581

(Issuer's telephone number, including area code)

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

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

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

Large accelerated filer o		Accelerated filer o

Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company x

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

As of May 27, 2011, there were 53,864,165 shares of the issuer’s common stock, par value $0.01 per share, outstanding.

DIGITAL CREATIVE DEVELOPMENT CORPORATION AND SUBSIDIARY

FOR THE NINE MONTHS ENDED

March 31, 2010

INDEX

Part I - FINANCIAL INFORMATION

Item 1.	CONDENSED FINANCIAL STATEMENTS	F-1

	Condensed Consolidated Balance Sheets as March 31, 2010 (Unaudited) and June 30, 2009	F-1

	Condensed Consolidated (Unaudited) Statements of Operations and Comprehensive Loss for the three months and nine months ended March 31, 2010 and 2009	F-2

	Condensed Consolidated (Unaudited) Statement of Stockholders’ Equity for the nine months ended March 31, 2010	F-3

	Condensed Consolidated Statements of Cash Flow for the nine months ended March 31, 2010 and 2009 (Unaudited)	F-4

	Notes to Condensed Consolidated Financial Statements	F-5 -9

Item 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION	3

Item 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	5

Item 4.	CONTROLS AND PROCEDURES	5

Part II	OTHER INFORMATION

Item 1.	LEGAL PROCEEDINGS	5

Item 1 A.	RISK FACTORS	6

Item 2.	UNREGISTERED SALES OF EQUITY SECURITIES	6

Item 3.	DEFAULTS UPON SENIOR SECURITIES	6

Item 4.	SUBMISSION OF MATTERS TO A VOTE	6

Item 5.	OTHER INFORMATION	6

Item 6.	EXHIBITS AND REPORTS ON FORM 8-K	6

	Signatures	7

	Certifications	8-11

PART 1---FINANCIAL INFORMATION

Item 1. Condensed Financial Statements

DIGITAL CREATIVE DEVELOPMENT CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS

ASSETS
	March 31, 2010			June 30, 2009
	(Unaudited)			(Audited)
	(in thousands)
CURRENT ASSETS
Cash and cash equivalents	$	0.6		$	0.4
Marketable securities available-for-sale and non-marketable securities
net of $300,000 at March 31, 2010 and June 30, 2009		75.0			150.6
TOTAL CURRENT ASSETS		75.6			151.0


TOTAL ASSETS	$	75.6		$	151.0

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES
Accrued expenses and other liabilities	$	528.6		$	483.6
Accrued interest		693.5			560.5
Notes payable--related parties		808.1			808.1
TOTAL CURRENT LIABILITIES		2,030.2			1,852.2


STOCKHOLDERS' EQUITY (DEFICIT)
Preferred Stock 2,000,000 Shares Authorized
Series A Convertible, Par Value $1 ; 2,200 Shares Issued and
Outstanding; Involuntary Liquidation Preference of $ 1 Per Share
Plus Accrued and Unpaid Dividends		2.2			2.2
Series C, Par Value $100 ; 9,900 Shares Issued and
Outstanding; Involuntary Liquidation Preference of $100 Per Share
Plus Accrued and Unpaid Dividends		990.0			990.0
Series D, Par Value $100 ; 4,000 Shares Issued and
Outstanding; Involuntary Liquidation Preference of $100 Per Share
Plus Accrued and Unpaid Dividends		400.0			400.0
Common Stock, Par Value $.01; Authorized 75,000,000 Shares; Issued and Outstanding:
53,864,165 Shares at March 31, 2010 and June 30 , 2009		538.6			538.6
Additional paid in capital		38,242.8			38,242.8
Accumulated other comprehensive loss		(2,649.0	)		(2,576.6	)
Accumulated deficit		(39,479.2	)		(39,298.2	)
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)		(1,954.6	)		(1,701.2	)

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)	$	75.6		$	151.0

See accompanying Notes to Condensed Consolidated Financial Statements

F-1

Item 1. Condensed Financial Statements (cont’d)

DIGITAL CREATIVE DEVELOPMENT CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)

	For the Nine Months Ended March 31 ,						For the Three Months Ended March 31,
	2010			2009			2010			2009
	(in thousands)						(in thousands)

REVENUE	$	-		$	-		$	-		$	-


OPERATING EXPENSES
General and administrative expenses		45.0			180.9			15.0			97.2

LOSS FROM OPERATIONS		(45.0	)		(180.9	)		(15.0	)		(97.2	)


OTHER INCOME (EXPENSE)
Interest expense, net and other		(133.0	)		(134.4	)		(44.6	)		(86.4	)
Realized losses on marketable securities available-for-sale		(3.0	)		(86.9	)		-			(2.3	)

TOTAL OTHER INCOME (EXPENSE)		(136.0	)		(221.3	)		(44.6	)		(88.7	)

NET LOSS		(181.0	)		(402.2	)		(59.6	)		(185.9	)

UNDECLARED PREFERRED STOCK DIVIDENDS		(109.1	)		(109.1	)		(36.4	)		(36.4	)

NET LOSS APPLICABLE TO COMMON SHAREHOLDERS	$	(290.1	)	$	(511.3	)	$	(96.0	)	$	(222.3	)

EARNINS PER COMMON SHARE
Basic	$	-		$	-		$	-		$	-
Diluted	$	-		$	-		$	-		$	-

WEIGHTED AVERAGE NUMBER OF OUTSTANDING SHARES FOR
BASIC AND DILUTED EARNINGS PER SHARE		53,864.2			53,864.2			53,864.2			53,864.2

OTHER COMPREHENSIVE LOSS
Unrealized loss on marketable securities available-for-sale		(72.4	)		(862.2	)		(30.2	)		(131.3	)
Net loss	$	(181.0	)	$	(402.2	)	$	(59.6	)	$	(185.9	)
TOTAL OTHER COMPREHENSIVE LOSS	$	(253.4	)	$	(1,264.4	)	$	(89.8	)	$	(317.2	)

See accompanying Notes to Condensed Consolidated Financial Statements

F-2

Item 1. Condensed Financial Statements (cont’d)

DIGITAL CREATIVE DEVELOPMENT CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED MARCH 31, 2010
(in thousands)
(unaudited)

											Accumulated
									Additional		Other
	Preferred Stock						Common		Paid-in		Comprehensive			Accumulated
	Series A		Series C		Series D		Stock		Capital		Loss			Deficit			Total

Balance at June 30, 2009 (audited)	$	2.2	$	990.0	$	400.0	$	538.6	$	38,242.8	$	(2,576.6	)	$	(39,298.2	)	$	(1,701.2	)

Unrealized loss on marketable securities												(72.4	)					(72.4	)

Net loss															(181.0	)		(181.0	)

Balance at March 31, 2010 (unaudited)	$	2.2	$	990.0	$	400.0	$	538.6	$	38,242.8	$	(2,649.0	)	$	(39,479.2	)	$	(1,954.6	)

See accompanying Notes to Condensed Consolidated Financial Statements

F-3

Item 1. Condensed Financial Statements (cont’d)

DIGITAL CREATIVE DEVELOPMENT CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED MARCH 31,
(unaudited)

	2010			2009
	(in thousands)

CASH FLOWS FROM OPERATING ACTIVITES:
Net loss	$	(181.0	)	$	(402.2	)
Adjustments to reconcile net loss to net cash used in operating activities:
Net realized losses on marketable securities		3.0			86.9

Changes in assets and liabilities:
Increase in accounts payable, accrued expenses and other liabilities		178.0			280.9

NET CASH USED IN OPERATING ACTIVITIES		-			(34.4	)

CASH FLOWS FROM INVESTING ACTIVITES:
Proceeds from sale of investments, net of purchases		0.2			21.9

NET CASH PROVIDED BY INVESTING ACTIVITIES		0.2			21.9

CASH FLOWS FROM FINANCING ACTIVITES:
Borrowings from related parties		-			12.5
NET CASH PROVIDED BY FINANCING ACTIVITIES		-			12.5

NET CHANGE IN CASH AND CASH EQUIVALENTS	$	0.2		$	0.0

CASH AND EQUIVALENTS, beginning of period		0.4			-

CASH AND EQUIVALENTS, end of period	$	0.6		$	0.0

CASH PAYMENTS FOR:
Interest expense	$	-		$	-
Income taxes	$	-		$	-

See accompanying Notes to Condensed Consolidated Financial Statements

F-4

DIGITAL CREATIVE DEVELOPMENT CORPORATION AND SUBSIDIARY

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2010

(Unaudited)

NOTE 1- BASIS OF PRESENTATION

The condensed consolidated financial statements include the accounts of Digital Creative Development Corporation and its wholly owned subsidiary (collectively, the "Company").

The accompanying condensed consolidated financial statements as of March 31, 2010 and for the three months and nine months ended March 31, 2010 and 2009 are unaudited and have been prepared by the Company in accordance with the rules and regulations of the Securities and Exchange Commission relating to interim financial statements. The accompanying consolidated balance sheet as of June 30, 2009 and other information as of June 30, 2009 has been derived from the Company's audited annual financial statements. These condensed financial statements do not include all disclosures provided in the Company's annual financial statements. The condensed financial statements should be read in conjunction with the financial statements and notes thereto for the year ended June 30, 2009 contained in the Company's Form 10-K filed with the Securities and Exchange Commission. All adjustments of a normal recurring nature, which, in the opinion of management, are necessary to present a fair statement of results for the periods have been made. The results of operations for the three months and nine months ended March 31, 2010 are not necessarily indicative of the results to be expected for the full year.

NOTE 2- DOUBT AS TO CONTINUING AS A GOING CONCERN

Our condensed consolidated unaudited financial statements were prepared on the assumption that we will continue as a going concern. We currently have a working capital and equity deficit of $1,954,600 and are in default of our notes payable. Our ability to obtain resources sufficient to continue to meet our obligations as they come due is dependent on raising cash through the sale of Broadcaster, Inc. shares; and/or raising additional equity; and obtaining forbearance of our debt holders. We intend to use our cash as well as other funds in the event that they shall be available on commercially reasonable terms, to finance our activities, although we can provide no assurance that these additional funds will be available in the amounts or at the times we may require. Management believes that it can obtain the additional funds necessary to continue its operations.

NOTE 3- PRINCIPLES OF CONSOLIDATION

The condensed consolidated financial statements include the accounts of Digital Creative Development Corporation and its wholly owned subsidiary, (collectively the "Company"). The Company currently has no active business. However, the Company was involved in acquiring and investing in software and high technology companies, with a focus on acquiring controlling interests and has entered into the software technology industry through the investment in International Microcomputer Software, Inc. (“IMSI”), (n/k/a Broadcaster, Inc). Since 1982, IMSI (n/k/a Broadcaster, Inc.) had been a developer and publisher of productivity software in precision design, graphics design and other related business applications, as well as graphics and CAD (Computer Aided Design) software and internet technology. On June 2, 2006 IMSI closed on its acquisition of AccessMedia Networks, Inc. The company now operates under the name of Broadcaster, Inc., and operates an Internet entertainment network.

F-5

DIGITAL CREATIVE DEVELOPMENT CORPORATION AND SUBSIDIARY

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2010

(Unaudited)

NOTE 4- MARKETABLE SECURITIES

The Company had investments and advances in certain marketable and non-marketable debt and equity securities at March 31, 2010 (unaudited) and June 30, 2009 (audited) as follows:

	(in thousands)
	March 31, 2010		June 30, 2009
	(Unaudited)		(Audited)
Marketable Securities - current:
Broadcaster, Inc., - at cost	$	2,724.0	$	2,736.2
Access Propeller Holdings, Inc., at cost		300.0		300.0
Unrealized loss on marketable securities		(2,649.0)		(2,585.6)
Less: allowance for impairments		(300.0)		(300.0)
Total - at fair market value	$	75.0	$	150.6

Until August 2007 the shares of Broadcaster, Inc. owned were "restricted securities" as defined in Rule 144 under the Securities Act of 1933. Under Rule 144, the Company could publicly sell, within any three month period, a number of shares not to exceed one percent of Broadcaster, Inc.'s then outstanding shares of common stock. In the event that Broadcaster, Inc. became listed on the NASDAQ or on a national securities exchange, the maximum amount that could be sold was the greater of one percent of the outstanding shares and the average weekly trading volume of Broadcaster, Inc.'s common stock for the four weeks preceding the Company's filing of a notice of sale with the SEC. Since these shares were restricted, the shares, which could be sold within one year, were classified as a current asset and the balance of the shares were classified in other assets, as non-current, on the balance sheet.

In August 2007, that restriction was removed after the departure of Bruce Galloway in May 2007, a former director and significant shareholder of the Company from the Board of Directors of Broadcaster. Accordingly, the restriction as to the balance sheet classification of these shares was also removed and classified as current assets.

The Company adopted ASC 820-10 (previously SFAS 157, Fair Value Measurements), which expands application of fair value accounting. ASC 820-10 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosure of fair value measurements. ASC 820-10 determines fair value to be the price that would be received for an investment in a current sale, which assumes an orderly transaction between market participants on the measurement date. ASC 820-10 requires the Company to assume that the portfolio investment is sold in principal market to market participants, or in the absence of a principal market, the most advantageous market, which may be a hypothetical market. Market participants are defined as buyers and sellers in the principal or most advantageous market that are independent, knowledgeable, and willing and able to transact. In accordance with ASC 820-10, the Company has considered its principal market as the market in which the Company exits its portfolio investments with the greatest volume and level of activity. ASC 820-10 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. In accordance with ASC 820-10, these inputs are summarized in the three broad levels listed below: Level 1 – Valuations based on quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.

Level 2 – Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

Level 3 – Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

F-6

DIGITAL CREATIVE DEVELOPMENT CORPORATION AND SUBSIDIARY

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2010

(Unaudited)

In addition to using the above inputs in investment valuations, we continue to employ the valuation policy approved by our board of directors that is consistent with ASC 820-10 (see Note 1). Consistent with our valuation policy, we evaluate the source of inputs, including any markets in which our investments are trading (or any markets in which securities with similar attributes are trading), in determining fair value. Our valuation policy considers the fact that because there is not a readily available market value for most of the investments in our portfolio, the fair value of the investments must typically be determined using unobservable inputs.

Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may fluctuate from period to period. Additionally, the fair value of our investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values that we may ultimately realize. Further, such investments are generally subject to legal and other restrictions on resale or otherwise are less liquid than publicly traded securities. If we were required to liquidate a portfolio investment in a forced or liquidation sale, we may realize significantly less than the value at which we have previously recorded it.

In addition, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different than the valuations currently assigned.

The following table presents fair value measurements of investments as of March 31, 2010 (dollars in thousands):



			Fair Value Measurements Using
	Total		Level 1		Level 2		Level 3
Investments	$	75.0	$	-	$	75.0	$	-

The following table presents changes in investments that use Level 2 inputs for the nine months ended March 31, 2010:

	Nine months ended March 31, 2010 (in thousands)
Balance as of June 30, 2009	$	2,727.2
Net unrealized losses		(2,649.0)
Net purchases, sales or redemptions		(3.2)
Net transfers in and/or out of Level 2		-
Balance as of March 31, 2010	$	75.0

As of March 31, 2010, the net unrealized loss on the investments that use Level 2 inputs was $2,649,000.

Several of the officers, directors and significant shareholders of Broadcaster were defendants in an action captioned Paul Goodman v. Spelling, et al in New York State Supreme Court. On January 16, 2008, Mr. Goodman commenced an action in New York State Supreme Court against Broadcaster and certain of its officers, directors, and shareholders, seeking monetary damages “in an amount to be determined but not less than $10 million plus other special, punitive and compensatory damages” for alleged defamation contained in a Company filing with the SEC. Mr. Goodman sought and obtained an ex parte temporary restraining order, which was vacated by the Court upon hearing argument from the defendants. This action had been removed and transferred to the Federal District Court for the Southern District of New York and then transferred to United States District Court for the Central District of California. Management of Broadcaster believes that the action was without merit and intended to defend it vigorously.

A total of 200,000 shares of Broadcaster, Inc. common stock secures the Company's 15% $325,000 Promissory Note to Multi Mag Corporation and approximately 373,845 shares of Broadcaster, Inc. common stock secures the $345,000 Notes to investors. The shares reflect the 1 for 2 reverse stock split of Broadcaster's shares effected at June 25, 2007. Due to the recent decline in the price of shares of Broadcaster, the Notes are now under-collateralized.

F-7

DIGITAL CREATIVE DEVELOPMENT CORPORATION AND SUBSIDIARY

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2010

(Unaudited)

The Company has sold 3,500 shares of Broadcaster, Inc. from July 1, 2009 through March 31, 2010. The proceeds of approximately $200 have been used for general working capital purposes.

From time to time, the Company may continue to sell a certain amount of its holdings in Broadcaster, Inc. The proceeds of these sales are anticipated to be principally used by the Company for general working capital purposes.

NOTE 5- ACCRUED EXPENSES AND OTHER LIABILITIES

Accrued expenses primarily consist of accrued legal and other professional fees and general administrative expenses of the Company.

NOTE 6- NOTES PAYABLE - RELATED PARTIES

At March 31, 2010 (unaudited) and June 30, 2009 (audited) the Company’s long term debt consisted of the following:

	(in thousands)
	March 31, 2010		June 30, 2009
	(Unaudited)		(Audited)
Secured Promissory Note with Interest at 15%, due December 31, 2007	$	325.0	$	325.0
Secured Promissory Notes with Interest at 10%, due December 31, 2008		345.0		345.0
Notes payable to certain former executives and related parties
with interest at 10%, due on various dates		138.1		138.1
		808.1		808.1

Less: Current portion		808.1		808.1
Long-term portion	$	-	$	-

Of the $345,000 Secured Promissory Notes, all but three of these noteholders whose notes total $195,000 have extended their notes to December 31, 2008. The Company's management is confident that future extensions can be obtained if necessary, but there can be no assurance that the Company will be able to obtain such extensions. The remaining three noteholders have not agreed to extend. Currently all of these notes are now in default .Interest expense in the amount of $84,600 was charged to operations in the nine months ended March 31, 2010.

On May 30, 2007, the Company and Multi-Mag executed Amendment #5 to the $325,000 Secured Promissory Note. This amendment extended the maturity date of the Note to December 31, 2007 upon the payment of accrued interest from June 1, 2006 through May 31, 2007 in the amount of $48,750 payable no later than July 15, 2007. This amount was paid on August 8, 2007 and any defaults were waived by Multi-Mag. The Company and Multi-Mag are currently in negotiations to extend the due date of the note. The Company’s management is confident that future extensions can be obtained. Although extensions were obtained in the past, there can be no assurance that the Company will be able to obtain these extensions, if needed. Interest expense in the amounts of $ 37,100 was charged to operations in the nine months ended March 31, 2010.

F-8

DIGITAL CREATIVE DEVELOPMENT CORPORATION AND SUBSIDIARY

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2010

(Unaudited)

NOTE 7- CONTINGENCIES

The Company is involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company's consolidated results of operations or financial position.

NOTE 8- STOCK-BASED COMPENSATION

In October, 2005, the Company made a contingent award to two of its current directors, Gary Herman and Skuli Thorvaldsson, as well as an award to a former director and significant shareholder, Bruce Galloway. The award consisted of options granted to purchase 7,440,000 shares of common stock at exercise prices ranging from $.0732 per share to $0.1385 and expiring through June 2015. These options, awarded for services rendered in connection with past services, including the restructuring of the Company in fiscal year 2002; director services; and other services, were valued at approximately $798,500, utilizing the Black-Scholes method.

The Company’s Board of Directors has approved this compensation for services rendered to the Company by Messrs. Herman and Thorvaldsson contingent upon the receipt of a fairness opinion from an independent advisory firm and approval of such fairness opinion by the Board of Directors. The Board of Directors has not reviewed or approved the opinion of the independent advisory firm. If such compensation is granted in full, the value of the related awards will approximate $798,500 and be charged to earnings at that time. Further, the Company finalized compensation agreements for Messrs. Herman and Thorvaldsson which include amounts to be paid for past services to the Company for the calendar years 2002, 2003, 2004, 2005 and 2006.

F-9

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Statements contained in this Quarterly Report on Form 10-Q, other than the historical financial information, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All such forward-looking statements involve known and unknown risks, uncertainties or other factors which may cause actual results, performance or achievement of the Company to be materially different from any future results, performance or achievement expressed or implied by such forward-looking statements. Factors that might cause such a difference include, but are not limited to, risks and uncertainties related to the substantial capital requirements, development of effective internal processes and systems, the ability to attract and retain high quality employees, changing overall economy and other risks described herein and in the Company's June 30,2009 Annual Report on Form 10-K.

PLAN OF OPERATION

Digital Creative Development Corporation (the “Company”) was principally involved in acquiring and investing in software and high technology companies, with a focus on acquiring controlling interests. At present, the Company does not have an operating business except for its interest in Broadcaster, Inc., (OTCBB- BCAS). The Company has since begun to search for candidates with which to enter into business combinations or strategic transactions.

The Company intends to locate and enter into a transaction with an existing, public or privately-held company that in management's view has growth potential (a "Target Business"). A transaction with a Target Business may be structured as a merger, consolidation, exchange of the Company's common stock for stock or assets of the Target Business or any other form, which will result in the combined enterprise remaining a publicly-held corporation.

Acquisitions or business combinations may not be available at the times or on terms acceptable to the Company, or at all. In addition, acquiring, or combining with, a business involves many risks, including:

·	Unforeseen obligations or liabilities;

·	Difficulty assimilating the acquired operations and personnel;

·	Risks of entering markets in which we have little or no direct prior experience;

·	Potential impairment of relationships with employees or customers as a result of changes in management;

·	Potential dilutive issuances of equity, large and immediate write-offs, the incurrence of debt, and amortization of goodwill or other intangible assets; and

·	Unforeseen obligations or liabilities.

The Company cannot make assurances that we will make any acquisitions or business combinations or that we will be able to obtain additional financing for such acquisitions or combinations, if necessary. If any acquisitions or combinations are made, we cannot make assurances that we will be able to successfully integrate the acquired or combined business into our operations or that the acquired or combined business will perform as expected. Furthermore, Federal and state tax laws and regulations have a significant impact upon the structuring of transactions. Management will evaluate the possible tax consequences of any prospective transaction and will endeavor to structure a transaction so as to achieve the most favorable tax treatment. There can be no assurance that the Internal Revenue Service or relevant state tax authorities will ultimately assent to our tax treatment of a particular consummated transaction. To the extent the Internal Revenue Service or any relevant state tax authorities ultimately prevail in recharacterizing the tax treatment of a transaction, there may be adverse tax consequences to us, a target business and their respective stockholders. Tax considerations as well as other relevant factors will be evaluated in determining the precise structure of a particular transaction, which could be effected through various forms of a merger, consolidation or stock or asset acquisition.

Pending negotiation and consummation of a transaction, the Company anticipates that it will have, aside from carrying on its search for a transaction partner, no business activities, and, thus, no source of revenue. Should the Company incur any significant liabilities prior to a combination with a Target Business, it may not be able to satisfy, without additional financing, such liabilities as are incurred.

RESULTS OF OPERATIONS

Nine Month Period Ended March 31, 2010 Compared To The Nine Month Period Ended March 31, 2009.

The net loss of $181,000 during the nine month period ended March 31, 2010 was less than the net loss in the comparable 2009 period, due to the Company ceasing its operations thus incurring lower general and administrative costs in the current period and lower realized losses on investments sold to fund its operations.

Three Month Period Ended March 31, 2010 Compared To The Three Month Period Ended March 31, 2009

The net loss of $59,600 during the three month period ended March 31, 2010 was less than the net loss in the comparable 2009 period due primarily to the Company ceasing its operations.

LIQUIDITY AND CAPITAL RESOURCES

The Company's current liabilities exceeded its current assets by approximately $1,954,600 at March 31, 2010, compared to current liabilities exceeding its current assets by $1,701,200 at June 30, 2009. The change in this financial condition was principally the result of continued operating losses, principally the result of interest expenses and other administrative costs.

Since the Company is inactive, except for its interest in Broadcaster, and it is not contemplated that Broadcaster will declare and pay dividends on its common stock, the Company depends upon sales of its shares of Broadcaster, Inc common stock, which are quoted on the OTCBB in order to meet its expenses, unless the Company obtains funding from third parties, of which there can be no assurance. The Company has sold 3,500 shares of Broadcaster, Inc. from July 1, 2009 through March 31, 2010. The proceeds of approximately $200 have been used for general working capital purposes.

The amount of proceeds available to the Company from the sale of shares of Broadcaster, Inc. depends upon the market for Broadcaster, Inc. shares, which is subject to volatility in price and market volume.

The proceeds of any such sales are anticipated to be principally used by the Company for general working capital purposes. The Company anticipates that its working capital needs will be financed by sales of Broadcaster shares until and unless the Company acquires a profitable operating business or makes other investments.

The condensed consolidated unaudited financial statements were prepared on the assumption that the Company will continue as a going concern. Considering the working capital and equity deficit of $1,954,600, and the fact that we are in default of our notes payable, the Company’s ability to obtain resources sufficient to continue to meet obligations as they come due is dependent on raising cash through the sale of Broadcaster, Inc. shares and/or raising additional equity; and obtaining forbearance of our debt holders. However the Company can provide no assurance that these additional funds will be available in the amounts or at the times required. Management currently believes that it can obtain the additional funds necessary to continue its operations.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company’s equity investments are concentrated in Broadcaster, Inc. At March 31, 2010, 100% of the total fair value of equity investments was concentrated in Broadcaster, Inc. The Company’s present preferred strategy is to hold equity investments for trading purposes and for long-term strategic purposes. Thus, the Company’s management is not necessarily troubled by short term equity price volatility with respect to its investments provided that the underlying business, economic and management characteristics of the investees remain favorable. The carrying values of investments subject to equity price risks are based on quoted market prices or management’s estimates of fair value as of the balance sheet dates. Market prices are subject to fluctuation and, consequently, the amount realized in the subsequent sale of an investment may significantly differ from the reported market value. Fluctuation in the market price of a security may result from perceived changes in the underlying economic characteristics of the investee, the relative price of alternative investments and general market conditions. Furthermore, amounts realized in the sale of a particular security may be affected by the relative quantity of the security being sold. Insofar as the Company’s liabilities are concerned, all loans to the Company have been made with fixed interest rates, and, accordingly, the market risk to the Company prior to the maturity of those instruments is minimal.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company's chief executive officer in conjunction with the chief financial officer, after evaluating the effectiveness of the Company's "disclosure controls and procedures" (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report (the "Evaluation Date") has concluded that the Company's disclosure controls and procedures are effective in ensuring that material information required to be disclosed is included in the reports that it files with the Securities and Exchange Commission.

This quarterly report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the securities and Exchange Commission that permit the Company to provide only management’s report in this report.

Changes in Internal Controls

During this fiscal quarter ,there were no significant changes in the Company's internal controls over financial reporting or, to the knowledge of the management of the Company, in other factors that could significantly affect those controls subsequent to the Evaluation Date.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The Company is, from time to time, the subject of litigation, claims and assessments arising out of matters occurring during the normal operation of the Company's business. In the opinion of management, the liability, if any, under such current litigation, claims and assessments, that are material, have been properly accrued.

Item 1A. Risk Factors

Item 2.Unregistered Sales of Equity Securities and Uses of Proceeds

None.

Item 3.Defaults upon Senior Securities

None.

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

None.

Item 5.Other Information

None.

Item 6.Exhibits And Reports On Form 8-K

(a)	Exhibits: None.

31.01 Chief Executive Officer---Certification pursuant to Rule 13a-14 (a) of the Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.02 Chief Financial Officer--- Certification pursuant to Rule 13a-14 (a) of the Exchange Act of 193,4 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.01 Chief Executive Officer---Certification pursuant to Rule 13a-14(b) of the Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.02 Chief Financial Officer-- Certification pursuant to Rule 13a-14(b) of the Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(b)	Reports on Form 8-K

None

SIGNATURES

In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	DIGITAL CREATIVE DIGITAL CORPORATION

Dated: June 3, 2011	By:	/s/ Gary Herman
		Name: Gary Herman
		Title: Chief Executive Officer

	By:	/s/ Vincent De Lorenzo
		Name: Vincent De Lorenzo
		Title: Chief Financial Officer

Attached files

TUMBLEWEED HOLDINGS, INC. Reports

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