The accompanying consolidated
financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America
which contemplate the continuation of the Company as a going concern. The Company has incurred a net loss for the year ended December
31, 2011 of $1,231,845. As of December 31, 2011 the Company recorded an accumulated deficit of $34,400,074. Further, the Company
has a working capital deficit of $5,904,064, that is not sufficient to maintain or develop its operations, and it 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 consolidated 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 issuance of its common stock. There is no assurance that the Company will be successful
in raising additional capital. Management believes that the Company will have revenues from its web series business in 2012. Subsequent
to year end, it completed the first web series, Hiding with expected revenues in the second quarter of 2012. In addition,
the Company has begun production of another web series that should be completed in the fall of 2012 and is expected to derive revenues
by year end. During 2011, the Company signed an unsecured Promissory note to secure financing in the amount of $450,000. The note
bears interest at 10% per annum. Subsequent to year end, the Company signed two unsecured Promissory notes for a total of $600,000
in additional financing also bearing interest at 10% per annum.
On March 23, 2012, Dolphin
Digital Media (Canada) Ltd filed for bankruptcy under the laws of the District of Ontario, Canada to discharge liabilities and
increase liquidity. The Company does not have any assets and has been inactive for the years ended December 31, 2011 and 2010.
It currently has unsecured payables to unrelated parties of approximately $300,000. The company has also commenced the dissolution
of its other foreign subsidiaries (both Canadian), Curtain Rising, Inc. and Annes World, Ltd. These subsidiaries do not
have assets or liabilities and have been inactive for several years.