SECURITIES AND EXCHANGE COMMISSION

 

Washington, DC 20549

 

FORM 10-Q

 

(Mark One)

 

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

 

For the quarterly period ended March 31, 2012

 

☐   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  ☑    No ☐

 

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

 

Large accelerated filer ☐		Accelerated filer ☐
Non-accelerated filer ☐ (Do not check if a smaller reporting company)		Smaller reporting company ☑

 

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

 

As of May 1, 2012, 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 SIX MONTHS ENDED

March 31, 2012

 

INDEX

 

Part I - FINANCIAL INFORMATION
Item 1.		CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
		Condensed Consolidated Balance Sheets as March 31, 2012 (Unaudited) and June 30, 2011	F-1
		Condensed Consolidated (Unaudited) Statements of Operations and Comprehensive Loss for the three months  and nine months ended March 31, 2012 and 2011	F-2
		Condensed Consolidated (Unaudited) Statement of Stockholders’ Equity for the nine months ended March 31, 2012	F-3
		Condensed Consolidated (Unaudited) Statements of Cash Flows  for the nine months ended March 31, 2012  and 2011	F-4
		Notes to Condensed Consolidated Financial Statements	F-5 - F-9
Item 2.		MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION	3
Item 3.		QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	4
Item 4.		CONTROLS AND PROCEDURES	4
Part II		OTHER INFORMATION
Item 1.		LEGAL PROCEEDINGS	5
Item 1 A.		RISK FACTORS	5
Item 2.		UNREGISTERED SALES OF EQUITY SECURITIES	5
Item 3.		DEFAULTS UPON SENIOR SECURITIES	5
Item 4.		SUBMISSION OF MATTERS TO A VOTE	5
Item 5.		OTHER INFORMATION	5
Item 6.		EXHIBITS AND REPORTS ON FORM 8-K	5
		Signatures	6
		Certifications— pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002.

 

 

 

PART 1---FINANCIAL INFORMATION

 

ITEM 1.  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

DIGITAL CREATIVE DEVELOPMENT CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
		3/31/12		6/30/2011
		(unaudited)		(audited)
		(in thousands)
CURRENT ASSETS
Cash and cash equivalents	$	-	$	0.6
Marketable securities		102.4		120.2
TOTAL CURRENT ASSETS		102.4		120.8
TOTAL ASSETS	$	102.4	$	120.8
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accrued expenses and other liabilities	$	677.9	$	603.6
Accrued interest		1,093.2		937.0
Notes payable--related parties		808.1		808.1
TOTAL CURRENT LIABILITIES		2,579.2		2,348.7
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, 2012 and June 30 , 2011		538.6		538.6
Additional paid in capital		38,242.8		38,242.8
Accumulated other comprehensive loss		(2,620.6)		(2,603.3)
Accumulated deficit		(40,029.8)		(39,798.2)
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)		(2,476.8)		(2,227.9)
TOTAL LIABILITIES AND  STOCKHOLDERS' EQUITY (DEFICIT)	$	102.4	$	120.8
See accompanying Notes to  Condensed Consolidated Financial Statements

 

 

 

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,
		2012		2011		2012		2011
		(in thousands)				(in thousands)
REVENUE	$	-	$	-	$	-	$	-
OPERATING EXPENSES
General and administrative expenses		75.0		45.0		25.0		15.0
(LOSS) FROM OPERATIONS		(75.0)		(45.0)		(25.0)		(15.0)
OTHER INCOME (EXPENSE)
Interest expense, net and other		(156.2)		(145.9)		(52.1)		(49.1)
Realized losses on marketable securities available for sale		(0.4)		-		-		-
TOTAL OTHER INCOME (EXPENSE)		(156.6)		(145.9)		(52.1)		(49.1)
NET LOSS		(231.6)		(190.9)		(77.1)		(64.1)
UNDECLARED PREFERRED STOCK DIVIDENDS		(109.1)		(109.1)		(36.4)		(36.4)
NET LOSS APPLICABLE TO COMMON SHAREHOLDERS	$	(340.7)	$	(300.0)	$	(113.5)	$	(100.5)
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
EARNINGS PER COMMON SHARE
Basic	$	-	$	-	$	-	$	-
Diluted	$	-	$	-	$	-	$	-
OTHER COMPREHENSIVE INCOME (LOSS)
Unrealized gain (loss) on marketable securities	$	(17.3)	$	-	$	(3.0)	$	-
Net  loss		(231.6)		(190.9)		(77.1)		(64.1)
TOTAL OTHER COMPREHENSIVE INCOME (LOSS)	$	(248.9)	$	(190.9)	$	(80.1)	$	(64.1)
See accompanying Notes to Condensed Consolidated Financial Statements

 

 

 

DIGITAL CREATIVE DEVELOPMENT CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED MARCH 31, 2012
(in thousands)
												Accumulated
										Additional		Other
		Preferred Stock						Common		Paid-in		Comprehensive		Accumulated
		Series A		Series C		Series D		Stock		Capital		Operations		Deficit		Total
Balance at June 30, 2011  (audited)	$	2.2	$	990.0	$	400.0	$	538.6	$	38,242.8	$	(2,603.3)	$	(39,798.2)	$	(2,227.9)
Unrealized loss on investments												(17.3)				(17.3)
Net loss														(231.6)		(231.6)
Balance at March 31, 2012 (unaudited)	$	2.2	$	990.0	$	400.0	$	538.6	$	38,242.8	$	(2,620.6)	$	(40,029.8)	$	(2,476.8)
See accompanying Notes to  Condensed Consolidated Financial Statements

 

 

 

DIGITAL CREATIVE DEVELOPMENT CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED MARCH 31
		2012 (unaudited)		2011 (unaudited)
		(in thousands)
CASH FLOWS FROM OPERATING ACTIVITES:
Net loss	$	(231.6)	$	(190.9)
Adjustments to reconcile net loss to net cash used in operating activities:
Net realized  losses  on marketable securities		0.4		-
Changes in assets and liabilities:
Increase in accounts payable, accrued expenses and other liabilities		230.6		190.9
NET CASH USED IN OPERATING ACTIVITIES		(0.6)		-
CASH FLOWS FROM INVESTING ACTIVITES:
Proceeds from sale of investments, net of purchases		-		-
NET CASH PROVIDED BY INVESTING ACTIVITIES		-		-
CASH FLOWS FROM FINANCING ACTIVITES:
Proceeds from issuance of notes payable--related parties		-		-
NET CASH PROVIDED BY FINANCING ACTIVITIES		-		-
NET CHANGE IN CASH AND CASH EQUIVALENTS	$	(0.6)	$	-
CASH AND EQUIVALENTS, beginning of period		0.6		0.6
CASH AND EQUIVALENTS, end of period	$	-	$	0.6
CASH PAYMENTS FOR:
Interest expense	$	-	$	-
Income taxes	$	-	$	-
See accompanying Notes to  Condensed Consolidated Financial Statements

 

 

DIGITAL CREATIVE DEVELOPMENT CORPORATION AND SUBSIDIARY

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2012

(unaudited)

(dollars in thousands)

 

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, 2012 and for the three months and nine months ended March 31, 2012 and 2011 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 condensed consolidated balance sheet as of June 30, 2011 and other information as of June 30, 2011 have been derived from the Company's audited annual financial statements. These condensed consolidated financial statements do not include all disclosures provided in the Company's annual financial statements. The condensed consolidated financial statements should be read in conjunction with the condensed consolidated financial statements and notes thereto for the year ended June 30, 2011 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 presented have been made. The results of operations for the three months and nine months ended March 31, 2012 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 $2,476.8 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 some or all of our investment in Broadcaster, Inc. shares,and/or raising additional equity,and / or obtaining forbearance of our debt holders. We intend to use our cash as well as other funds, to the extent that they are 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 Company has no active business. However, the Company has been 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. Broadcaster, Inc. also operates an Internet entertainment network.

 

 

 

 

DIGITAL CREATIVE DEVELOPMENT CORPORATION AND SUBSIDIARY

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2012

(unaudited)

(dollars in thousands)

 

 

NOTE 4- MARKETABLE SECURITIES

 

The Company had investments and advances in certain marketable and non-marketable debt and equity securities at March 31, 2012 (unaudited) and June 30, 2011 (audited) as follows:

 

	3/31/2012		6/30/2011
	(unaudited)		(audited)
Broadcaster, Inc at cost	$	2,723.0	$	2,723.5
Unrealized loss on marketble securities		2,620.6		2,603.3
Access Propeller Holdings, Inc. - at cost		300.0		300.0
Less: allowance for impairment		(300.0)		(300.0)
	$	102.4	$	120.2

 

Generally Accepted Accounting Principles in the United States (GAAP) includes a framework for measuring fair value and disclosing fair value measurements.  Under GAAP, fair value is 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. GAAP requires the Company to assume that the portfolio investment is sold in a principal market between 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 GAAP, 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.  GAAP specifies a hierarchy of valuation techniques based on the extent to which the inputs to those valuation techniques are observable or unobservable.  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.

 

 

DIGITAL CREATIVE DEVELOPMENT CORPORATION AND SUBSIDIARY

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2012

 (unaudited)

(dollars in thousands)

 

 

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 GAAP.  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 the investments in our portfolio, the fair value of the investments must typically be determined using unobservable inputs.

 

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, 2012:

 

					Fair Value Measurements Using
	Total				Level 1				Level 2				Level 3
Investments		$	102.4			$	-			$	102.4			$	-

 

The following table presents changes in investments that use Level 2 inputs for the nine months ended March 31, 2012:

 

	Nine months ended
	31-Mar-12
Balance as of June 30, 2011	$	120.2
Net unrealized losses		(17.3)
Net purchases, sales or redemptions		(0.5)
Net transfers in and/or out of Level 2		-
Balance as of  March 31, 2012	$	102.4

 

As of March 31, 2012, the net unrealized loss on the investments that use Level 2 inputs was $2,620.6

 

 

DIGITAL CREATIVE DEVELOPMENT CORPORATION AND SUBSIDIARY

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2012

 (unaudited)

(dollars in thousands)

 

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, 2012 (unaudited) and June 30, 2011 (audited) the Company’s long term debt consisted of the following:

 

		March 31, 2012				June 30, 2011
		(Unaudited)				(Audited)
Promissory Note with Interest at 15% (1)		$	325.0			$	325.0
Promissory Notes with Interest at 10% (2)			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		$	-0-			$	-0-

 

(1)

On May 30, 2007, the Company and the lender (“Multi-Mag”) executed Amendment #5 to this Promissory Note to extend the maturity date of the Note to December 31, 2007.  The Company and Multi-Mag are currently in negotiations to further 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 $36.6 was charged to operations in the nine months ended March 31, 2012.  The note is secured by 200,000 shares of Broadcaster, Inc. common stock.

 

(2)

Of the $345.0 Secured Promissory Notes, all but three of these note holders whose notes total $195.0 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 note holders have not agreed to extend the due dates. Currently all of these notes are now in default.  Interest expense in the amount of $109.1 was charged to operations in the nine months ended March 31, 2012. These notes are secured by 373,845 shares of Broadcaster, Inc. common stock.

 

Due to the recent decline in the price of shares of Broadcaster, these Notes are now under-collateralized.

 

The Company may, from time to time, 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.

 

 

 

 

 

DIGITAL CREATIVE DEVELOPMENT CORPORATION AND SUBSIDIARY

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2012

(unaudited)

(dollars in thousands)

 

 

 

NOTE 7- COMMITMENTS AND 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 each of its current directors, Gary Herman and Skuli Thorvaldsson, as well as an award to a former director and significant shareholder, Bruce Galloway based upon the board obtaining valuations and approvals. The award consisted of options granted to purchase 7,440,000 shares of common stock at exercise prices ranging from $0.0732 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 $798.5 using the Black-Scholes model.

 

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. That fairness opinion has been received and approved by the Board on February 2, 2011. The value of the related awards is approximately $798.5. 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.

 

Although the Board approved the plan on February 2, 2011, the Board may revise the plan in light of the current financial situation of the Company.

 

 

NOTE 9- STOCKHOLDERS’ EQUITY

 

On December 13, 2011 the Company filed a 14C Information Statement with the Securities and Exchange Commission for the purpose of increasing its authorized shares. A majority of the shareholders of the Company approved the increase in the Company’s authorized number of shares from 85,000,000 shares (75 million common shares and 10 million preferred shares) to 615,000,000 shares (600 million common shares and 15 million preferred shares) by Written Consent. The Company has received approval for this increase from the various regulatory agencies.

 

 

 

 

 

 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 30,2011 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 always be available 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.

 

We cannot make assurances that the Company will make any acquisitions or business combinations or that the Company 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, the target business, and/or 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 not have any business activities, aside from carrying on its search for a transaction partner. 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

 

 

Three Month Period Ended March 31, 2012 Compared To The Three Month Period Ended December 31, March 31, 2011.

 

Net loss of $77,100 in the three month period ended March 31, 2012 was slightly higher than the net loss of $64,100 in the comparable 2011 period, principally due to higher interest expense and, to a lesser extent, slightly higher general and administrative expenses as the result of higher accrued expenses for accounting and auditing services.

 

Nine Month Period Ended March 31, 2012 Compared To The Nine Month Period Ended March 31, 2011.

 

Net loss of $231,600 in the nine month period ended March 31, 2012 was slightly higher than the net loss of $190,900 in the comparable 2011 period, principally due to higher interest expense and, to a lesser extent, slightly higher general and administrative expenses as the result of higher accrued expenses for accounting and auditing services.

 

LIQUIDITY AND CAPITAL RESOURCES

 

The Company's current liabilities exceeded its current assets by approximately $2,476,800 at March 31, 2012, compared to current liabilities exceeding its current assets by $2,227,900 at June 30, 2011. 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, which cannot be assured.

 

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 $2,476,800, 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

 

Not required for smaller reporting companies.

 

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.

 

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

 

No required for smaller reporting companies

 

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:

 

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 DEVELOPMENT CORPORATION
Dated: May 24, 2012	By:	/s/ Gary Herman
		Name: Gary Herman
		Title: Chief Executive Officer
	By:	/s/ Vincent De Lorenzo
		Name: Vincent De Lorenzo
		Title: Chief Financial Officer