UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
 
 FORM
10-K
 
 x
              ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
 
 For
Fiscal Year Ended September 30, 2009
 
 OR
 
 o
              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 333-156057
  CRITICAL
DIGITAL DATA, INC.
 (Name of
small business issuer in its charter)
 
 Nevada
              80-0189455(State
      or other jurisdiction of
                incorporation
      or organization)
              (I.R.S.
      Employer
                Identification
      No.)
 
 
 7770
Regents Road, Suite 113-129, San Diego, CA 92122
 (Address
of principal executive offices)
  858-518-0447
 (Registrant’s
telephone number; including area code)
 
 Securities
registered under Section 12(b) of the Act:
 
 Title
      of each class
              Name
      of each exchange on which registeredNone
              None
 
 Securities
registered under Section 12(g) of the Act:
 Common
Stock, Par Value $0.001
 (Title
      of Class)
 
 Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.
 Yes o    No
x
 
 Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.
 Yes o    No
x
  
  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 has submitted electronically and posted on
its corporate Website, 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).      Yes o    No
o
 
 Indicate
by 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 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  x(Do
      not check if a smaller reporting company)
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act).     Yes x    No
o
 
 The
number of shares outstanding of the registrant’s Common Stock as of December 29,
2009 was 4,377,000.
 
 Documents
incorporated by reference - None
 
 Transitional
Small Business Disclosure Format (Check one):  Yes o  No x
  
 
 TABLE OF CONTENTS
 
 PART I
              
              
              
              PageITEM
      1.
              
              DESCRIPTION
      OF BUSINESS
              
              1ITEM
      1A.
              
              RISK
      FACTORS
              
              6ITEM
      1B.
              
              UNRESOLVED
      STAFF COMMENTS
              
              11ITEM
      2.
              
              PROPERTIES
              
              12ITEM
      3.
              
              LEGAL
      PROCEEDINGS
              
              12ITEM
      4.
              
              SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS
              
              12PART IIITEM
      5.
              
              MARKET
      FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
      PURCHASES OF EQUITY SECURITIES
              
              12ITEM
      6.
              
              SELECTED
      FINANCIAL DATA
              
              13ITEM
      7.
              
              MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS
              
              14ITEM
      7A.
              
              QUANTITATIVE
      AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
              
              20ITEM
      8.
              
              FINANCIAL
      STATEMENTS AND SUPPLEMENTARY DATA
              
              20ITEM
      9.
              
              CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE
              
              20ITEM
      9A(T).
              
              CONTROLS
      AND PROCEDURES
              
              20ITEM
      9B.
              
              OTHER
      INFORMATION
              
              21PART IIIITEM
      10.
              
              DIRECTORS,
      EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
              
              21ITEM
      11.
              
              EXECUTIVE
      COMPENSATION
              
              22ITEM
      12.
              
              SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS
              
              23ITEM
      13.
              
              CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
      INDEPENDENCE
              
              24ITEM
      14.
              
              PRINCIPAL
      ACCOUNTING FEES AND SERVICES
              
              24PART IVITEM
      15.
              
              EXHIBITS,
      FINANCIAL STATEMENT SCHEDULES
              
              25EXHIBIT
      INDEX
              
              25SIGNATURES
              
              26
 
 
  FORWARD
LOOKING STATEMENTS
 
 Information
in this report contains “forward looking statements” which may be identified by
the use of forward-looking terminology, such as “may”, “shall”, “will”, “could”,
“expect”, “estimate”, “anticipate”, “predict”, “probable”, “possible”, “should”,
“continue”, or similar terms, variations of those terms or the negative of those
terms. The forward-looking statements specified in the following information
have been compiled by our management on the basis of assumptions made by
management and considered by management to be reasonable. Our future operating
results, however, are impossible to predict and no representation, guaranty, or
warranty is to be inferred from those forward-looking statements.
 
 The
assumptions used for purposes of the forward-looking statements specified in the
following information represent estimates of future events and are subject to
uncertainty as to possible changes in economic, legislative, industry, and other
circumstances. As a result, the identification and interpretation of data and
other information and their use in developing and selecting assumptions from and
among reasonable alternatives requires the exercise of judgment. To the extent
that the assumed events do not occur, the outcome may vary substantially from
anticipated or projected results, and, accordingly, no opinion is expressed on
the achievability of those forward-looking statements. No assurance can be given
that any of the assumptions relating to the forward-looking statements specified
in the following information are accurate, and we assume no obligation to update
any such forward-looking statements.
 
 PART
I
 ITEM
1. DESCRIPTION OF
BUSINESS
 
 Unless
otherwise noted, the terms "Critical Digital Data”, “CDD", the "Company", "we",
"us", and "our" refer to the ongoing business operations of Critical Digital
Data, Inc.
 
 Overview
 Critical
Digital Data, Inc. is a Nevada Corporation (the “Company” or “CDD”) incorporated
on May 2, 2008, with its principal place of business in San Diego,
California.  CDD is a development stage company that intends to
develop, launch and operate an online data storage service (“HomeDataGuard
Personal Digital Vault Application,” or “Digital Vault”) specifically for
data preservation and disaster recovery. The DigitalVault will
enable subscribers to create a “back-up” copy of their most critical
documents and electronic personal data, in an off-site secure location.
 We intend to operate the business of CDD under the service and brand
name “HomeDataGuard” (sometimes herein referred to as “HDG”). HDG
will provide:
 
 1)
              Secure
      online digital storage (back-up) and reproduction services via
      www.HomeDataGuard.com and as private labeled versions of
      HomeDataGuard Personal Digital Vault Application, and;2)
              Access
      to independent service providers, “HomeDataPros®”, trained by us to
      provideconfidential, efficient assistance in the conversion of customers’
      printed documents to digital documents and assist in the account set-up
      for a secure HomeDataGuard Online File
Cabinet.
  Upon
incorporation, CDD authorized 100,000,000 shares of common stock with a par
value of $0.001 per share and 10,000,000 shares of preferred stock with a par
value of $0.001.  On November 15, 2008, the Company’s Board of
Directors approved a recapitalization (the “Recapitalization”) of the Company
whereby each shareholder of record on October 31, 2008 was granted an additional
nine shares of common stock for each share owned.  As a result, the
number and value of shares of common stock outstanding were increased and
additional paid in capital was decreased to reflect a change in the market price
from $1.00 per share to $0.10 per share. Share and per share amounts reflected
throughout the financial statements and notes thereto have been retroactively
restated for the Recapitalization.
  1
  From May
2008 through November 2008, the Company privately sold, to accredited investors,
560,000 shares of common stock (the “PPM Shares”) at $.10 per share, resulting
in an increase in capital of $56,000.  On December 10, 2008, CDD filed
a registration statement on Form S-1 with the Securities and Exchange Commission
(the “SEC”) in order to register the PPM Shares. The Registration Statement was
declared "Effective" by the SEC on December 22, 2008.
  In
addition to 70,000 shares sold and registered with the S-1 Registration
Statement, during the year ended September 30, 2009, the Company sold 263,667
shares of its common stock for $51,100 through two private offerings to
accredited investors pursuant to Rule 506 of the Securities Act of 1933 at
prices of $0.15 per share and $0.30 share.
  We are a
development stage business and have had no revenue since our
formation.  As of mid June, 2009, the HomeDataGuard.com website has
been live and the HomeDataGuard Digital Vault Application is undergoing user
testing.  Our common stock has been accepted for trading on the OTC
Bulletin Board under the symbol "CDIX".  However, there are currently
no "market makers" making a market for our common stock.
  Background
 A
person’s most important personal data is at risk from destruction or damage in
fires, floods, hurricanes, tornadoes, landslides and other natural disasters, as
well as theft. Such data includes but is not limited to homeowner insurance
policies, personal estate documents, mortgage and real estate documentation,
stock certificates, product warranties, photographs of assets/property, birth
certificates, tax records, etc.  Most of this data oftentimes solely
exists in physical paper-based form.
  We
believe that the average individual does not spend very much time or put much
thought into organizing and consolidating his or her most important physical
papers. Oftentimes, a person’s most valued and critical physical documents are
dispersed amongst boxes in garages, in closets, file cabinets at home and at
work, in piles in one’s bedroom or kitchen, in bank safety deposit boxes,
personal home safes, albums, etc. Likewise electronically stored data is
spread amongst hard drives, external hard drives, floppy disks, CD-ROMs,
flash drives, in email accounts, etc. Other critical documentation and data may
be held by advisors (attorneys, accountants, physicians), on diverse servers
etc.
  HomeDataGuard
was developed with the intent to be a very simple-to-use and secure digital
repository for the aggregation, organization, storage and rapid retrieval of
that personal critical data.
  HomeDataGuard
 HomeDataGuard,
comprised of the HomeDataGuard Personal Digital Vault Application and the
HomeDataGuard.com website, will enable a Subscriber, at any time, to
digitally transfer a digital copy of their personal documents and information
(“upload” and/or “download”) to and from their HomeDataGuard file cabinet
on-demand.  To facilitate the aggregation and uploading of a
Subscriber’s personal information, HomeDataPros, who will be independent
service providers trained by the Company to help subscribers scan, upload
and organize their data, will be available in select geographic regions,
commencing in San Diego County.
  2
  Companies
in the information protection and storage services industry store and manage
information in a variety of media formats, which can broadly be divided into
physical and electronic records, and provide a wide range of services related to
the records stored. Physical records may include paper documents, as well
as all other non-electronic media such as microfilm and microfiche, master audio
and videotapes, film, X-rays and blueprints. Digital records may include files
retained on some form of hardware device and files in word processing formats,
database formats, spreadsheets, digital photographs, digital videos, pdfs, rtfs,
etc. HomeDataGuard’s services and functionality will be geared toward
storing and protecting inactive or semi-active information in most any digital
file format, which is not typically accessed frequently by its owners and
updated only occasionally.
  The
HomeDataGuard Personal Digital Vault Application is designed to simulate a
traditional bank-like physical vault containing a private room with a
four-drawer file cabinet.   The virtual interface is extremely
easy to use, and provides the Subscriber with a virtual experience that may feel
very much like the real experience of opening and closing a file cabinet drawer,
scrolling through file folders, inserting files inside folders, and moving
folders around.
  A
Subscriber logs in and is presented with a video which shows a steel vault
unlocking and its door opening, complete with sound effects.  The
registered user is taken inside the vault to his/her personal secure file
cabinet, which stands next to a whiteboard which contains
instructions.  The Subscriber can choose to store, organize and/or
retrieve their data by accessing the appropriate file drawer and folders
presented within
  The
Subscriber clicks on one of the file cabinet drawers, which rolls open to
display the file folders contained inside.   When the Subscriber
scrolls over a folder and selects to open it, the folder displays thumbnail
images of the files contained within.  The Subscriber can upload
a file into a pre-named folder.    The top two drawers
contain several pre-named folders to help a Subscriber get started and be
organized.  The Subscriber may also create dozens of new folders, edit
folders, even move them to other drawers.  Subscribers have the
ability to choose which folders and drawers to place their important data
inside.  The website will provide guidance, prompts and checklists to
subscribers, and ensure that they are reminded several times per year to make
necessary updates, changes and/or add new information to their digital file
cabinet.
  When a
Subscriber opens an account they initially do so with the purpose of storing
important personal data and documents within their own private secure
HomeDataGuard Online File Cabinet.   In order to transfer
documents or information to one’s HomeDataGuard Online File Cabinet, that data
must first exist in a digital format (“digital copy”.) It is then uploaded via
the Internet to HomeDataGuard’s servers.   If the data does not
pre-exist in a digital format, it would need to be converted by one of several
methods, including but not limited to: being scanned; being faxed to a digital
destination; be digitally photographed; or made into a digital
movie.
  Personal
files can be uploaded by the Subscriber or for a fee by a HomeDataPro® or other
trained professional.  To store the digital copies into their personal file
cabinets, Subscribers would follow the prompts on the site.  Users are
prompted to determine which named file folder to place the digital copies into,
for organizational purposes.
  Subscribers
will be able to select an annual or monthly payment subscription plan, for
access to their four drawer file cabinet (the “Basic” HomeDataGuard Personal
Digital Vault Application.)  A subscriber can obtain, automatically, as
much additional digital storage space as they need beyond the initial 4
gigabytes provided, and will be charged for each additional incremental gigabyte
of space used on a monthly basis.
  3
  Data
Access and Maintenance
 Once a
digital copy is uploaded to a Subscriber’s personal file cabinet, it is easily
accessible to that Subscriber anytime from any hardware device that can access
the Internet and download that file from HomeDataGuard.   Only
that Subscriber will have access, unless he/she provides the username and
password information directly to another party.
 
 Data
Storage Functionality & Encryption
 Data
storage space is currently leased from Amazon Web Services. In the future, CDD
may select other storage and hosting providers that meet HomeDataGuard’s
system’s requirements.    All files uploaded to HomeDataGuard by
its subscribers are always immediately and automatically encrypted before they
are stored on our servers.
 
 HomeDataPros®
 We intend
to recommend trained and qualified independent professionals, who the company
has certified as “HomeDataPros®.”   HomeDataPros® will be trained
by us to provideconfidential, efficient
assistance in the conversion of customers’ documents and information to
digital copies and assist in the account set-up and uploading to a secure
online HomeDataGuard Online File Cabinet.
  HomeDataPros®
will assist the user in the following activities: document scanning; creating
digital video recordings of personal property and home inventory; digitally
photographing property; and uploading any Subscriber-requested digital
copies to the personal file cabinet on www.HomeDataGuard.com.
  Market
for HomeDataGuard
 We
anticipate that our initial customers will be consumer households that reside in
San Diego County and other geographic locations where there is a high risk
of damage to homes as a result of fires, floods, hurricanes, earthquakes and
other disasters.
 
 Market
for Private Labeling the HomeDataGuard Personal Digital Vault
Application
 We
anticipate that there will be an interest by other companies to private label
the HomeDataGuard Personal Digital Vault Application and have been pursuing
business development initiatives to seek out such relationships.
 
 On
November 18, 2009, the Company entered into a one year contract with a company
who intends to private label the HomeDataGuard Online File
Cabinet.  The company intends to offer consumers a bundled product
offering providing several identity theft and fraud protection services,
including the secure online document storage provided by CDD.
  Revenue
 We expect
to derive revenue primarily from initial and recurring subscription revenues.
For business-to-consumer subscriptions, it is anticipated that customers will
subscribe for an annual license, at this time expected to start at $49.95 per
year or $4.50 per month for a HomeDataGuard Online File Cabinet and that a
portion of those subscribers will renew annually.  Starting with 4
gigabytes of storage space, a HomeDataGuard Online File Cabinet account will
automatically expand its storage space on demand, and charge the subscriber for
each incremental gigabyte of digital storage space used.
  A la
carte services provided by HomeDataPros® will be charged by the service provided
and will be priced based upon time and services provided.
  Growth
Strategy
 Our
objective is to establish a leadership position in the niche of record
protection and storage services of personal critical information, protecting and
storing our customers’ information without regard to media format or geographic
location. Our primary avenues of growth are expected to be: (1) acquire consumer
household customers within the US and Canada, starting within fire-prone and
earthquake-prone regions of California; (2) establish and expand a workforce of
HomeDataPro® professionals in those regions; (3) eventually expand into other
regions of the United States.
 
 4
 
 Intellectual
Property
 We rely
on a combination of trademark, copyright, trade secret and patent laws in the
United States as well as confidentiality procedures and contractual provisions
to protect our proprietary technology and our brand. HomeDataGuardTM and
HomeDataPro® are not registered trademarks as of the date of this Annual Report.
An application to register HomeDataPro® as a service mark was submitted to the
U.S. Patent & Trademark Office, as well as a follow-up Response to Office
Action statement, and is expected to be granted within the next three to six
months. The owners of the filed service mark are our co-founders, Dina Moskowitz
& Marc Zimmerman who have agreed to assign the service mark to
us.
  In
September 2008 the company submitted a copyright application to the U.S.
Copyright Office for the HomeDataGuard.com Personal Digital Vault
Application.  We have received confirmation that the copyright has
been granted effective November 19, 2008.
  We also
rely on copyright laws to protect copy on our web site and all marketing
materials. We have registered at least 30 Internet domain names related to our
business in order to protect our proprietary interests. From time to time, we
may encounter disputes over rights and obligations concerning
intellectual property. Also, the efforts we have taken to protect our
proprietary rights may not be sufficient or effective. Any significant
impairment of our intellectual property rights could harm our business, our
brand and reputation, or our ability to compete. Also, protecting our
intellectual property rights could be costly and time consuming.
  On
February 2, 2009, the Company entered into a licensing agreement with a third
party software development firm for a non-exclusive, perpetual and
non-sublicensible right to use  certain proprietary software code for
the Digital Vault application and HomeDataGuard website.
  Subsequent
to the Company’s fiscal year end September 30, 1009, on November 18,
2009,  the Company entered into a one year contract with a company who
intends to private label the HomeDataGuard Online File Cabinet.  The
company intends to offer consumers a bundled product offering providing
several  identity theft and fraud protection services, including the
secure online document storage provided by CDD.
  Employees
 At the
present time our Chief Executive Officer, Dina Moskowitz, and our President,
Marc Zimmerman, are our only employees as well as our sole officers, directors
and major shareholders.  Ms. Moskowitz and Mr. Zimmerman will devote such
time as required to actively market and further develop our services and
software products.  At present, we expect Ms. Moskowitz and Mr. Zimmerman
to each devote at least 20 hours per week to our business.  Our
executive officers have not received any compensation since the date of our
incorporation, and we did not accrue any compensation. We do not anticipate
hiring any additional employees until such time as additional staff is required
to support our operations.
 
 Public
Information
 You may
obtain a wide variety of information regarding our data storage service on our
internet website at www.homedataguard.com.  We
make available via the Securities and Exchange Commission internet website
((http://www.sec.gov)
all filings made
by us under the Securities Exchange Act of 1934, including Forms 10-K and 10-Q
and related amendments and our proxy statements.   All such
filings are available free of charge.  The information on the website
listed above is not and should not be considered part of this annual report on
Form 10-K and is not incorporated by reference in this document.
  5
 
 ITEM
1A.             RISK
FACTORS
 
 You
should carefully consider the risks described below as well as other information
provided to you in this document, including information in the section of this
document entitled “Forward Looking Statements.” The risks and uncertainties
described below are not the only ones facing the Company. Additional risks and
uncertainties not presently known to the Company or that the Company currently
believes are immaterial may also impair the Company’s business operations. If
any of the following risks actually occur, the Company’s business, financial
condition or results of operations could be materially adversely affected, the
value of the Company common stock could decline, and you may lose all or part of
your investment.
  RISKS
RELATED TO THE BUSINESS AND FINANCIAL CONDITION
 
 We
have had operating losses since formation and expect to continue to incur net
losses for the near term.
 We
commenced business in April 2008 and have only recently commenced selling our
product.  Accordingly, we have a limited operating
history.  As of September 30, 2009, we had a deficit accumulated
during the development stage of $111,245.  We have reported net losses
of $101,290 and $9,955 for the periods ended December September 30, 2009 and
2008, respectively.  We have generated no sales to
date.  Unless our sales increase substantially in the near future, we
anticipate that we will continue to incur net losses in the near term, and we
may never be able to achieve profitability.  In order to achieve
profitable operations we need to significantly increase our revenues from the
sales of subscriptions.   We cannot be certain that our business
will ever be successful or that we will generate significant revenues and become
profitable.
 
 Investors may lose their entire
investment if we fail to reach profitability.
 We
commenced business in April 2008. We have no demonstrable operations record from
which you can evaluate the business. Our annual report must be considered in
light of the risks, uncertainties, expenses and difficulties frequently
encountered by companies in their early stages of development. We cannot
guarantee that we will be successful in accomplishing our objectives. To date,
we have operated at a loss and may continue to operate at a loss in the
foreseeable future. Investors should therefore be aware that they may lose their
entire investment in the Company.
 
 Our
business model is unproven, and we cannot guarantee our future
success.
 HomeDataGuard
is a new and unproven business model. The success of our business model depends
on our ability to achieve high volumes of subscription enrollment in order to
offset the costs associated with our projected marketing and advertising
expenses, as well as discounts and overhead. If we are unable to efficiently
acquire subscribers, the results of operations would be adversely
affected.  Further, as a strategic response to an aggressive
competitive environment to provide online data storage, we may elect from time
to time to make pricing, service, hiring and marketing decisions that could
increase our expenses, affect our revenues and impact our financial results.
Moreover, because our expense levels in any given quarter are based, in part, on
management’s expectations regarding future revenues, if revenues are below
expectations, the effect on our operating results may be magnified by our
inability to adjust spending in a timely manner to compensate for a shortfall in
revenues. The extent to which expenses are not subsequently followed by
increased revenues would harm our operating results and could seriously impair
our business.
  6
 
 Limited
protection of Intellectual Property.
 
 HomeDataGuardTM  is
not a registered trademark as of the date of this Annual Report.
 
 On April
21, 2009, the service mark HOMEDATAPRO was registered as number 3609761 with the
U.S. Patent & Trademark Office. The owners of the filed service mark are our
co-founders, Dina Moskowitz and Marc Zimmerman, who have agreed to assign the
service mark to us.
 
 There can
be no assurance that we will be able to adequately protect our trade secrets. In
the event competitors independently develop or otherwise obtain access to our
know-how, concepts or trade secrets, we may be adversely affected.
 
 We
rely on increasing consumer acceptance of Internet-enabled data storage
services.
 Historically
there has been a general initial response of reluctance by consumers to trust
online businesses with their personal information. To attract subscribers and
private label partners we will have to overcome this reluctance. If we do not,
our business will be adversely affected.
 
 Our
ability to grow our business depends in part on a strong brand
identity.
 Establishing
and maintaining brand identity and brand loyalty will be critical to attracting
new subscribers and service provider members. In order to attract and retain
subscribers and members, and respond to competitive pressures, we expect to
expend resources to maintain and enhance our brand in the future. In addition,
maintaining our brand will depend on our ability to provide a high-quality
consumer experience and high quality service, which we may not do successfully.
If we are unable to maintain and enhance our brand, our ability to attract new
clients or successfully expand our operations will be harmed.
 
 Laws
and regulations
 Many new
state and federal laws and regulations are being contemplated and enacted
relative to privacy issues in general and the care and handling of personal
information in particular. In reaction to publicized incidents in which
electronically stored information has been lost, illegally accessed or stolen,
many states have adopted breach of data security statutes and regulations that
require notification to consumers if the security of their personal information,
such as social security numbers, is breached. In addition, the United States
Congress is considering several bills that are intended to address data
security, including by requiring notification to affected persons of breaches of
data security.
 
 Competition
 We have
numerous direct, indirect and partial competitors, most of which have valuable
industry relationships and access to greater resources than we do. In addition,
we will compete with our potential customers’ pre-existing internal information
protection and storage services methods. There is no assurance that consumer
households or service providers will begin to use an outside service such as
HomeDataGuard for their future information protection and storage services.
While we believe that we will offer a unique product offering toward a niche
sector within the online data storage space, there can be no assurance that
consumers will regard our concept as sufficiently distinguishable from
competitors and that our concept will not be introduced by our
competitors.
 
 Security
breaches
 Our
failure to protect our customers’ confidential information against security
breaches could damage our reputation, harm our business and adversely impact our
results of operations.
  7
 
 Reliance
upon third party providers
 Development
Team: We have contracted with a team of freelance qualified software developers
with specialties in online storage, flash design, database design and website
design in order to develop the HomeDataGuard.com site. Should any one of the
developers be unable to execute their portion of the development effort, the
launch of the site could be delayed until a replacement is found.
 
 Back-End
Storage & Functionality: As part of the CDD business plan, we will be
reliant on the leasing of storage space, hosting services and bandwidth from
third party vendors. While such vendors are considered well-respected industry
leaders for leasing such services, there can be no assurance that their systems
will not experience periodic problems, security breaches, or other unforeseen
difficulties that could adversely affect our business operations. While there
are many competitors available to transfer the various services over to if faced
with operational difficulties, there can be no assurances that CDD would be able
to affect those transfers seamlessly without impacting customer accounts and
retain on-demand access to customer data during that period of
transference.
 
 We
have no operating history on which to evaluate our potential for future
success.  This makes it difficult to evaluate our future prospects and
the risk of success or failure of our business.
 We began
our operations in 2008 and your evaluation of our business and prospects will be
based on our limited operating history. Consequently, our short history and
results of operations may not give you an accurate indication of our future
results of operations or prospects. You must consider our business and prospects
in light of the risks and difficulties we will encounter as an early-stage
company in a highly competitive market. We may not be able to successfully
address these risks and difficulties, which could materially harm our business
and operating results.
 
 As we
grow our business, we there can be no assurance that our business strategy
will  be successful or that our revenues will ever increase
sufficiently to achieve and maintain profitability on a quarterly or annual
basis.
  In
order to execute our business plan, we will need to raise additional capital. If
we are unable to raise additional capital, we may not be able to achieve our
business plan and you could lose your investment.
 We need
to raise additional funds through public or private debt or equity financings as
well as obtain credit from vendors to be able to fully execute our business
plan. Any additional capital raised through the sale of equity may dilute your
ownership interest. We may not be able to raise additional funds on favorable
terms, or at all. If we are unable to obtain additional funds or credit from our
vendors, we will be unable to execute our business plan and you could lose your
investment.
 
 We
depend heavily on our management team and the loss of any or all of the members
of such management team could materially adversely affect our business, results
of operations and our financial condition.
 Our
success depends, to a significant extent, upon the efforts, the abilities and
the business experience of Dina Moskowitz, our Chief Executive Officer and Marc
Zimmerman, our President. Loss of the services of either of these executives
could materially adversely affect our business, results of operations and
financial condition, and could cause us to fail to successfully implement our
business plan.
 
 Internet
system failures or viruses could seriously impact our operations and cause
customers to seek other solutions.
 The need
to securely transmit all confidential information in a timely fashion will be
critical to our potential clients. Any computer virus that is spread over the
Internet could disable or damage our system or delay our ability to transmit or
receive correspondence and/or files between clients and CDD. Additionally, any
breach of confidentiality or even perceived compromise of integrity of computer
information could cause credibility problems with our clients. Any system
failure that causes interruption in our operations could impact our ability to
maintain customers. Failures in the telecommunications network on which we rely
would result in customers’ receiving no or diminished service.
  8
 
 If
we fail to develop and maintain an effective system of internal controls, we may
not be able to accurately report our financial results or prevent fraud; as a
result, current and potential stockholders could lose confidence in our
financial reports, which could harm our business and the trading price of our
common stock.
 Effective
internal controls are necessary for us to provide reliable financial reports and
effectively prevent fraud. Section 404 of the Sarbanes-Oxley Act of 2002
requires us to evaluate and report on our internal controls over financial
reporting and have our independent registered public accounting firm annually
attest to our evaluation, as well as issue their own opinion on our internal
controls over financial reporting. We plan to prepare for compliance with
Section 404 by strengthening, assessing and testing our system of internal
controls to provide the basis for our report. The process of strengthening our
internal controls and complying with Section 404 is expensive and time
consuming.  We cannot be certain that the measures we will undertake
will ensure that we will maintain adequate controls over our financial processes
and reporting in the future. Furthermore, if we are able to rapidly grow our
business, the internal controls that we will need will become more complex, and
significantly more resources will be required to ensure our internal controls
remain effective. Failure to implement required controls, or difficulties
encountered in their implementation, could harm our operating results or cause
us to fail to meet our reporting obligations. If we or our auditors discover a
material weakness in our internal controls, the disclosure of that fact, even if
the weakness is quickly remedied, could diminish investors’ confidence in our
financial statements and harm our stock price. In addition, non-compliance with
Section 404 could subject us to a variety of administrative sanctions, including
the suspension of trading, ineligibility for listing on one of the Nasdaq Stock
Markets or national securities exchanges, and the inability of registered
broker-dealers to make a market in our common stock, which may reduce our stock
price.
 
 RISKS
RELATED TO COMMON STOCK
 
 There
is currently no trading market for our common stock, and liquidity of shares of
our common stock is limited.
 There is
no established public trading market for our securities. Hence, there is no
central place, such as a stock exchange or electronic trading system, to resell
your common stock.  If you want to resell your shares, you will have
to locate a buyer and negotiate your own sale.  It is our plan to
utilize a market maker who will apply to have our common stock quoted on the
Over the Counter Bulletin Board in the United States.  Our shares are
not and have not been listed or quoted on any exchange or quotation system
although we have been assigned a trading symbol by FINRA and have been accepted
for trading on the OTC Bulletin Board. We have applied to become eligible for
electronic trading and trading of our stock may commence, if we become "DTC
Eligible".  There can be no assurance that a regular trading market
will develop or that if developed, will be sustained.  In the absence
of a trading market, an investor will be unable to liquidate his investment
except by private sale.
 
 Failure
to develop or maintain a trading market could negatively affect its value and
make it difficult or impossible for you to sell your shares. Even if a market
for common stock does develop, the market price of common stock may be highly
volatile. In addition to the uncertainties relating to future operating
performance and the profitability of operations, factors such as variations in
interim financial results or various, as yet unpredictable, factors, many of
which are beyond our control, may have a negative effect on the market price of
our common stock.
  9
 
 Fluctuations
in operating results could adversely affect the market price of our common
stock.
 Because
our revenues and costs may fluctuate significantly, investors should not rely on
quarter-to-quarter comparisons of our results of operations or the pro forma
financial information as an indication of future performance. It is possible
that, in future periods, results of operations will differ from the estimates of
public market analysts and investors. Such a discrepancy could cause the market
price of our common stock to decline significantly.
 
 Prospective
investors not independently represented
 Legal
counsel to the Company does not act as counsel to any prospective investors in
connection with this Offering. Each prospective investor is encouraged to
consult with his or her own legal counsel, accountant or other professional
prior to subscribing to Shares.
 
 Should
our stock become listed on the OTC Bulletin Board, if we fail to remain current
on our reporting requirements, we could be removed from the OTC Bulletin Board
which would limit the ability of broker-dealers to sell our securities in the
secondary market.
 Companies
trading on the Over the Counter Bulletin Board,  must be reporting
issuers under Section 12 of the Securities Exchange Act of 1934, as amended, and
must be current in their reports under Section 13, in order to maintain price
quotation privileges on the OTC Bulletin Board.  As a result, when and
if our shares are listed for trading, the market liquidity for our shares could
be severely adversely affected by limiting the ability of broker-dealers to sell
our securities and the ability of shareholders to sell their securities in the
secondary market.  In addition, we may be unable to get relisted on
the OTC Bulletin Board, which may have an adverse material effect on the
Company.
 
 We
do not expect to pay dividends in the future; any return on investment may be
limited to the value of our common stock.
 We do not
currently anticipate paying cash dividends in the foreseeable
future.  The payment of dividends on our common stock will depend on
earnings, financial condition and other business and economic factors affecting
it at such time as the board of directors may consider relevant.  Our
current intention is to apply net earnings, if any, in the foreseeable future to
increasing our capital base and development and marketing
efforts.  There can be no assurance that the Company will ever have
sufficient earnings to declare and pay dividends to the holders of our common
stock, and in any event, a decision to declare and pay dividends is at the sole
discretion of our board of directors.  If we do not pay dividends, our
common stock may be less valuable because a return on your investment will only
occur if its stock price appreciates.
 
 Authorization
of preferred stock.
 Our
Certificate of Incorporation authorizes the issuance of up to 10,000,000 shares
of preferred stock with designations, rights and preferences determined from
time to time by its Board of Directors. Accordingly, our Board of Directors is
empowered, without stockholder approval, to issue preferred stock with dividend,
liquidation, conversion, voting, or other rights which could adversely affect
the voting power or other rights of the holders of the common stock. In the
event of issuance, the preferred stock could be utilized, under certain
circumstances, as a method of discouraging, delaying or preventing a change in
control of the Company. Although we have no present intention to issue any
shares of our    authorized preferred stock, there can be no
assurance that the Company will not do so in the future.
 
 The
Shares are an illiquid investment and transferability of the Shares is subject
to significant restriction.
 There are
substantial restrictions on the transfer of the Shares. Therefore, the purchase
of the Shares must be considered a long-term investment acceptable only for
prospective investors who are willing and can afford to accept and bear the
substantial risk of the investment for an indefinite period of
time.  There is not a public market for the resale of the
Shares.  A prospective investor, therefore, may not be able to
liquidate its investment, even in the event of an emergency, and Shares may not
be acceptable as collateral for a loan.
  10
 
 Our
shares are subject to the U.S. “Penny Stock” Rules and investors who purchase
our shares may have difficulty re-selling their shares as the liquidity of the
market for our shares may be adversely affected by the impact of the “Penny
Stock” Rules.
 Our stock
is subject to U.S. “Penny Stock” rules, which may make the stock more difficult
to trade on the open market. Our common shares are not currently traded on the
OTCBB, but it is the Company’s plan that the common shares be quoted on the
OTCBB. A “penny stock” is generally defined by regulations of the U.S.
Securities and Exchange Commission (“SEC”) as an equity security with a market
price of less than US$5.00 per share. However, an equity security with a market
price under US$5.00 will not be considered a penny stock if it fits within any
of the following exceptions:
 
 (i) the
equity security is listed on NASDAQ or a national securities
exchange;
 (ii) the
issuer of the equity security has been in continuous operation for less than
three years, and either has (a) net tangible assets of at least
US$5,000,000, or (b) average annual revenue of at least US$6,000,000;
or
 (iii) the
issuer of the equity security has been in continuous operation for more than
three years, and has net tangible assets of at least US$2,000,000.
 
 Our
common stock does not currently fit into any of the above
exceptions.
 
 If an
investor buys or sells a penny stock, SEC regulations require that the investor
receive, prior to the transaction, a disclosure explaining the penny stock
market and associated risks. Furthermore, trading in our common stock will be
subject to Rule 15g-9 of the Exchange Act, which relates to non-NASDAQ and
non-exchange listed securities. Under this rule, broker/dealers who recommend
our securities to persons other than established customers and accredited
investors must make a special written suitability determination for the
purchaser and receive the purchaser’s written agreement to a transaction prior
to sale. Securities are exempt from this rule if their market price is at least
$5.00 per share. Since our common stock is currently deemed penny stock
regulations, it may tend to reduce market liquidity of our common stock, because
they limit the broker/dealers’ ability to trade, and a purchaser’s ability to
sell, the stock in the secondary market.
 
 The low
price of our common stock has a negative effect on the amount and percentage of
transaction costs paid by individual shareholders. The low price of our common
stock also limits our ability to raise additional capital by issuing additional
shares. There are several reasons for these effects. First, the internal
policies of certain institutional investors prohibit the purchase of low-priced
stocks. Second, many brokerage houses do not permit low-priced stocks to be used
as collateral for margin accounts or to be purchased on margin. Third, some
brokerage house policies and practices tend to discourage individual brokers
from dealing in low-priced stocks. Finally, broker’s commissions on low-priced
stocks usually represent a higher percentage of the stock price than commissions
on higher priced stocks. As a result, the Company’s shareholders may pay
transaction costs that are a higher percentage of their total share value than
if our share price were substantially higher.
 
 ITEM
1B. UNRESOLVED STAFF COMMENTS
  None.
 11
  ITEM
2. DESCRIPTION OF
PROPERTIES
 
 Our
principal executive offices are located at  3270 Caminito Eastbluff,
#95, La Jolla, California,  92037  on a rent-free basis at
the home of our CEO, Dina Moskowitz.  Our telephone number is (858)
518-0447.  We anticipate this situation will be maintained for at least the
next six months.  The facility meets our current needs, however should we
expand in the future, we may have to relocate.  If we have to relocate, we
will seek office space at or below then prevailing rates.
  ITEM
3.              
LEGAL
PROCEEDINGS
  We are
not a party to any material legal proceedings.  We are not aware of
any pending or threatened litigation against us that we expect will have a
material adverse effect on our business, financial condition, liquidity, or
operating results. However, legal claims are inherently uncertain, and we cannot
assure you that we will not be adversely affected in the future by legal
proceedings.
 ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
 
 None.
  PART
II
  ITEM
5. MARKET FOR COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES
 
 Market
Information.
  To our
knowledge, there has been no trading in our common stock.
 
 Record
Holders.
 
 As of
December 14, 2009, an aggregate of 4,377,000 shares of our common stock were
issued and outstanding and were owned by approximately 42 holders of
record.  The foregoing number of record holders does not include any
persons who hold their stock in “street name.”
 
 Recent
Sales of Unregistered Securities.
 
 On
February 2, 2009, the Company entered into a licensing agreement with a third
party software development firm for a non-exclusive, perpetual and
non-sublicensible right to use  certain proprietary software code for
the Digital Vault application and HomeDataGuard website.   As
compensation for this license, CDD has issued to this firm a warrant to purchase
from CDD up to 133,333 fully paid and non-sublicensable shares of the
Company'sCommon
Stock, pursuant to Regulation D.  The exercise price for each Warrant
Share is $ .15 per share, and the warrant shall be exercisable on or before
January 22, 2019.
  During the year ended September
30, 2009, the Company sold 263,667 shares of its common stock for $51,100
through twoprivate offerings to
accredited investors pursuant to Rule 506 of the Securities Act of 1933 at
prices of $0.15 per share and $0.30 per share. During October 2009, an
additional 53,333 shares of common stock were sold, valued at
$16,000.  All 317,000 shares are restricted under Rule 144 of the
Securities Act of 1933.   Proceeds from the sale of the common
stock are being utilized for the development and marketing of HomeDataGuard and
HomeDataGuard Personal Digital Vault Application private label partnership
opportunities.
  12
 
 Re-Purchase
of Equity Securities.
 
 None
 
 Dividends.
 
 None.
 
 Securities
Authorized for Issuance Under Equity Compensation
Plans.
  On March
11, 2009 we adopted the 2009 Stock Incentive Plan pursuant to which we are
authorized to grant stock options to qualify as Incentive Stock Options, “ISO”,
under Section 422 of the Internal Revenue Code, as amended, non-qualified
options and stock appreciation rights to our employees, officers, directors and
consultants.  The Company is authorized to grant options to purchase
up to 1,000,000 shares of common stock under the Plan which as of December 14,
2009, options to purchase 748,500 shares of common stock remained available for
future grant.  The Company intends that any grant, award or other
acquisition of the Company’s securities pursuant to the Plan to any officer
and/or director of the Company shall be exempt from Section 16(b) of the
Securities Exchange Act of 1934, as amended. No participant may be granted ISOs
under the Plan that would result in ISOs to purchase shares of Common Stock with
an aggregate fair market value (measured on the Date of Grant) of more than
$100,000 first becoming exercisable by such Participant in any one calendar
year.  The 2009 Plan shall be administered by a committee of the Board
of Directors (the “Committee”).  The Committee shall have exclusive
and final authority in each determination, interpretation or other action
affecting the Plan and its participants.
 
 Number
      of
                securities
      to
                be
      issued
                upon
      exercise
                of outstanding
                options
              
              
              Weighted-
                average
      exercise
                price
      of
                outstanding
                options
              
              
              Number
      of securities
                remaining
      available
                for
      future issuance
                under
      equity
                compensation
      plans
                (excluding
      securities
                reflected
      in column
                (a))(a)
              
              
              (b)
              
              
              (c)Equity
      compensation plans approved by security holders
              
              
              251,500
              
              
              $
              0.20
              
              
              
              748,500Equity
      compensation plans not approved by security holders
              
              
              —
              
              
              
              —
              
              
              
              —Total
              
              
              251,500
              
              
              $
              0.20
              
              
              
              748,500
  ITEM
6.              
SELECTED
FINANCIAL DATA.
 
 Not
applicable to a “smaller reporting company” as defined in Item 10(f)(1) of SEC
Regulation S-K.
  13
 ITEM
7.              
MANAGEMENT'S
DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS
 This
section of the Annual Report includes a number of forward-looking statements
that reflect our current views with respect to future events and financial
performance. Forward-looking statements are often identified by words like
believe, expect, estimate, anticipate, intend, project and similar expressions,
or words which, by their nature, refer to future events. You should not place
undue certainty on these forward-looking statements. These forward-looking
statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from our predictions.
 
 Plan
of Operation
 
 We intend
to develop, launch and operate the Digital Vault Application specifically for
data preservation and disaster recovery. The DigitalVault will enable
subscribers to create a “back-up” copy of their most critical documents and
electronic personal data, in an off-site secure location.  CDD's
financial model will be based on the recurring nature of a subscription revenue
model, from both direct-to-consumer subscriptions on www.HomeDataGuard.com, as
well as from wholesale subscriptions through private label
partnerships.  It is anticipated that direct-to-consumer customers
will subscribe for an annual or monthly license, and private label partners will
purchase wholesale subscriptions in bulk, payable
monthly.  Additionally, a la carte services provided by HomeDataPros
will be charged for the service provided and will be priced based upon time and
materials.
 
 We
anticipate that in our first few years of operations we will direct most of our
marketing and business development efforts towards fire-prone regions and
earthquake-prone regions in California and toward private label partnership
opportunities. We may also roll out into Florida and Louisiana, focusing on the
hurricane and flood-prone regions.  We will initially do our best to
leverage the media and form partnership relationships with trusted advisors who
maintain original critical documents for their clients (i.e., certified public
accountants, real estate agents, family law practitioners, financial planners,
etc.).
  The
following discussion should be read in conjunction with our financial statements
and the related notes that appear elsewhere in this Annual Report.
  Revenues
  For the
period from May 2, 2008 (Inception) through September 30, 2009, CDD recognized
no revenues.  We are still a development stage company and do not
expect to begin generating revenues until we begin offering our product and
services.
  Operating
Expenses – For the year ended September 30, 2009
  Total
operating expenses for the year ended September 30, 2009 totaled $98,973, and
consisted primarily of the following:
  ·
              Stock
      based compensation expense was $15,617 for fiscal year 2009.  On
      March 11, 2009, the Company adopted its 2009 Stock Incentive Plan in which
      we are authorized to grant stock options and stock appreciation rights to
      our employees, officers, directors and consultants.  In
      conjunction with the Plan, we granted options to purchase a total of
      201,500 shares of common stock.  The options were valued at
      $18,069 using the Black-Scholes option pricing
  model.
 ·
              In
      January 2009, we issued warrants to purchase 133,333 shares of CDD common
      stock at $0.015 per share to a third party software development firm in
      exchange for a Licensing Agreement  providing CDD the right to
      use for internal purposes certain software developed by the software
      development firm.  The warrant is exercisable at any time on or
      before January 22, 2019 and may be exercisable in either cash or through
      the receipt of shares equal to the value of the warrant as defined in the
      Licensing Agreement.  The fair value of the 133,333 warrants was
      estimated to be approximately $19,000 and is expensed as software
      licensing costs during fiscal year
2009.
  14
  ·
              Professional
      fees, excluding those recognized in relation to the 2009 Stock Incentive
      Plan, totaled approximately $22,000 and relate primarily to accounting
      fees incurred in preparation of the Company’s Form 10-Q for the first,
      second quarters and third quarters as well as public relations fees
      incurred in preparation of the Company’s launch of its
      product.
 ·
              Marketing
      fees for fiscal year 2009 totaled approximately $7,000. Such costs were
      primarily attributable to the Company’s pre-launch of its HomeDataGuard
      product.
 ·
              Incorporation
      and filing fees totaled approximately $3,000 for fiscal year 2009 and
      related primarily to quarterly reports filed with the
  SEC.
 ·
              Various
      general and administrative fees consisting primarily of the monthly
      liability insurance, depreciation, internet and web design services,
      printing and office expenses totaled approximately $32,000 for fiscal year
      2009.
  Operating
Expenses – For the Period from May 2, 2008 (Inception) through September 30,
2008
  Total
operating expenses for the period from May 2, 2008 (Inception) through September
30, 2008 totaled $8,467 and consisted primarily of the following:
  ·
              Professional
      fees relating to the audit of the Company’s financial statements for the
      period from May 2, 2008 (Inception) through September 30, 2008 totaled
      $4,000.
 ·
              Marketing
      fees incurred to launch HDG and begin advertising the Company to the
      public totaled approximately $2,500 for the period from May 2, 2008
      (Inception) through September 30,
2008.
 ·
              Professional
      fees billed by the Company’s attorney for reimbursement of CDD’s filing
      fees in the State of Nevada and registration to do business in the State
      of California totaled approximately $570.  The Company’s
      attorney is related to CDD’s Chief Executive
  Officer.
  Other
Expenses
  During
fiscal years 2009 and 2008, the Company incurred $1,517 and $688, respectively
of other expenses resulting from interest incurred on a note payable to a
related entity (the “Note Payable”).  The Note Payable resulted from
funds paid on behalf of CDD by an entity controlled by the Chief Executive
Officer and President of CDD (the “Related Entity”) to assist in the development
of the Digital Vault.  The principle balance of the Note Payable is
$15,172, bears interest at 10% per annum and matures on September 30,
2010.  Additionally, the Company incurred $800 in both fiscal year
2009 and 2008 related to the California state minimum tax imposed on
corporations.
  Net
Loss
  During
fiscal years 2009 and 2008 the Company incurred a net loss of $101,290 and
$9,955 respectively, due primarily to operating expenses as described
above.
  15
  Capital
Resources and Liquidity
  Net
cash used in operating activities was $54,526 and $4,414 for fiscal year 2009
and for the period from May 2, 2008 (Inception) through September 30, 2008,
respectively and is primarily attributable to the payment of marketing and
professional fees, liability insurance and office expenses.  CDD
incurred vendor payables primarily for public relations, marketing and legal
fees at September 30, 2009.  The result was an increase in net cash
provided by operating activities of approximately $6,000 for said
period.
  Net cash
used in investing activities was $30,020 and $9,129 for fiscal year 2009 and for
the period from May 2, 2008 (Inception) through September 30, 2008,
respectively, resulting from the development of the DigitalVault.
  Net cash
provided by financing activities during fiscal year 2009 and for the period from
May 2, 2008 (Inception) through September 30, 2008 was $58,450 and $49,000,
respectively and resulted primarily from the Company’s sale of its common stock
via private placement memorandums during each respective period.
  We
currently rely on cash flows from financing activities to fund our capital
expenditures and to support our working capital requirements. We expect that
future cash requirements will principally be for capital expenditures and
working capital requirements.
  We
anticipate that depending on market conditions and our plan of operations, we
may continue to incur operating losses in the foreseeable future. Therefore, our
auditors have raised substantial doubt about our ability to continue as a going
concern.
  Off-Balance
Sheet Arrangements
 
 There are
no off-balance sheet arrangements that have or are reasonably likely to have a
current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that is material to
investors.
 
 Inflation
 
 Inflation
and changing prices have had no effect on our net sales and revenues or on our
income from continuing operations over our two most recent fiscal
years.
  Critical
Accounting Policies and Estimates
 
 The
financial statements of our company have been prepared in accordance with
generally accepted accounting principles in the United States. Because a precise
determination of many assets and liabilities is dependent upon future events,
the preparation of financial statements for a period necessarily involves the
use of estimates which have been made using careful judgment.
 
 The
financial statements have, in management’s opinion, been properly prepared
within reasonable limits of materiality and within the framework of the
significant accounting policies summarized below.
 
 We have
identified the following critical accounting policies that are most important to
the portrayal of our financial condition and results of operations and that
require management’s most difficult, subjective or complex judgments, often as a
result of the need to make estimates about the effect of matters that are
inherently uncertain. The following is a review of the more critical accounting
policies and methods used by us:
  16
 
 Basis
of presentation - Going concern
  No
assurance can be given that a market for the CDD product will develop, or that
customers will be willing to pay for the CDD product.  For the year
ended September 30, 2009, the Company incurred net losses totaling $101,290; had
net cash used in operating activities totaling $54,526; and had an accumulated
deficit of $111,245 as of September 30, 2009.  If the Company is unable to
generate sufficient cash flow from operations and/or continue to obtain
financing to meet its working capital requirements, it may have to curtail its
business sharply or cease business altogether.
  The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern that contemplates the realization of assets and
the satisfaction of liabilities in the normal course of business. However, the
ability of the Company to continue as a going concern on a longer-term basis
will be dependent upon the ability to generate sufficient cash flow from
operations to meet its obligations on a timely basis and the ability to
ultimately attain profitability. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
  The
Company has paid for the development of the Digital Vault through the borrowing
of funds from an entity controlled by the major shareholders of
CDD  as well as through the sale of shares of its own common
stock.  There can be no assurance that the Related Entity will be able
to continue to loan funds to CDD in the future.  Additionally, while
the Company has been successful in the past in raising capital, no assurance can
be given that these sources of financing will continue to be available to the
Company and/or that demand for the Company’s equity instruments will be
sufficient to meet its capital needs.
  Management
believes that the actions presently being taken to obtain additional funding and
market the Digital Vault will be sufficient to enable the Company to continue as
a going concern.
  Development
Stage Company
  The
Company’s financial statements are presented as those of a development stage
enterprise.  Activities during the development stage primarily include
the creation of a business plan and the development and marketing of the Digital
Vault.
  Fair
Value Estimates
  The
Company is required to estimate the fair value of all financial instruments
included on its balance sheet.  The fair value of an asset or
liability is the amount at which it could be exchanged or settled in a current
transaction between willing parties.  The carrying values for cash and cash
equivalents, prepaid assets, accounts payable and accrued liabilities
approximate their fair value due to their short maturities.
  Use
of estimates
  The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting
period.  Actual results could differ from those
estimates.
  17
  Revenue
recognition
  Upon the
generation of revenue, the Company will recognize revenue when it is realized or
realizable and earned. The Company considers revenue realized or realizable and
earned when it has persuasive evidence of an arrangement that the services have
been rendered to the customer, the sales price is fixed or determinable, and
collectability is reasonably assured.  Subscription revenues shall be
recognized over the period benefited. Deferred revenues shall be recorded when
cash has been collected, however the related service has not yet been
provided.
  Cash
and Cash Equivalents
  For
purposes of the balance sheet and statement of cash flows, the Company considers
all highly liquid debt instruments purchased with an original maturity of three
months or less to be cash equivalents.
  Website
in development
  The
Company accounts for the development of its website and Digital Vault under the
guidance of FASB ASC No. 350 “Intangibles-Goodwill &
Other”.  Costs incurred in the planning stage of a website are
expensed while costs incurred in the development stage are capitalized and
amortized over the estimated two year life of the asset.  For the year
ended September 30, 2009 and period ended September 30, 2008, the Company paid
$30,020 and $22,929, respectively to develop its website and charged $8,471 and
$0, respectively, to amortization expense.
  Income taxes
  The
Company follows FASB ASC No. 740, “Income Taxes”.  Under ASC No. 740,
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled.  A valuation
allowance can be provided for a net deferred tax asset, due to uncertainty of
realization.
  Net
loss per common share
  Basic net
loss per share is computed by dividing net loss by the weighted average number
of shares of common stock outstanding during the period. Diluted net loss per
share is computed by dividing net loss by the weighted average number of shares
of common stock and potentially outstanding shares of common stock during each
period. There were no potentially dilutive shares outstanding as of September
30, 2009 and 2008.
  Stock-based
Compensation
  Stock
based compensation expense is recorded in accordance with FASB ASC Nos. 718 and
505 for stock and stock options awarded in return for goods and services
received. The expense is measured at the grant-date fair value of the award and
recognized as compensation expense on a straight-line basis over the service
period, which is the vesting period. The Company estimates forfeitures that it
expects will occur and records expense based upon the number of awards expected
to vest.
  18
  Recently
Issued Accounting Pronouncements
  In
June 2009, the FASB issued guidance related to the FASB Accounting Standards
Codification ("ASC"). Effective for interim and annual financial periods ending
after September 15, 2009, the ASC has become the source of authoritative
generally accepted accounting principles in the United States and supersedes all
existing non-SEC accounting and reporting standards. All other non-grandfathered
non-SEC accounting literature not included in the ASC has become
non-authoritative. This new guidance affected the way in which the Company
references and reports accounting and reporting standards beginning with these
financial statements.
  In June
2009, the FASB issued guidance to improve 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. The guidance 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 does not expect the
guidance to have a material impact on its financial statements.
  Also
during June 2009, the FASB issued guidance regarding financial reporting by
enterprises involved with variable interest entities.  This guidance
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 does not expect the guidance to have a material impact
on its financial statements.
  In May
2009, the FASB issued guidance on subsequent events that establishes general
standards of accounting for and disclosure of events that occur after the
balance sheet date and requires the disclosure of the date through which an
entity has evaluated subsequent events and whether that represents the date the
financial statements were issued or were available to be issued. This new
guidance was effective for the Company in 2009 and, consistent with its prior
practice, the Company evaluated all subsequent events that occurred through the
time these financial statements were filed with the SEC on December 14,
2009.
  In April
2009, the FASB issued disclosure guidance about fair value of financial
instruments in interim financial statements. This was effective for the Company
in 2009 but had no impact on the financial statements.
  In
March 2008, the FASB issued new disclosure requirements regarding
derivative instruments and hedging activities. Entities must now provide
enhanced disclosures on an interim and annual basis regarding how and why the
entity uses derivatives; how derivatives and related hedged items are accounted
for, and how derivatives and related hedged items affect the entity’s financial
position, financial results and cash flow. Pursuant to the transition
provisions, the Company adopted these new requirements on January 1, 2009.
The adoption of this standard had no impact on our financial
statements.
  In
December 2007, the FASB issued an update to business combination accounting. The
new pronouncement establishes principles and requirements for how the acquirer
in a business combination recognizes and measures in its financial statements
the identifiable assets acquired, the liabilities assumed and any noncontrolling
interest in the acquiree at the acquisition date fair value. This update
significantly changes the accounting for business combinations in a number of
areas, including the treatment of contingent consideration, preacquisition
contingencies, transaction costs and restructuring costs. In addition, under the
new guidelines, changes in an acquired entity’s deferred tax assets and
uncertain tax positions after the measurement period could impact income tax
expense. The provisions of this standard will apply to any acquisitions we
complete after October 1, 2009.
  19
 ITEM
7A.            QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
 
 Not
applicable to a “smaller reporting company” as defined in Item 10(f)(1) of SEC
Regulation.
  ITEM
8.              
FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
 
 The
financial statements required by Item 8 are submitted in a separate section of
this report, beginning on F-1, are incorporated herein and made a part
hereof.
  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 that are designed to ensure that
information required to be disclosed in the reports that we file with the SEC
under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in the SEC’s rules and forms and that such
information is accumulated and communicated to our management, including our
principal executive and financial officers, as appropriate, to allow for timely
decisions regarding required disclosure. As required by SEC Rule 15d-15(b), we
carried out an evaluation, under the supervision and with the participation of
our management, including our principal executive and financial officers, of the
effectiveness of the design and operation of our disclosure controls and
procedures as of the end of the period covered by this report.  Based
on the foregoing, our principal executive and financial officers concluded that
our disclosure controls and procedures are effective to ensure the information
required to be disclosed in our reports filed or submitted under the Exchange
Act is recorded, processed and reported within the time periods specified in the
SEC’s rules and forms.
 
 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 15d-15(f) under the
Exchange Act, and for assessing the effectiveness of internal control over
financial reporting.
 
 Internal
control over financial reporting is intended to provide reasonable assurance
regarding the reliability of our financial reporting and the preparation of
financial statements for external purposes in accordance with accounting
principles generally accepted in the United States.  Internal control
over financial reporting includes those policies and procedures that (1) pertain
to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of our assets, (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with accounting principles generally accepted
in the United States and that our receipts and expenditures are being made only
in accordance with authorizations of our management and directors, and (3)
provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisitions, use, or disposition of our assets that could have a
material effect on our financial statements.
  20
 
 Management,
with the participation of our principal executive and financial officers,
conducted an evaluation of the effectiveness of our internal control over
financial reporting, as of September 30, 2009, based on criteria established in
Internal Control—Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO).    Based on
that evaluation, management concluded that, as of December 31, 2008, our
internal control over financial reporting was effective.
 
 This
annual report does not include an attestation report of our independent
registered public accounting firm regarding internal control over financial
reporting.  Management’s report was not subject to attestation by our
independent registered public accounting firm pursuant to temporary rules of the
SEC that permit us to provide only management’s report in this annual
report.
 
 Changes
in Internal Control Over Financial Reporting
 
 There was
no change in our internal control over financial reporting during the most
recent fiscal quarter that 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, PROMOTERS AND CORPORATE GOVERNANCE
 
 Our
directors and executive officers will manage our
business.    The following table sets forth the names and
ages of the members of our Board of Directors and our executive officers and the
positions held by each, as of  December 14, 2009. The board of
directors elects our executive officers annually. A majority vote of the
directors who are in office is required to fill vacancies. Each director will
serve until his or her successor is elected and qualified, or until his or her
earlier resignation or removal.
 
 Name
              
              Age
              
              PositionDina
      M. Moskowitz
              
              43
              
              Chief
      Executive Officer and DirectorMarc
      Zimmerman
              
              42
              
              President
      and Director
 
 Management
 
 Dina
M. Moskowitz, Chief Executive Officer
 Dina
Moskowitz, age 43, has been the CEO and a director since the inception of the
Company.  From 2006 through November 15, 2009, she had been President
of PineappleHut, Inc. a San Diego-based real estate and mortgage brokerage. She
is also founder and past principal of Corporate Business Plan Associates, a firm
which has been providing custom business plan services for more than fifteen
years. She earned her B.S. Economics degree in Finance from the Wharton School
of Business, University of Pennsylvania. She is a licensed real estate agent
with the California Department of Real Estate and is a licensed REALTOR®. As
well she has been providing mortgage brokering services from 2003 to 2008, first
as a loan consultant with 1st Financial, Inc., followed by PineappleHut, Inc.
Dina serves as Trustee on the Board, Chief Financial Officer and member of the
Strategic Planning Committee for San Diego Hebrew Homes (dba Seacrest Village
Retirement Communities).
  21
 
 Marc
Zimmerman, President
 Marc
Zimmerman, age 42, has been the President and a director since the inception of
the Company.   He is Chief Executive Officer and Co-Founder and
Broker of Record of PineappleHut, Inc. He has worked in the real estate business
for the past 16 years, serving serving as a mortgage broker and a real
estate agent.. From 2002 to 2006 he was President and CEO of 1st Financial
Inc., a mortgage brokerage business. He is registered as a licensed broker with
the California Department of Real Estate, is a licensed REALTOR® with membership
in the National Association of Realtors, California Association of Realtors and
San Diego Association of Realtors. Marc attended the Berkeley School of Music in
Boston and is a highly accomplished keyboardist/pianist/bass
player.
 
 Family
Relationships
 
 There are
no family relationships among the Company’s directors, executive officers, or
persons nominated or chosen by the Company to become directors or executive
officers.
 
 Compliance
with Section 16(a) of the Exchange Act.
 
 Under the
Securities Exchange Act of 1934, as amended, our directors, certain officers,
and any persons holding more than 10% of any class of our equity securities are
required to report their ownership of our equity securities and any changes in
that ownership to the Securities and Exchange Commission and any exchange or
quotation system on which our securities are listed or
quoted.  Specific due dates for these reports have been established
and we are required to report any failure to file such reports on a timely
basis.  Based solely on a review of copies of reports filed with the
SEC, we believe that all persons required to file such reports complied with the
filing requirements applicable to them for the fiscal year ended September 30,
2009.
  ITEM
11.           EXECUTIVE
COMPENSATION
 
 Executive
Compensation
 Our
executive officers have not received any compensation since the date of our
incorporation, and we did not accrue any compensation.
 
 Audit
Committee
 Presently,
our Board of Directors is performing the duties that would normally be performed
by an audit committee. We intend to form a separate audit committee, and plan to
seek potential independent directors. In connection with our search, we plan to
appoint an individual qualified as an audit committee financial
expert.
 
 Directors’
Compensation
 The
Company’s directors currently serve without cash compensation
  22
 ITEM
12.            
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
 
 The
following table sets forth certain information, as of  December 14,
2009, with respect to any person (including any “group”, as that term is used in
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”)) who is known to us to be the beneficial owner of more than five
percent (5%) of any class of our voting securities, and as to those shares of
our equity securities beneficially owned by each of our directors and executive
officers and all of our directors and executive officers as a group. Unless
otherwise specified in the table below, such information, other than information
with respect to our directors and executive officers, is based on a review of
statements filed with the Securities and Exchange commission (the “Commission”)
pursuant to Sections 13 (d), 13 (f), and 13 (g) of the Exchange Act
with respect to our common stock. As of December 14, 2009, there were
4,377,000 shares of our common stock outstanding.
 
 The
number of shares of common stock beneficially owned by each person is determined
under the rules of the Commission and the information is not necessarily
indicative of beneficial ownership for any other purpose. Under such rules,
beneficial ownership includes any shares as to which such person has sole or
shared voting power or investment power and also any shares which the individual
has the right to acquire within sixty (60) days after the date hereof,
through the exercise of any stock option, warrant or other right. Unless
otherwise indicated, each person has sole investment and voting power (or shares
such power with his or her spouse) with respect to the shares set forth in the
following table. The inclusion herein of any shares deemed beneficially owned
does not constitute an admission of beneficial ownership of those
shares.
 
 The table
also shows the number of shares beneficially owned as of December 14, 2009 by
each of our individual directors and executive officers, by our nominee
directors and executive officers and by all our current directors and executive
officers as a group.
 
 Name
      of Beneficial Owner (1)
              
              Common
      Stock
                Beneficially
      Owned
              
              
              Percentage
      of
                Common
      StockDina
      M. Moskowitz
              
              
              1,750,000
              
              
              
              40.0
              %Marc
      Zimmerman
              
              
              1,750,000
              
              
              
              40.0
              %The
      Borg Trust(2)
              
              
              250,000
              
              
              
              5.7
              %Officers
      and Directors as a group
              
              
              3,500,000
              
              
              
              80.0
              %
 
 (1)
              Beneficial
      Ownership is determined in accordance with the rules of the Securities and
      Exchange Commission and generally includes voting or investment power with
      respect to securities. Shares of common stock subject to options,
      warrants, or convertible debt currently exercisable or convertible, or
      exercisable or convertible within 60 days of December 14, 2009 are deemed
      outstanding for computing the percentage of the person holding such option
      or warrant but are not deemed outstanding for computing the percentage of
      any other person. Percentages are based on a total of shares of
      common stock outstanding on December 14, 2009, and the shares issuable
      upon the exercise of options, warrants exercisable, and debt convertible
      on or within 60 days of December 14,
2009.
 (2)
              Ian
      Mausner has investment and voting power over the shares registered in the
      name of The Borg Trust.
 
 23
 ITEM
13.            
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
 In order
to develop the Company’s Digital Vault and begin marketing of the Company,
PineappleHut Realty, Inc., a company that is owned by the founders of CDD, made
payments to various consultants on behalf of CDD in the amount of
$15,172.  Subsequently, CDD entered into a note payable agreement with
PineappleHut Realty, Inc. evidencing the amount of the funds that had been paid
to date (the “Note Payable”).  The Note Payable bears interest at 10%
per annum and is due on September 30, 2010.
  ITEM
14.            
PRINCIPAL
ACCOUNTANT FEES AND SERVICES.
 The
following table shows the fees that were paid or accrued by us for audit and
other services provided by our auditors for the 2008 and 2009 fiscal
years.
 
 2008
              
              
              2009Audit
      Fees (1)
              
              $
              4,000
              
              
              $
              6,000Audit-Related
      Fees (2)
              
              
              -
              
              
              
              -Tax
      Fees (3)
              
              
              -
              
              
              
              -All
      Other Fees
              
              
              -
              
              
              
              -Total
              
              $
              4,000
              
              
              $
              6,000
 
 (1)
              Audit
      fees represent fees for professional services provided in connection with
      the audit of our annual financial statements and the review of our
      financial statements included in our Form 10-Q quarterly reports and
      services that are normally provided in connection with statutory or
      regulatory filings for the 2008 and 2009 fiscal years.(2)
              Audit-related
      fees represent fees for assurance and related services that are reasonably
      related to the performance of the audit or review of our financial
      statements and not reported above under “Audit
  Fees.”
 (3)
              Our
      auditors do not provide us with tax compliance, tax advice or tax planning
      services.
 
 The
Company’s Board of Directors reviews and approves audit and permissible
non-audit services performed by its independent accounts, as well as the fees
charged for such services.  In its review of non-audit service fees
and its appointment of Hawkins Accounting Inc. as the Company’s independent
accountants, the Board of Directors considered whether the provision of such
services is compatible with maintaining independence.
  24
  ITEM
15. EXHIBITS AND FINANCIAL STATEMENT
SCHEDULES
  The
Company’s financial statements and related notes thereto are listed and included
in this Annual Report beginning on page F-1.   The following
exhibits are filed with, or are incorporated by reference into, this Annual
Report.
 
 EXHIBIT
INDEX
  Exhibit
      Number
              
              Description23.2
              
              Consent
      of Critical Digital Data, Inc.’s Auditors*31.1
              
              Certification
      of Principal Executive Officer/Principal Financial Officer pursuant to
      Section 302 of the Sarbanes-Oxley Act*32.1
              
              Certification
      of Principal Executive Officer/Principal Financial Officer pursuant to
      U.S.C Section 1350 as adopted pursuant to Section 906 of the
      Sarbanes-Oxley Act*
  *  Filed
herewith.
  25
  SIGNATURES
 
 In
accordance with Section 13 or 15(d) of the Exchange Act, the company caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
  Critical
      Digital Data, Inc.
                  (Registrant)Date:
      December 29,  2009
                By:
                /s/ Dina
      M. MoskowitzDina
      M. Moskowitz
                  Chief
      Executive Officer
  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.
  Signature
                
                Title
                
                Date/s/
      Dina M. Moskowitz
                
                Chief Executive Officer, Chief Financial Officer
                
                December
      29, 2009Dina
      M. Moskowitz
                
                and
      Treasurer, (Principal Executive Officer)/s/
      Marc Zimmerman
                
                President
      and Secretary
                
                December
      29, 2009Marc
      Zimmerman
                
                (Principal Accounting Officer)
 
 26
 
 Critical
Digital Data, Inc.
 (A
Development Stage Company)
 September
30, 2009
 
 INDEX
TO FINANCIAL STATEMENTS
 
 Contents
              Page(s)Report
      of Independent Registered Public Accounting
      Firm
              F-1Balance
      Sheets at September 30, 2009 and 2008
              F-2Statements
      of Operations for the Year ended September 30, 2009, the Period from May
      2, 2008 (Inception) through September 30, 2008 and the Period from May 2,
      2008 (Inception) through September 30,
      2009
              F-3Statement
      of Stockholders’ Equity for the Period from May 2, 2008 (Inception)
      through September 30,
      2009
              F-4Statement
      of Cash Flows for the Year ended September 30, 2009, the Period from May
      2, 2008 (Inception) through September 30, 2008 and the Period from May 2,
      2008 (Inception) through September 30,
      2009
              F-5Notes
      to the Financial
      Statements
              F-6
      to F-13
 
 27
 
 
  Board of
Directors
 Critical
Digital Data, Inc.
 San
Diego, California
 
  Report of Independent
Registered Public Accounting Firm
 
  We have
audited the balance sheet of Critical Digital Data, Inc. as of September 30,
2009 and 2008, the related statements of operations, stockholders’ equity and
cash flows from the date of inception (May 2, 2008) through the year ended
September 30, 2009.  These financial statements are the responsibility
of the Company’s management. Our responsibility is to express an opinion on
these financial statements based on our audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board in the United States of America.  Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the schedule of accounts receivable is free of material
misstatement.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the schedule of accounts
receivable.  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 audit provides reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Critical Digital Data, Inc. as of
September 30, 2009 and 2008, the results of operations and its cash flows from
the date of inception (May 2, 2008) through the  year ended September
30, 2009 in conformity with generally accepted accounting principles in the
United States of America.
 
 The
accompanying financial statements have been prepared assuming the Company will
continue as a going concern.  As discussed in Note 2 to the financial
statements, the Company has incurred net losses since inception, which raise
substantial doubt about its ability to continue as a going
concern.  The financial statements do not include any adjustment that
might result from the outcome of this uncertainty.
 
 
 /s/
R.R. Hawkins & Associates International, PSC
 December
14, 2009
 Los
Angeles, CA
 Corporate Offices
 5777 W. Century Blvd.  , Suite No. 1500
 Los Angeles, CA 90045
 T: 310.553.5707  F: 310.553.5337
 www.rrhawkins.com
 F-1
 CRITICAL
      DIGITAL DATA, INC.(A
      Development Stage Company)BALANCE
      SHEETSASSETSSeptember
      30,

                2009
              
              September
      30,

                2008Current
      assets:Cash
              
              $
              9,361
              
              
              $
              35,457Prepaid
      assets
              
              
              4,635
              
              
              
              -Total
      current assets
              
              
              13,996
              
              
              
              35,457Website
      in development, net
              
              
              44,478
              
              
              
              22,929Total
      assets
              
              $
              58,474
              
              
              $
              58,386LIABILITIES AND STOCKHOLDERS’
      EQUITYCurrent
      liabilities:Accounts
      payable and accrued expenses
              
              $
              9,569
              
              
              $
              2,909Accounts
      payable and accrued expenses-related parties
              
              
              2,930
              
              
              
              1,260Total
      current liabilities
              
              
              12,498
              
              
              
              4,169Note
      payable  - related party
              
              
              15,172
              
              
              
              15,172Total
      liabilities
              
              
              27,671
              
              
              
              19,341CommitmentsStockholders’
      equity:Preferred
      stock, $0.001 par value; 10,000,000 sharesauthorized;
      no shares issued and outstanding
              
              
              -
              
              
              
              -Common
      stock, $0.001 par value; 100,000,000 sharesauthorized;
      4,323,667 and 3,990,000 shares issued andoutstanding
      at September 30, 2009 and 2008, respectively
              
              
              4,324
              
              
              
              3,990Additional
      paid-in capital
              
              
              137,725
              
              
              
              45,360Founders'
      receivable
              
              
              -
              
              
              
              (350
              )Deficit
      accumulated during development stage
              
              
              (111,245
              )
              
              
              (9,955
              )Total
      stockholders’ equity
              
              
              30,804
              
              
              
              39,045Total
      liabilities and stockholders’ equity
              
              $
              58,474
              
              
              $
              58,386
  See
accompanying notes to  financial statements
  F-2
 CRITICAL
DIGITAL DATA, INC.
 (A
Development Stage Company) CONDENSED STATEMENTS OF
OPERATIONS
  Year Ended
                    September 30,
                    2009
                  
                  
                  Period Ended
                    September 30,
                    2008
                  
                  
                  Period from
                    May 2, 2008
                    (inception) to
                    September 30,
                    2009Revenues
                  
                  $
                  -
                  
                  
                  
                  -
                  
                  
                  $
                  -Operating
      expensesProfessional
      fees
                  
                  
                  37,701
                  
                  
                  
                  4,000
                  
                  
                  
                  41,701Software
      licensing costs
                  
                  
                  18,982
                  
                  
                  
                  -
                  
                  
                  
                  18,982Marketing
                  
                  
                  7,085
                  
                  
                  
                  2,514
                  
                  
                  
                  9,599Corporate
      fees
                  
                  
                  2,749
                  
                  
                  
                  -
                  
                  
                  
                  2,749General
      and administrative
                  
                  
                  32,456
                  
                  
                  
                  1,953
                  
                  
                  
                  34,409Total
      operating expenses
                  
                  
                  98,973
                  
                  
                  
                  8,467
                  
                  
                  
                  107,440Loss
      from operations
                  
                  
                  (98,973
                  )
                  
                  
                  (8,467
                  )
                  
                  
                  (107,440
                  )Taxes
                  
                  
                  800
                  
                  
                  
                  800
                  
                  
                  
                  1,600Interest
      expense-related party
                  
                  
                  1,517
                  
                  
                  
                  688
                  
                  
                  
                  2,205Net
      loss
                  
                  $
                  (101,290
                  )
                  
                  $
                  (9,955
                  )
                  
                  $
                  (111,245
                  )Weighted
      average number of commonshares
      outstanding - basic and fully diluted
                  
                  
                  4,182,215
                  
                  
                  
                  3,766,304
                  
                  
                  
                  3,965,617Net
      loss per share - basic and fully diluted
                  
                  $
                  (0.03
                  )
                  
                  $
                  (0.01
                  )
                  
                  $
                  (0.03
                  )
 See accompanying
notes to  financial statements
  F-3
  CRITICAL
DIGITAL DATA (A
Development Stage Company) Condensed
Statement of Stockholders' Equity For
the period from May 2, 2008 (inception) through September 30,
2009
  Common
      Stock
                
                
                Additional
                  Paid-In
                
                
                Accumulated

                  Deficit
      During
                  Development
                
                
                Founders'Shares
                
                
                Amount
                
                
                Capital
                
                
                Stage
                
                
                Receivable
                
                
                TotalBalance,May
      2, 2008
                
                
                -
                
                
                $
                -
                
                
                $
                -
                
                
                $
                -
                
                
                $
                -
                
                
                $
                -Issuance
      of common stock for cash - May 2008
                
                
                30,000
                
                
                
                30
                
                
                
                2,970
                
                
                
                -
                
                
                
                -
                
                
                
                3,000Issuance
      of common stock for cash - June 2008
                
                
                20,000
                
                
                
                20
                
                
                
                1,980
                
                
                
                -
                
                
                
                -
                
                
                
                2,000Issuance
      of common stock for cash - July 2008
                
                
                360,000
                
                
                
                360
                
                
                
                35,640
                
                
                
                -
                
                
                
                -
                
                
                
                36,000Issuance
      of common stock for cash - August 2008
                
                
                50,000
                
                
                
                50
                
                
                
                4,950
                
                
                
                -
                
                
                
                -
                
                
                
                5,000Issuance
      of common stock for cash - September 2008
                
                
                30,000
                
                
                
                30
                
                
                
                2,970
                
                
                
                -
                
                
                
                -
                
                
                
                3,000Issuance
      of founders' shares - May 2008
                
                
                3,500,000
                
                
                
                3,500
                
                
                
                (3,150
                )
                
                
                -
                
                
                
                (350
                )
                
                
                -Net
      loss
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (9,955
                )
                
                
                -
                
                
                
                (9,955
                )Balance,September
      30, 2008
                
                
                3,990,000
                
                
                
                3,990
                
                
                
                45,360
                
                
                
                (9,955
                )
                
                
                (350
                )
                
                
                39,045Issuance
      of common stock for cash - October 2008
                
                
                40,000
                
                
                
                40
                
                
                
                3,960
                
                
                
                
                
                
                
                
                
                
                
                4,000Issuance
      of common stock for cash - November 2008
                
                
                30,000
                
                
                
                30
                
                
                
                2,970
                
                
                
                
                
                
                
                
                
                
                
                3,000Issuance
      of common stock for cash - February 2009
                
                
                186,667
                
                
                
                187
                
                
                
                27,813
                
                
                
                
                
                
                
                
                
                
                
                28,000Issuance
      of common stock for cash - July 2009
                
                
                45,000
                
                
                
                45
                
                
                
                13,455
                
                
                
                
                
                
                
                
                
                
                
                13,500Issuance
      of common stock for cash - September 2009
                
                
                32,000
                
                
                
                32
                
                
                
                9,568
                
                
                
                
                
                
                
                
                
                
                
                9,600Stock
      based compensation expense
                
                
                
                
                
                
                
                
                
                
                15,617
                
                
                
                
                
                
                
                
                
                
                
                15,617Warrants
      issued in exchange for licensing agreement
                
                
                
                
                
                
                
                
                
                
                18,982
                
                
                
                
                
                
                
                
                
                
                
                18,982Pay
      off of founders' receivable
                
                
                
                
                
                
                
                
                
                
                -
                
                
                
                
                
                
                
                350
                
                
                
                350Net
      loss
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (101,290
                )
                
                
                
                
                
                
                (101,290
                )Balance,September
      30, 2009
                
                
                4,323,667
                
                
                $
                4,324
                
                
                $
                137,725
                
                
                $
                (111,245
                )
                
                $
                -
                
                
                $
                30,804
 See
accompanying notes to financial statements
  F-4
 CRITICAL
      DIGITAL DATA, INC.(A
      Development Stage Company)CONDENSED
      STATEMENT OF CASH FLOWSYear
      Ended
                September
      30,
                2009
              
              
              Period
      Ended
                September
      30,
                2008
              
              
              May
      2, 2008
                (inception)to
                September
      30,
                2009Cash
      flows from operating activitiesNet
      loss
              
              $
              (101,290
              )
              
              $
              (9,955
              )
              
              $
              (111,245
              )Adjustments
      to reconcile net loss to net cash used in operating
    activitiesStock
      based compensation
              
              
              15,617
              
              
              
              -
              
              
              
              15,617Depreciation
              
              
              8,471
              
              
              
              -
              
              
              
              8,471Software
      licensing costs
              
              
              18,982
              
              
              
              -
              
              
              
              18,982Changes
      in operating assets and liabilitiesPrepaid
      assets
              
              
              (4,635
              )
              
              
              -
              
              
              
              (4,635
              )Accounts
      payable and accrued expenses
              
              
              6,659
              
              
              
              4,281
              
              
              
              10,940Accounts
      payable and accrued expenses-related parties
              
              
              1,670
              
              
              
              1,260
              
              
              
              2,930Net
      cash used in operating activities
              
              
              (54,526
              )
              
              
              (4,414
              )
              
              
              (58,940
              )Cash
      flows from investing activitiesPurchase
      of website development
              
              
              (30,020
              )
              
              
              (9,129
              )
              
              
              (39,149
              )Net
      cash used in investing activities
              
              
              (30,020
              )
              
              
              (9,129
              )
              
              
              (39,149
              )Cash
      flows from financing activitiesProceeds
      from issuance of common stock
              
              
              58,100
              
              
              
              49,000
              
              
              
              107,100Payments
      on Founders' receivable
              
              
              350
              
              
              
              -
              
              
              
              350Net
      cash provided by financing activities
              
              
              58,450
              
              
              
              49,000
              
              
              
              107,450Net
      increase (decrease) in cash
              
              
              (26,096
              )
              
              
              35,457
              
              
              
              9,361Cash,
      beginning of period
              
              
              35,457
              
              
              
              -
              
              
              
              -Cash,
      end of period
              
              $
              9,361
              
              
              $
              35,457
              
              
              $
              9,361Supplemental
      disclosure of cash flow information:Income
      taxes paid
              
              $
              -
              
              
              
              
              
              
              $
              -Interest
      paid
              
              $
              -
              
              
              
              
              
              
              $
              -Supplementary
      disclosure of  noncash financing activities:Issuance
      of common stock for founders' receivable
              
              $
              -
              
              
              
              
              
              
              $
              350Issuance
      of note payable for development of website and marketing of
      Company
              
              $
              -
              
              
              
              
              
              
              $
              15,172
 
 See
accompanying notes to financial statements
  F-5
  CRITICAL
DIGITAL DATA, INC.
 (A
Development Stage Company)
 Notes to
the Financial Statements
 September
30, 2009
   NOTE
1 - ORGANIZATION AND OPERATIONS
  Critical
Digital Data, Inc.  (“CDD” or the “Company”), a development stage
company, was incorporated on May 2, 2008 under the laws of the State of Nevada
with its principal place of business in San Diego, California. CDD is a
development stage company that intends to develop, launch and operate an online
data storage service (a “Digital Vault”) specifically for data preservation and
disaster recovery. The Digital Vault enables subscribers to create a “back-up”
copy of their most critical documents and electronic personal data, in an
off-site secure location. We intend to operate the business of CDD under the
service and brand name “Home Data Guard” (“HDG”). HDG will provide:
  1)
              Secure
      online digital storage (back-up) and reproduction services via
      www.HomeDataGuard.com, and;
  2)
              Access
      to service providers, “Home Data Pros”, who will assist HDG subscribers in
      backing up and copying subscribers’ personal
  data.
  Upon
incorporation, CDD authorized 100,000,000 shares of common stock with a par
value of $0.001 per share and 10,000,000 shares of preferred stock with a par
value of $0.001.  On November 15, 2008, the Company’s Board of
Directors approved a recapitalization (the “Recapitalization”) of the Company
whereby each shareholder of record on October 31, 2008 was granted an additional
nine shares of common stock for each share owned.  As a result, the
number and value of shares of common stock outstanding were increased and
additional paid in capital was decreased to reflect a change in the market price
from $1.00 per share to $0.10 per share. Share and per share amounts reflected
throughout the financial statements and notes thereto have been retroactively
restated for the Recapitalization.
  Activities
during the development stage have consisted of developing the HomeDataGuard
Personal Digital Vault Application and raising capital.
  Between
May 2008 and November 2008, the Company sold 560,000 shares of common stock (the
“PP Shares”) resulting in an increase in capital of $56,000.
  On
December 10, 2008, CDD filed a registration statement on Form S-1 with the
Securities and Exchange Commission (the “SEC”) to register the PP Shares. The
Registration Statement was declared "Effective" by the SEC on December 22,
2008.
  F-6
 CRITICAL
DIGITAL DATA, INC.
 (A
Development Stage Company)
 Notes to
the Financial Statements
 September
30, 2009
 NOTE
2 - GOING CONCERN
  No
assurance can be given that a market for the CDD product will develop, or that
customers will be willing to pay for the CDD product.  For the year
ended September 30, 2009, the Company incurred net losses totaling $101,290; had
net cash used in operating activities totaling $54,526; and had an accumulated
deficit of $111,245 as of September 30, 2009.  If the Company is unable to
generate sufficient cash flow from operations and/or continue to obtain
financing to meet its working capital requirements, it may have to curtail its
business sharply or cease business altogether.
  The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern that contemplates the realization of assets and
the satisfaction of liabilities in the normal course of business. However, the
ability of the Company to continue as a going concern on a longer-term basis
will be dependent upon the ability to generate sufficient cash flow from
operations to meet its obligations on a timely basis and the ability to
ultimately attain profitability. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
  The
Company has paid for the development of the HomeDataGuard Personal Digital Vault
Application through the borrowing of funds from an entity controlled by the
major shareholders of CDD (See Note 4 – Related Party Transactions) as well as
through the sale of shares of its own common stock (See Note 5-Stockholders’
Equity).  Additionally, while the Company has been successful in the
past in raising capital, no assurance can be given that these sources of
financing will continue to be available to the Company and/or that demand for
the Company’s equity instruments will be sufficient to meet its capital
needs.
  Management
believes that the actions presently being taken to obtain additional funding and
market the HomeDataGuard Personal Digital Vault Application will be sufficient
to enable the Company to continue as a going concern.
  NOTE
3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  Development
Stage Company
  The
Company’s financial statements are presented as those of a development stage
enterprise.  Activities during the development stage primarily include
the creation of a business plan and the development and marketing of the
HomeDataGuard Personal Digital Vault Application.
  Fair
Value Estimates
  The
Company is required to estimate the fair value of all financial instruments
included on its balance sheet.  The fair value of an asset or
liability is the amount at which it could be exchanged or settled in a current
transaction between willing parties.  The carrying values for cash and cash
equivalents, prepaid assets, accounts payable and accrued liabilities
approximate their fair value due to their short maturities.
  Use
of estimates
  The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting
period.  Actual results could differ from those
estimates.
  F-7
 CRITICAL
DIGITAL DATA, INC.
 (A
Development Stage Company)
 Notes to
the Financial Statements
 September
30, 2009
 Revenue
recognition
  Upon the
generation of revenue, the Company will recognize revenue when it is realized or
realizable and earned. The Company considers revenue realized or realizable and
earned when it has persuasive evidence of an arrangement that the services have
been rendered to the customer, the sales price is fixed or determinable, and
collectability is reasonably assured.  Subscription revenues shall be
recognized over the period benefited. Deferred revenues shall be recorded when
cash has been collected, however the related service has not yet been
provided.
  Cash
and Cash Equivalents
  For
purposes of the balance sheet and statement of cash flows, the Company considers
all highly liquid debt instruments purchased with an original maturity of three
months or less to be cash equivalents.
  Website
in development
  The
Company accounts for the development of its website and HomeDataGuard Personal
Digital Vault Application under the guidance of FASB ASC No. 350
“Intangibles-Goodwill & Other”.  Costs incurred in the planning
stage of a website are expensed while costs incurred in the development stage
are capitalized and amortized over the estimated two year life of the
asset.  For the year ended September 30, 2009 and period ended
September 30, 2008, the Company paid $30,020 and $22,929, respectively to
develop its website and charged $8,471 and $0, respectively, to amortization
expense.
  Income taxes
  The
Company follows FASB ASC No. 740, “Income Taxes”.  Under ASC No. 740,
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled.  A valuation
allowance can be provided for a net deferred tax asset, due to uncertainty of
realization.
  Net
loss per common share
  Basic net
loss per share is computed by dividing net loss by the weighted average number
of shares of common stock outstanding during the period. Diluted net loss per
share is computed by dividing net loss by the weighted average number of shares
of common stock and potentially outstanding shares of common stock during each
period. There were no potentially dilutive shares outstanding as of September
30, 2009 and 2008.
  Stock-based
Compensation
  Stock
based compensation expense is recorded in accordance with FASB ASC Nos. 718 and
505 for stock and stock options awarded in return for goods and services
received. The expense is measured at the grant-date fair value of the award and
recognized as compensation expense on a straight-line basis over the service
period, which is the vesting period. The Company estimates forfeitures that it
expects will occur and records expense based upon the number of awards expected
to vest.
  F-8
 CRITICAL
DIGITAL DATA, INC.
 (A
Development Stage Company)
 Notes to
the Financial Statements
 September
30, 2009
 Recently
Issued Accounting Pronouncements
  In June
2009, the FASB issued guidance related to the FASB Accounting Standards
Codification ("ASC"). Effective for interim and annual financial periods ending
after September 15, 2009, the ASC has become the source of authoritative
generally accepted accounting principles in the United States and supersedes all
existing non-SEC accounting and reporting standards. All other non-grandfathered
non-SEC accounting literature not included in the ASC has become
non-authoritative. This new guidance affected the way in which the Company
references and reports accounting and reporting standards beginning with these
financial statements.
  In June
2009, the FASB issued guidance to improve 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. The guidance 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 does not expect the
guidance to have a material impact on its financial statements.
  Also
during June 2009, the FASB issued guidance regarding financial reporting by
enterprises involved with variable interest entities.  This guidance
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 does not expect the guidance to have a material impact
on its financial statements.
  In May
2009, the FASB issued guidance on subsequent events that establishes general
standards of accounting for and disclosure of events that occur after the
balance sheet date and requires the disclosure of the date through which an
entity has evaluated subsequent events and whether that represents the date the
financial statements were issued or were available to be issued. This new
guidance was effective for the Company in 2009 and, consistent with its prior
practice, the Company evaluated all subsequent events that occurred through the
time these financial statements were filed with the SEC on December 14,
2009.
  In April
2009, the FASB issued disclosure guidance about fair value of financial
instruments in interim financial statements. This was effective for the Company
in 2009 but had no impact on the financial statements.
  In
March 2008, the FASB issued new disclosure requirements regarding
derivative instruments and hedging activities. Entities must now provide
enhanced disclosures on an interim and annual basis regarding how and why the
entity uses derivatives; how derivatives and related hedged items are accounted
for, and how derivatives and related hedged items affect the entity’s financial
position, financial results and cash flow. Pursuant to the transition
provisions, the Company adopted these new requirements on January 1, 2009.
The adoption of this standard had no impact on our financial
statements.
  F-9
 CRITICAL
DIGITAL DATA, INC.
 (A
Development Stage Company)
 Notes to
the Financial Statements
 September
30, 2009
 In
December 2007, the FASB issued an update to business combination accounting. The
new pronouncement establishes principles and requirements for how the acquirer
in a business combination recognizes and measures in its financial statements
the identifiable assets acquired, the liabilities assumed and any noncontrolling
interest in the acquiree at the acquisition date fair value. This update
significantly changes the accounting for business combinations in a number of
areas, including the treatment of contingent consideration, preacquisition
contingencies, transaction costs and restructuring costs. In addition, under the
new guidelines, changes in an acquired entity’s deferred tax assets and
uncertain tax positions after the measurement period could impact income tax
expense. The provisions of this standard will apply to any acquisitions we
complete after October 1, 2009.
  NOTE
4 – RELATED PARTY TRANSACTIONS
  In order
to develop the Company’s HomeDataGuard Personal Digital Vault Application and
begin marketing of the Company, the Related Entity made payments to various
consultants on behalf of CDD in the amount of $15,172.  Subsequently,
CDD entered into a note payable agreement with the Related Entity evidencing the
amount of the funds that had been paid to date (the “Note
Payable”).  The Note Payable bears interest at 10% per annum and is
due on September 30, 2010.  As of September 30, 2009, CDD had accrued
interest totaling $2,205 related to the Note payable
  The
Company’s attorney is related to one of the founders of the Company and has
billed CDD $572 for the reimbursement of filing fees relating to CDD’s
incorporation in the state of Nevada as well as its registration to do business
in the state of California.  Such expenses are recorded as General and
administrative expenses and included in Accounts payable and accrued expenses –
related party in the accompanying financial statements.
  NOTE
5 – STOCKHOLDERS’ EQUITY
  The
Company was incorporated on May 2, 2008. The authorized shares of the Company
consist of 100,000,000 shares of common stock with a par value of $0.001 per
share and 10,000,000 shares of preferred stock with a par value of $0.001 per
share.  Prior to December 1, 2008, the Company sold 560,000 shares of
common stock valued at $56,000 through a private placement
memorandum.  CDD filed a registration statement on Form S-1 with the
SEC in order to register these shares. The Registration Statement was declared
"Effective" by the SEC on December 22, 2008.  Additionally, during the
period ended September 30, 2008, the two founders of CDD were each granted
1,750,000 shares of common stock, the purchase of which was evidenced by a
Founders’ Receivable in the amount of $350.  The Founders’ Receivable
was paid during fiscal year 2009.
  Subsequent
to the Form S-1 filing, the Company sold an additional 263,667 shares of common
stock value at $51,100 via two separate private placement memorandums at prices
of $.15 and $.30 per share. These shares are restricted under Rule 144 of the
Securities Act of 1933.
  As
payment for a Licensing Agreement (“LA”) with a third party software development
firm, on January 22, 2009 CDD issued a warrant to the software development firm
to purchase up to 133,333 fully paid and non-assessable shares of CDD’s common
stock at $0.015 per share.  The warrant shall be exercisable at any
time on or before January 22, 2019 and may be exercisable in either cash or
through the receipt of shares equal to the value of the warrant as defined in
the LA.  The fair value of the 133,333 warrants was estimated to be
approximately $19,000 using the Black-Scholes option pricing model based on the
following assumptions: expected dividend yield 0%, expected volatility 70%,
risk-free interest rate 2.9%, and expected life of 10 years and is expensed as
Software Licensing Costs during the year ended September 30, 2009.
  F-10
 CRITICAL
DIGITAL DATA, INC.
 (A
Development Stage Company)
 Notes to
the Financial Statements
 September
30, 2009
 NOTE
6–STOCK INCENTIVE PLAN
  On March
11, 2009 (the “Effective Date”), we adopted the 2009 Stock Incentive Plan, (the
“Plan”), pursuant to which we are authorized to grant stock options intended to
qualify as Incentive Stock Options, “ISO”, under Section 422 of the Internal
Revenue Code of 1986, as amended, non-qualified options and stock appreciation
rights to our employees, officers, directors and consultants.  The
Company is authorized to grant options to purchase up to 1,000,000 shares of
common stock under the Plan which as of August 15, 2009, options to purchase
813,500 shares of common stock remained available for future
grant.  The Company intends that any grant, award or other acquisition
of the Company’s securities pursuant to the Plan to any officer and/or director
of the Company shall be exempt from Section 16(b) of the Securities
Exchange Act of 1934, as amended. No participant may be granted ISOs under the
Plan that would result in ISOs to purchase shares of Common Stock with an
aggregate fair market value (measured on the Date of Grant) of more than
$100,000 first becoming exercisable by such Participant in any one calendar
year.  The 2008 Plan shall be administered by a committee of the Board
of Directors (the “Committee”).  The Committee shall have exclusive
and final authority in each determination, interpretation or other action
affecting the Plan and its participants.
  As of
September 30, 2009, we have granted options to purchase a total of 201,500
shares of common stock under the Plan.  The options were granted to
advisors and consultants for services rendered at a price equal to the fair
market value of the common stock at the date of grant.  As permitted
by the Plan, the Committee determined fair market value of the common stock at
the date of grant based on a number of factors including the $0.15 per common
share price that securities were sold to third party investors previously during
fiscal year 2009.
 
 The
Company recognizes option expense ratably over the vesting
periods.  For the year ended September 30, 2009, the Company recorded
compensation expense related to options granted under the Plan of
$15,617.
 
 Forfeitures
are estimated at the time of grant and revised, if necessary, in subsequent
periods if actual forfeitures differ from initial estimates.  Stock-based
compensation expense was recorded net of estimated forfeitures for the year
ended September 30, 2009 such that expense was recorded only for those
stock-based awards that are expected to vest.
 
  The fair
value of option grants for the year ended September 30, 2009 was estimated using
the Black-Scholes option pricing model with the following
assumptions:
  Expected dividend yield
                0.00Risk-free
      interest rate
                1.50-2.5%Expected
      volatility
                70-90%Expected
      life (in years)
                3
 The
Black-Scholes option-pricing model was developed for use in estimating the fair
value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions, including the expected stock price volatility. Because
the Company’s employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management’s
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock
options.
  F-11
 CRITICAL
DIGITAL DATA, INC.
 (A
Development Stage Company)
 Notes to
the Financial Statements
 September
30, 2009
 Stock
option activity under the Plan for the year ended September 30, 2009 is
summarized as follows:
  Shares
                
                
                WeightedAverage
                  Exercise Price
                  perShare
                
                
                Weighted Average

                  Remaining
                  Contractual Life
                  (in years)
                
                Grant
      Date
                  Fair
      ValueOutstanding
      at September 30, 2008
                
                
                -
                
                
                $
                -
                
                
                
                -Options
      granted
                
                
                201,500
                
                
                $
                0.17
                
                
                
                2.82
                
                
                $
                18,069Options
      exercised
                
                
                -
                
                
                $
                -
                
                
                
                -
                
                
                
                -Options
      cancelled/forfeited/ expired
                
                
                -
                
                
                $
                -
                
                
                
                -
                
                
                
                -Outstanding
      at September 30, 2009
                
                
                201,500
                
                
                $
                0.17
                
                
                
                2.82
                
                
                $
                18,069Vested
      and expected to vest at September 30, 2009 (1)
                
                
                201,500
                
                
                $
                0.17
                
                
                
                2.82
                
                
                $
                18,069Exercisable
      at September 30, 2009
                
                
                181,500
                
                
                $
                0.16
                
                
                
                2.76
                
                
                $
                15,616
 
 (1)
              The
      expected to vest options are the result of applying the pre-vesting
      forfeiture rate assumptions to total outstanding
  options.
 
 As of
September 30, 2009, there was $2,452 of unrecognized compensation cost related
to unvested stock options.  The Company intends to issue new shares to
satisfy share option exercises.
  NOTE
7 – INCOME TAXES
  The
Company incurred a loss of $111,245 for the period from May 2, 2008 (Inception)
to September 30, 2009.  As of September 30, 2009, the Company has a
net operating loss carry forward of $37,823 available to reduce future taxable
income for federal and state income tax purposes. The Company established a full
valuation allowance in accordance with the provision of ASC No. 740. The Company
continually reviews the adequacy of the valuation allowance and recognizes a
benefit from income taxes only when reassessment indicates that it is more
likely than not that the benefits will be realized.
  No
provision was made for federal income tax since the Company has net operating
losses.  The provision for income taxes included in the accompanying
financial statements consists of the state minimum tax imposed on
corporations.
  F-12
 CRITICAL
DIGITAL DATA, INC.
 (A
Development Stage Company)
 Notes to
the Financial Statements
 September
30, 2009
 NOTE
8 – COMMITMENTS AND CONTINGENCIES
  On August
27, 2009, CDD entered into an agreement with a consultant to solicit corporate
sponsorship and promotion for HomeDataGuard as well as to provide business
development activities for private label partnership
opportunities.  The agreement calls for the payment of a retainer of
$2,000 upon the execution of the agreement followed by monthly retainer of
$2,000 in months two and three of the contract for a total of $6,000 for the
three month term of the agreement.  As of December 14, 2009 the
retainer portion of the agreement had been paid in full.  The
agreement also calls for various payments to be made in cash and/or options
based on performance, the execution of various sponsorship and/or promotion
transactions, and the consultant’s participation on CDD’s Strategic Advisory
Board.  As of September 30, 2009, the consultant had also been granted
options to purchase 15,000 shares of common stock at $0.30 per
share.  The options vest 5,000 per month beginning September 30,
2009.  The agreement shall continue in force until terminated by
either party with thirty days written notice.
  On June
1, 2009, CDD entered into an agreement with a communications consultant to
perform public relations and media relations services.  The agreement
calls for payments of $1,500 in June 2009 and $2,000 per month
thereafter.  The agreement shall continue in force until terminated by
either party with thirty days written notice.
  NOTE
9 – SUBSEQUENT EVENTS
  Subsequent
to September 30, 2009, CDD raised an additional $16,000 from the sale of 53,333
shares of common stock.  Such shares are restricted under Rule 144 of
the Securities Act of 1933.
  During
October 2009, CDD granted a total of $50,000 options from the
Plan.  The options vest with four months of the grant date, expire
three years from the grant date, have exercise prices of $0.30 per option and
are valued at approximately $8,707.
  On
October 5, 2009, one of the founders of CDD loaned the Company
$3,500.  The loan is evidenced by a note payable bearing interest at
6% per annum and maturing on October 5, 2010.  During November 2009,
CDD entered into a contract with a third party LLC (“LLC”) whereby CDD would
provide a version of its online file cabinet to act as an integrated subsection
of LLC’s website.  For each subscription of the file cabinet sold, CDD
will receive a monthly licensing fee.  As an inducement for CDD to
enter into the contract, LLC agreed to pay CDD $1,750 upon execution of the
contract and will pay a monthly minimum of $1,750 upon launch of the online file
cabinet until such date the subscriptions exceed 5,000.  The launch
will commence within 60 days of execution of the agreement.
  The
Company has evaluated subsequent events for recognition or disclosure through
the date these financial statements were available to be issued, December 29,
2009.
   F-13