**UNITED
        STATES**
 **SECURITIES
        AND EXCHANGE COMMISSION**
 **Washington,
        DC 20549**
 
 **FORM
        10-KSB**
 
 
 **ANNUAL
        REPORT**
 **Under
        Section 13 or 15(d) of the Securities Act of 1934**
 **For
        the Fiscal Year Ended June 30, 2002**
 
 
 **DIGITAL
        CREATIVE DEVELOPMENT CORPORATION**
 (Formerly
        ARTHUR TREACHER’S, INC. )
 (Name
        of
        Small Business Issuer in Its Charter)
 
 UTAH
              
              34-1413104(State
                  or Other Jurisdiction ofIncorporation
                  or Organization)
              
              (I.R.S.
                  Employer Identification No.)200
                  East 82nd Street, New York, NY
              
              10028(Address
                  of Principal Executive Offices)
              
              (Zip Code)212-247-0581(Issuer's
                  Telephone Number)Securities
                registered under Section 12(b) of the Act:Title
                of Each Class to be so Registered
              
              Name
                of Each Exchange on Which Each Class is to be
                RegisteredSecurities
                registered under Section 12(g) of the Act:75
                  ,000,000 shares
              
              Common
                  Stock, $.01 par value(Title
                  of Class)
 
 Check
        whether the issuer (1) filed all reports required to be filed by Section
        13 or
        15(d) of the Exchange Act during the past 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 o  
        No x
  Check
        if
        there is no disclosure of delinquent filers in response to Item 405 of
        Regulation S-B is not contained in this form, and no disclosure will 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-KSB. x
  State
        issuer's revenues for its most recent fiscal year. $
        192,700
  Shares
        outstanding : 51,689,165 at September 22, 2005
  State
        the
        aggregate market value of the voting stock held by non-affiliates computed
        by
        reference to the price at which the stock was sold, or the average bid and
        asked
        prices of such stock, as of a specified date within the past 60 days. (See
        definition of affiliate in Rule 12b-2 of the Exchange Act.) $7,236,000
  Note:
        if
        determining whether a person is an affiliate will involve an unreasonable
        effort
        and expense, the issuer may calculate the aggregate market value of the common
        equity held by non-affiliates on the basis of reasonable assumptions, if
        the
        assumptions are stated.
  1
 
 PART
        I
  BACKGROUND
 
 Digital
        Creative Development Corporation (the “Company”) is principally involved in
        acquiring and investing in software and high technology companies, with a
        focus
        on acquiring controlling interests. Prior to February 28, 2002, the Company’s
        primary business was the operation, franchising, ownership and development
        of
        Arthur Treacher’s Fish & Chip’s (“Arthur Treacher’s”) and Pudgie’s Famous
        Chicken (“Pudgie's”) fast food restaurants. . However, we have since begun to
        search for candidates with which to enter into business combinations or
        strategic transactions. (See “Plan of Business”).Since the Spring 2002, the
        Company has been inactive , except for its interest in International
        Microcomputer Software Inc. (“IMSI”) (OTCBB- IMSI).
 
 On
        February 28, 2002, the Company sold its 80% interest in Arthur Treacher’s, Inc.
        (Delaware) (“ATI (Delaware)”) to PAT Services, Inc. (“PAT Services”), an entity
        controlled by Mr. Jeffery Bernstein, for the consideration of $100, assumption
        of liabilities and a waiver by Mr. Bernstein of his right to convert his
        shares
        of ATI (Delaware) into shares of common stock of the Company under the
        conversion agreement with the Company, ATI (Delaware) and Mr. Bernstein executed
        in connection with the acquisition of Pudgie's in October 2000.
        Contemporaneously with the sale of ATI (Delaware), ATI (Delaware) transferred
        certain property rights (including all its trademarks) and 100% of the stock
        of
        its subsidiaries, Arthur Treacher’s Franchise Systems, Inc. and Pudgie's
        Franchise Corp. to PAT Franchise Systems, Inc. (“PAT Franchise”), an entity
        controlled by Mr. Bernstein, in consideration for the assumption of certain
        liabilities of ATI (Delaware). The two subsidiaries of ATI (Delaware) are
        parties to the franchise agreements with the franchisees in the Arthur
        Treacher’s and Pudgie's restaurant systems.
 
 In
        conjunction with the sale of ATI (Delaware), the secured promissory note
        executed in December 2000 by the Company, ATI (Delaware) and its subsidiary,
        M.I.E. Hospitality, Inc. (“MIE”) in favor of DCDC (Delaware) was amended and
        restated. The amended promissory note has a principal balance of $1,071,310,
        which equaled the outstanding principal balance and accrued and unpaid interest
        on the original note as of February 28, 2002. PAT Services became a party
        to the
        note and pledged its 80% interest in ATI (Delaware) as collateral to secure
        the
        note. PAT Franchise became a guarantor of the note and provided DCDC (Delaware)
        with a first security interest in the proprietary rights transferred by ATI
        (Delaware) to PAT Franchise and in the franchise agreements to which Arthur
        Treacher’s and Pudgie's are parties. The note was due on December 1, 2004 and
        bore interest at the rate of 12% per year, with the interest payable monthly
        commencing April 30, 2002. The Company and PAT Services executed interest
        payment waivers for the months of April, May and June 2002. The
        Company sold the amended promissory note to KGS Holdings, Ltd for consideration
        of $107,131 on June 22, 2002 and used the proceeds for working capital purposes.
 
 In
        February 2000, the Company formed a subsidiary, Digital Creative Development
        Corporation, a Delaware corporation (“DCDC (Delaware)”), for the purpose of
        investing and acquiring entities engaged in creating and providing entertainment
        content to businesses and consumers through digital broadband and conventional
        distribution platforms. In August 2000, the Company, a Utah Corporation changed
        its name from Arthur Treacher’s, Inc. to Digital Creative Development
        Corporation (the “Company”).
  On
        August
        31, 2001, the Company signed a merger agreement (the “Merger Agreement”) with
        IMSI. The Company was to merge into a wholly owned subsidiary of IMSI.
        Shareholders of the Company were to exchange shares of common stock of the
        Company for IMSI common stock constituting approximately 51% of the issued
        and
        outstanding common stock of IMSI. Upon execution of the Merger Agreement,
        the
        Company purchased a promissory note in the principal amount of $ 3,580,000
        for
        $2,500,000, owed by IMSI to Union Bank of California, which note was to have
        been cancelled upon consummation of the merger. Since 1982, IMSI has been
        a
        developer and publisher of productivity software in precision design, graphics
        design and other related business applications, as well as graphics and CAD
        (Computer Aided Design) software and Internet technology.
 
 2
  Upon
        signing of the Merger Agreement, Martin Wade, then the Company’s CEO, also
        became CEO of IMSI. In addition, as of the date of the Merger Agreement,
        the
        members of the Board replaced the members of the Board of Directors of IMSI,
        who
        resigned in their entirety with the exception of Robert Mayer, who continues
        to
        serve as a board member, and who also became a member of the board of the
        Company.
 
 On
        February 28, 2002, the Company and IMSI entered into an agreement, which
        provided for the conversion of the promissory note purchased by the Company
        into
        9,000,000 shares of common stock of IMSI plus $250,000 in cash to be paid
        in 15
        monthly installments. The parties agreed to terminate the merger contemplated
        by
        the Merger Agreement. IMSI also agreed to prepare and file a registration
        statement registering 2,000,000 of common stock and to provide the Company
        with
        piggyback registration rights with respect to the remaining 7,000,000 shares.
        Effective January 31, 2002, certain members of the Boards of Directors of
        the
        Company and IMSI resigned, with no directors serving on the boards of both
        companies.
 IMSI
          is a
          graphics and CAD (Computer-Aided-Design) software and Internet technology
          company headquartered in Novato, California. IMSI owns and operates three
          business divisions: Design Software, ArtToday.com and Design. NET. IMSI’s Design
          Software division is based on TurboCAD computer aided design software and
          FloorPlan3D home design software. Since 1982, IMSI has been a developer
          and
          publisher of productivity software in precision design, graphics design
          and
          other related business applications. ArtToday.com, is a wholly owned subsidiary
          of IMSI and offers images, photos, fonts and other digital content over
          the
          Internet. Design.NET’s charter is to offer design online with 3D viewing and
          editing.
 As
        of
        September 22, 2005, the closing bid price of common stock of IMSI as quoted
        on
        the NASD Bulletin Board was $1.10 per share.
  Item
        1. Description of
        Business
 
 A. Overview
 
 Until
        February 28, 2002, the primary business of the Company was the operation
        and
        franchising of Arthur Treacher’s and Pudgie’s restaurant concepts, as well as
        the co-branding of these concepts with Nathan’s Famous, Inc. (“Nathan’s”), Miami
        Subs Corporation (“Miami Subs”) and Kenny Rogers Roasters (“Kenny Rogers”).
        Currently, the Company does not have any existing operations.
 
 Plan
        of
        Business
 
 The
        Company intends to locate and enter into a transaction with an existing,
        public
        or privately-held company that in management's view, has growth potential
        (a
        "Target Business"). A transaction with a Target Business may be structured
        as a
        merger, consolidation, exchange of the Company's common stock for stock or
        assets of the Target Business or any other form which will result in the
        combined enterprise remaining a publicly-held corporation.
 
 Acquisitions
        or business combinations may not be available at the times or on terms
        acceptable to us, or at all. In addition, acquiring, or combining with, a
        business involves many risks, including:
 
 ·
              unforeseen
                  obligations or liabilities;
 ·
              difficulty
                  assimilating the acquired operations and
                  personnel;
 ·
              risks
                  of entering markets in which we have little or no direct prior
                  experience;
 ·
              potential
                  impairment of relationships with employees or customers as a result
                  of
                  changes in management; and
 ·
              Potential
                  dilutive issuances of equity, large and immediate write-offs, the
                  incurrence of debt, and amortization of goodwill or other intangible
                  assets.
  
 3
  We
        cannot
        make assurances that we will make any acquisitions or business combinations
        or
        that we will be able to obtain additional financing for such acquisitions
        or
        combinations, if necessary. If any acquisitions or combinations are made,
        we
        cannot make assurances you that we will be able to successfully integrate
        the
        acquired or combined business into our operations or that the acquired or
        combined business will perform as expected.
 
 Furthermore,
        Federal and state tax laws and regulations have a significant impact upon
        the
        structuring of transactions. Management will evaluate the possible tax
        consequences of any prospective transaction and will endeavor to structure
        a
        transaction so as to achieve the most favorable tax treatment. There can
        be no
        assurance that the Internal Revenue Service or relevant state tax authorities
        will ultimately assent to our tax treatment of a particular consummated
        transaction. To the extent the Internal Revenue Service or any relevant state
        tax authorities ultimately prevail in recharacterizing the tax treatment
        of a
        transaction, there may be adverse tax consequences to us, a target business
        and
        their respective stockholders. Tax considerations as well as other relevant
        factors will be evaluated in determining the precise structure of a particular
        transaction, which could be effected through various forms of a merger,
        consolidation or stock or asset acquisition.
 
 Pending
        negotiation and consummation of a transaction, the Company anticipates that
        it
        will have, aside from carrying on its search for a transaction partner, no
        business activities, and, thus, no source of revenue. Should the Company
        incur
        any significant liabilities prior to a combination with a Target Business,
        it
        may not be able to satisfy without additional financing such liabilities
        as are
        incurred.
 
 H.
        Employees
 
 As
        of
        June 30, 2002 and through the current date, the Company had no employees.
        Gary
        Herman, the Company’s Chairman, Chief Executive Officer, President and
        Secretary and Skuli Thorvaldsson the Company’s Chief Financial Officer serve on
        a management consulting basis.
  ENTERTAINMENT
        AND SOFTWARE BUSINESS
 
 This
        segment of the Company’s business, operating through its subsidiary, DCDC
        (Delaware), was established to invest and acquire entities, which develop,
        produce and distribute software and media content resulting in revenue
        generation from motion pictures; television; animation; product endorsement
        and
        sales; and licensing and syndication. Content is intended to be delivered
        to
        businesses and consumers through digital broadband and conventional distribution
        platforms.
 
 For
        the
        period through June 30, 2002, DCDC (Delaware) made the following investments
        in
        an effort to execute the plan above.
 
 Our
        Yearbook Corp. was a portal site for high school and college yearbooks on
        the
        Internet. DCDC (Delaware) invested $450,000 for 450,000 shares of preferred
        stock as well as three loans for an aggregate principal amount of $160,000.
        On
        August 3, 2000, Our Yearbook was forced into an involuntary proceeding under
        Chapter 11 of the U.S. Bankruptcy Code. In February, 2001 the matter was
        converted to Chapter 7 liquidation by the Court. DCDC (Delaware) has established
        allowances in the amount of $610,000 during the 2001 fiscal year.
  4
  Interactive
        Pager Media, Inc. (n/k/a Comstar Wireless Corp.) is a provider of wireless
        two-way paging services in the United States. DCDC (Delaware) invested
        $1,000,000 for 122,100 shares of preferred stock. DCDC (Delaware) 
        established an allowance for the full amount of the investment. The
        assets
        of Comstar were sold in May 2004 and it is the Company’s position that a return
        on this investment will not be realized.
  Thinking
        Tools, Inc. (n/k/a GVI Security Solutions, Inc. (OTCBB: GVIS) was a provider
        of
        Internet services. DCDC (Delaware) invested $300,000 for 600,000 shares of
        common stock of Thinking Tools. DCDC (Delaware) has written down this investment
        to its market value at June 30, 2002, of $.02/share. From February to May
        2004
        the company sold its position in this investment for gross proceeds of 
        approxiamatelly $ 69,000 and realized a loss of $231,000.
  Liquor.com,
        Inc. was an Internet site for the purchase of wine, champagne, spirits, and
        accessories. DCDC (Delaware) loaned Liquor.com $250,000 under a promissory
        note
        which was convertible into 71,023 shares of common stock and a warrant
        exercisable for 35,511 shares of common stock. DCDC (Delaware) established
        an
        allowance for the full amount of the note since Liquor.com ceased operations
        in
        the Fall of 2000.
  MadeMyWay.com,
        Inc. (n/k/a Datametrics Corporation) was a provider of Internet based digital
        printing services. DCDC (Delaware) invested $1,200,000 for 1,200,000 shares
        of
        common stock of MadeMyWay.com. DCDC (Delaware) established an allowance for
        the
        full amount of the investment since MadeMyWay.com ceased operations in April
        2001. In April 2002, in consideration of its investment, DCDC (Delaware)
        received 2,600,000 shares of common stock of DataMetrics Corporation (OTCBB:
        DMTI), the former parent of MadeMyWay. Subsequently, the stock of DMTI was
        subject to a 20:1 reverse stock split. At present, DCDC (Delaware) has 120,000
        shares of common stock of DMTI. The Company has written down this investment
        to
        its market value at June 30, 2002 of $.02 per share. On September 22, 2005,
        the
        common stock of DMTI was quoted at $.02 per share.
  Heavy.com,
        Inc. is a digital entertainment company with a focus on original content
        creation. DCDC (Delaware) extended a loan of $500,000 to the company in the
        summer of 2000. DCDC (Delaware) also has warrants to purchase 63,450 shares
        of
        common stock of Heavy.com at $7.47/ share. In the fall of 2000 this loan
        was
        converted to 320,194 shares of Series B-2 Preferred Stock. DCDC (Delaware)
        has
        established an allowance for the full amount of the investment since it is
        the
        Company’s position that this investment has no significant value that will be
        realized. In the summer of 2004, the Company sold its investment to the two
        principal shareholders of Heavy for the total consideration of $30,000.
 
 Acquisitions
 
 In
        September 2000, the Company, through DCDC (Delaware) invested or advanced
        approximately $1,841,100 in two entertainment concept companies. These companies
        were CineBlast, Inc., a wholly owned subsidiary, and EyeCandy, an affiliate
        of
        the Company. CineBlast was an independent movie production company. EyeCandy
        was
        a production company whose primary focus was the production and distribution
        of
        a television series, America in 60 Minutes, in China. At June 30, 2001 the
        Company wrote off its investments and advances and absorbed a charge for
        impairment loss, since it was determined that the respective operations of
        these
        entities were to be curtailed and that no significant value from these
        operations could be realized by the Company.
   5
 
 In
        December, 2001 the Company entered into an agreement with the principals
        of
        CineBlast!, Gil Holland, Michael Morley and Raymond DeMarco to transfer 100%
        of
        the shares of CineBlast for the consideration and reduction of sums of various
        consulting and employment agreements. In January, 2003 the principals of
        CineBlast, Raymond DeMarco, Michael Morley and Gil Holland filed an action
        in
        New York State Supreme Court, New York County (Index# 100192/03) against
        the
        Company and DCDC (Delaware) alleging among other things, breach of contract.
        In
        July, 2003 the parties executed a Settlement Agreement and a Stipulation
        of
        Discontinuance. (See, Legal Proceedings). Additionally, in November 2001
        the
        Company discontinued the operations of its affiliate, EyeCandy.
 
 In
        March
        2001 the Company acquired Tuneinmovies.com, Inc. (“Tune-In”) through DCDC
        (Delaware). Tune-In was a creator and aggregator of new media content. At
        that
        time, DCDC also acquired Keynomics, Inc. (“Keynomics”), which provides software
        technology to industry, with emphasis on performance improvement and ergonomic
        education and training in the computer workstation environment. As of June
        30,
        2002, the Company had disposed of all of its investments in Tune-In and
        Keynomics.
 
 On
        November 29, 2001, the Company and IMSI executed a Stock Purchase Agreement,
        effective October 1, 2001, for the sale of Keynomics to IMSI. Keynomics was
        sold
        for the total consideration of $450,000. IMSI agreed to pay the purchase price as follows: (i) $50,000 paid
        in
        cash on the closing date; (ii) $150,000 in equal monthly installments of
        $25,000
        per month for 6 months; (iii) $100,000 was paid by crediting against the
        purchase price the payments made to the Company in October and November 2001;
        and (iv) $150,000 paid by offsetting against the purchase price certain payments
        from the Company to IMSI made between the Effective Date and
        Closing.
 
 On
        November 5, 2001, after experiencing less than anticipated results from the
        operations of Tune-In, the Company entered into a memorandum agreement to
        sell
        certain assets and liabilities of Tune-In to its management team.
 
 On
        August
        31, 2001, the Company signed a merger agreement (the “Merger Agreement”) with
        IMSI. The Company was to be merged into a wholly owned subsidiary of IMSI.
        Shareholders of the Company were to exchange shares of common stock of the
        Company for IMSI common stock constituting approximately 51% of the issued
        and
        outstanding common stock of IMSI. Upon execution of the Merger Agreement,
        the
        Company purchased a promissory note in the principal amount of $3,580,000
        owed
        by IMSI to Union Bank of California, which note was to have been cancelled
        upon
        consummation of the merger.
 
 Upon
        signing of the Merger Agreement, Martin Wade also became CEO of IMSI. In
        addition, as of the date of the Merger Agreement, the members of the Board
        replaced the members of the Board of Directors of IMSI, who resigned in their
        entirety with the exception of Robert Mayer, who continues to serve as a
        board
        member, and who also became a member of the board of the Company.
 
 On
        February 28, 2002, the Company and IMSI entered into an agreement which provided
        for the conversion of the promissory note purchased by the Company into
        9,000,000 shares of common stock of IMSI plus $250,000 in cash to be paid
        in
        monthly installments over 15 months. The parties agreed to terminate the
        merger
        contemplated by the Merger Agreement. IMSI also agreed to prepare and file
        a
        registration statement registering 2,000,000 of the shares of common stock
        and
        to provide the Company with piggyback registration rights with respect to
        the
        remaining 7,000,000 shares. In addition, effective February 28, 2002, certain
        members of the Boards of Directors of the Company and IMSI resigned and no
        directors continue to serve as directors of both companies.
 
 
 6
  The
        Investment Company Act of 1940
  The
        Investment Company Act of 1940 (the “Act”) was primarily meant to regulate
“investment companies,” which generally include families of mutual funds of the
        type offered by the Fidelity and Vanguard organizations (to pick two of many),
        closed-end investment companies that are traded on the public stock markets,,and
        certain non-managed pooled investment vehicles such as unit investment trusts.
        These entities are in the business of investing, reinvesting and trading
        in
        securities and generally own relatively diversified portfolios of publicly
        traded securities that are issued by companies not controlled by these entities.
  A
        company
        can, either deliberately or inadvertently, come to have the defining
        characteristics of an investment company within the meaning of the Act without
        proclaiming that fact or being willing to voluntarily submit itself to
        regulation as an acknowledged investment company The Act and rules under
        it
        contain provisions to differentiate “true” operating companies from companies
        that may be considered to have sufficient investment-company-like
        characteristics to require regulation by the Act’s complex procedural and
        substantive requirements. These provisions apply to companies that own or
        hold
        securities, as well as companies that invest, reinvest and trade in securities,
        and particularly focus on determining the primary nature of a company’s
        activities, including whether an investing company controls and does business
        through the entities in which it invests or, instead, holds its securities
        investments passively and not as part of an operating business. For instance,
        under what is, for most purposes, the most liberal of the relevant tests,
        a
        company may become subject to the Act’s registration requirements if it either
        holds more than 45% of its assets in, or derives more than 45% of its income
        from, investments in companies that the investor does not primarily control
        or
        through which it does not actively do business. In making these determinations
        the Act generally requires that a company’s assets be valued on a current fair
        market value basis, determined on the basis of securities’ public trading price
        or, in the case of illiquid securities and other assets, in good faith by
        the
        company’s board of directors. The Company views its investments in IMSI, as
        operating investments primarily intended to secure its strategic goals.
  The
        Company‘s investments that it held as of June 30, 2002 should be regarded as
        strategic deployments of Company assets to develop its digital entertainment
        and
        software business, rather than financial investments that generally are
        considered to constitute investment securities. The Company has never held
        itself out as an investment company; its historical development has focused
        almost exclusively restaurant, software and digital entertainment business;
        the
        activities of its officers and employees have been overwhelmingly addressed
        to
        achieving success in the restaurant, software and digital entertainment
        business; and prior to 2000, its income (and losses) have been derived almost
        exclusively from the restaurant and has more recently sought companies in
        the
        software and digital entertainment business. The Company is primarily engaged
        in
        a business other than investing, reinvesting, owning, holding or trading
        in
        securities.
  The
        Company’s only significant asset as of September 22, 2005 was its ownership
        interest of 6,835,758 shares of common stock of IMSI, constituting approximately
        23% of the total outstanding shares of common stock of IMSI. An additional
        450,000 shares of common stock, or approximately 2% of IMSI is beneficially
        owned by Gary Herman, the Company’s Chairman. 337,000 shares of common stock, or
        approximately 1% of IMSI is beneficially owned by Bruce Galloway, the Company’s
        principal shareholder. Mr. Galloway also owns options to purchase
        100,000
        shares of IMSI stock at $ 1.10 per share and 500,000 warrants at $ .81 per
        share. Although the Company and its affiliates do not act as a group, the
        Company believes that the Company controls IMSI within the meaning of the
        Act.
        No assurances can be given that the SEC will agree that the Company is not
        currently deemed to be an unregistered investment company in violation of
        the
        Act. If the SEC takes the view that the Company has been operating and continues
        to operate as an unregistered investment company in violation of the Act,
        and
        does not provide the Company with a sufficient period to either register
        as an
        investment company or divest itself of investment securities and/or acquire
        non-investment securities, the Company may be subject to significant potential
        penalties.
   7
  In
        the
        absence of exemptions granted by the SEC (which are discretionary in nature
        and
        require the SEC to make certain findings), the Company would be required
        either
        to register as a closed-end investment company or a business development
        company
        under the Act, or, in the alternative, to divest itself of sufficient investment
        securities and/or to acquire sufficient non-investment assets so as not to
        be
        regarded as an investment company under the Act.
  If
        the
        Company elects to register as a closed-end investment company under the Act,
        a
        number of significant requirements will be imposed upon the Company. These
        would
        include, but not be limited to, a requirement that at least 40% of the Company’s
        board of directors not be “interested persons” of the Company as defined in the
        Act , that those directors be granted certain special rights with respect
        to the
        approval of certain kinds of transactions (particularly those that pose a
        possibility of giving rise to conflicts of interest); and broad prohibitions
        on
        affiliate transactions. While the Company could apply for individual exemptions
        from these restrictions, there could be no guarantee that such exemptions
        would
        be granted, or granted on terms that the Company would deem practical.
        Additionally, the Company would be required to report its financial results
        in a
        different form from that currently used by the Company, which would have
        the
        effect of turning the Company’s Statement of Operations “upside down” by
        requiring that the Company report any investment income that it may receive
        and
        the results of its investment activities, instead of its operations, as its
        primary sources of revenue.
 
 If
        the
        Company elects to divest itself of sufficient investment securities and/or
        to
        acquire sufficient non-investment assets so as not to be regarded as an
        investment company under the Act, the Company would need to ensure that the
        value of investment securities (excluding the value of U.S. Government
        securities and securities of certain majority-owned subsidiaries) does not
        exceed forty percent (40%) of the Company’s total assets (excluding the value of
        U.S. Government securities and cash items) on an unconsolidated basis. In
        seeking to meet this requirement, the Company might choose to divest itself
        of
        assets that it considers strategically significant for the conduct of its
        operations or to acquire additional operating assets that would have a material
        effect on the Company’s operations. There can be no assurance that the Company
        could identify such operating assets to acquire or could successfully acquire
        such assets. Any such acquisition could result in the Company issuing additional
        shares that may dilute the equity of the Company’s existing stockholders, and/or
        result in the Company incurring additional indebtedness, which could have
        a
        material impact on the Company’s balance sheet and results of operations. Were
        the Company to acquire any additional businesses, there would the additional
        risk that the Company’s acquired and previously-existing businesses could be
        disrupted while the Company attempted to integrate the acquired business,
        as
        well as risks associated with the Company attempting to manage a new business
        with which it was not familiar. Any of the above risks could result in a
        material adverse effect on the Company’s results of operations and financial
        condition.
 
 Item
        2. Description of
        Property.
 
 Since
        January 2002, the Company's principal executive offices have been located
        at 200
        East 82nd Street, New York, NY 10028. The Company is charged a nominal amount
        for the use of these premises.
 
 Item
        3. Legal
        Proceedings.
 
 The
        Company and its various subsidiaries and operating units are from time to
        time
        involved in ordinary and routine litigation. The Company is also involved
        in the
        following litigation:
 
 ATAC
        Corporation and Patrick Cullen v. Arthur Treacher's, Inc. and James
        Cataland ,
        Case
        No. 1:95CV 1032, in the U.S. District Court, Northern District, Ohio Eastern
        Division; filed May 9, 1995.
 
  8
  On
        November 16, 1994, Arthur Treacher's terminated the agency agreement of a
        Regional Development Representative, ATAC Corporation, on the grounds that
        ATAC
        breached the agreement by assigning the agency agreement to a third party
        without the consent of Arthur Treacher's. ATAC claims that the Company was
        aware
        of and consented to the third-party assignment. The Company is unaware of
        any
        document signed by a properly authorized representative of the Company formally
        authorizing or consenting to the assignment. On May 9, 1995, ATAC filed the
        action and alleged that the Company terminated the contract without cause,
        tortuously interfered with other business relationships, committed wrongful
        conversion of the territory and committed restraint of trade and price-fixing,
        breach of contract, fraud, and violations of RICO. ATAC originally demanded
        a
        minimum of $2,750,000 in compensatory damages and $6,000,000 in punitive
        damages. In response to the original complaint, the Company filed a motion
        to
        dismiss all of the claims. In addition, the Company filed a counterclaim
        against
        ATAC seeking a Declaratory Judgment that ATAC does not have a service contract
        with the Company in certain areas which the Company does business, that ATAC
        has
        committed breach of contract and that the Company is entitled to indemnification
        for previous lawsuits which have occurred because of the actions of ATAC
        on
        behalf of the Company. ATAC has twice amended the claims and allegation of
        the
        original complaint. In the Third Amended Complaint, ATAC asserts claims against
        the Company and the Company's former President, James Cataland, for fraud,
        breach of contract, tortuous interference with contract, violations of the
        Ohio
        Business Opportunity Act, violations of the Ohio Consumer Sales Practices
        Act
        and breach of fiduciary duty. ATAC seeks in excess of $10,000,000 in and
        statutory damages from the Company. In response to the Third Amended Complaint,
        the Company in 1997 filed a Motion to Dismiss ATAC's claims for breach of
        fiduciary duty and under the Consumer Sales Practices and Business Opportunity
        Acts. The Company also requested that the district court dismiss the claim
        against the Company's former President. The Company in 1998 filed Motions
        for
        Summary Judgment on behalf of itself and the Company's former President with
        respect to all of ATAC's claims (except breach of contract) and requested
        that
        the court refer the remaining contract claim to binding arbitration. The
        Court
        granted the Company's Motion to Stay the lawsuit pending arbitration and
        the
        ruling is presently the subject of an appeal to the Sixth Circuit Court of
        Appeals. The parties submitted briefs to the Sixth Circuit between July and
        October of 1999 and a hearing was held in June 2000. The Sixth Circuit should
        hand down its decision within the next few months.
 
 The
        Company originally believed that the lawsuit was an attempt by plaintiffs
        to
        regain the territory by forcing the Company to defend expensive litigation
        at
        significant expense and that the plaintiffs' claims are without merit. The
        Company now understands that ATAC solely seeks damages from the Company.
        The
        Company still believes that ATAC's claims are meritless. The Company's attorneys
        have indicated that they intend to vigorously defend the Company from the
        claims
        made by ATAC and pursue any counterclaims.
 
 PAT
        Services, assumed any liability or award from this legal proceeding in
        connection with the sale of ATI (Delaware), the Company’s restaurant operations
        on February 28, 2002. The Company has received no notice of any further
        developments in this action since 2000.
 
 Sorrentino
        v. Digital Creative Development Corporation
 
 Ralph
        Sorrentino, the former President and Chief Executive Officer of the Company
        commenced an action, entitled RJS
        Consulting Corp. and Ralph J. Sorrentino v. Digital Creative Development
        Corporation et. al. ,
        on or
        about May 9, 2001. The Demand for Arbitration alleged that the Executive
        Consulting Agreement between the Company and RJS Consulting Corp. was terminated
        without cause and that Mr. Sorrentino had “good reason” to terminate the
        agreement. The Demand for Arbitration sought monetary damages in an amount
        not
        less than $5,000,000 arising out of the alleged breach of the Executive
        Consulting Agreement and compensatory and punitive damages in an amount to
        be
        proved at the arbitration arising out of the alleged defamation of Mr.
        Sorrentino by agents of the Company.
   9
 
 The
        Company, DCDC (Delaware), Mr. Sorrentino, and RJS Consulting Corp., an affiliate
        of Mr. Sorrentino, executed the Executive Consulting Agreement in May 2000.
        Under the agreement, Mr. Sorrentino, acting through RJS Consulting Corp.,
        served
        as Chief Executive Officer and President of the Company and DCDC (Delaware).
        Mr.
        Sorrentino was to receive a base annual fee of $250,000 for an initial term
        of
        30 months. Mr. Sorrentino received options to purchase 5,000,000 shares of
        Common Stock at an exercise price of $.37/share, which exercise price was
        reduced to $.01 under certain circumstances. The Company had also agreed
        to
        assume and be primarily liable for and to indemnify Mr. Sorrentino against
        up to
        $2,500,000 of indebtedness incurred by Mr. Sorrentino for any legal purpose.
        The
        Company terminated Mr. Sorrentino on May 7, 2001.
 
 The
        Company, DCDC (Delaware), RJS Consulting Corp. and Mr. Sorrentino executed
        a
        Memorandum of Agreement on October 30, 2001. Pursuant to the Memorandum,
        the
        Company agreed to buy out Mr. Sorrentino’s interest under the Executive
        Consulting Agreement and related documents and Mr. Sorrentino agreed to
        surrender all of his options to purchase common stock of the Company, including
        the option for 5,000,000 shares of common stock issued in connection with
        the
        Executive Consulting Agreement. Under the Memorandum, the Company agreed
        to pay
        Mr. Sorrentino $270,000 and to assume an aggregate of $1,669,600 in indebtedness
        from Mr. Sorrentino, including two mortgages in favor of Wells Fargo for
        an
        aggregate of $570,600, a mortgage in favor of Fleet Mortgage Group in the
        principal amount of $1,000,000 and an lease in favor of Chase Automotive
        Finance
        in the principal amount of $99,792. Such payments are to be made over a period
        of fifteen (15) years in monthly installments, except for Chase Automotive,
        which is for a period of two (2) years. Upon satisfaction of the obligation
        to
        Chase Automotive Finance, the Company agreed to pay Mr. Sorrentino an aggregate
        of $4,653 payable in 36 equal monthly installments. The Company agreed that
        upon
        the consummation of the merger with IMSI, the Company’s obligations to Mr.
        Sorrentino will be secured by the assets of IMSI, such security interest
        to be
        subordinated to existing secured bank debt and certain other creditors who
        had
        previously agreed to restructure their indebtedness in order to facilitate
        the
        merger with IMSI.
 
 In
        the
        event that the merger with IMSI was not consummated, the Company agreed under
        the Memorandum to enforce its rights under the promissory note, which the
        Company purchased from Union Bank of California in August 2001, and, upon
        foreclosure on the promissory notes, IMSI shall be obligated to make payments
        to
        the Company of $ 50,000 per month for 60 months, in turn, remitting payment
        to
        Sorrentino. The merger with IMSI was not consummated.
 
 On
        February 28, 2002, the Company and IMSI terminated the proposed merger
        agreement, and entered into an agreement which provides for the conversion
        of
        the promissory note purchased by the Company into 9,000,000 shares of common
        stock of IMSI plus $250,000 in cash to be paid in monthly installments over
        15
        months. The parties agreed to terminate the merger contemplated by the Merger
        Agreement. IMSI also agreed to prepare and file a registration statement
        registering 2,000,000 of the shares of common stock and to provide the Company
        with piggyback registration rights with respect to the remaining 7,000,000
        shares. In addition, effective February 28, 2002, certain members of the
        Boards
        of Directors of the Company and IMSI resigned and no directors continue to
        serve
        as directors of both companies.
 
 Subsequently,
        on July 25, 2002, Mr. Sorrentino and RJS Consulting Corp., filed an action
        in
        New York State Supreme Court, New York County (Index # 602399/02) against
        the
        Company, DCDC (Delaware), various officers and directors, alleging among
        other
        things, breach of contract and fraud. In February, 2003 the Parties entered
        into
        a settlement agreement and dismissal of the action. Under the settlement,
        the
        Company made a one time cash payment to Mr. Sorrentino of $300,000 and
        transferred 500,000 shares of stock, of its holdings in International
        Microcomputer Software, Inc. valued at $565,000 for a total fair value of
        $
        865,000.
 10
  CineBlast
        Litigation
 
 In
        January, 2003 the principals of CineBlast, Raymond DeMarco, Michael Morley
        and
        Gil Holland field an action in New York State Supreme Court, New York County
        (Index # 100192/03) against the Company and DCDC (Delaware). In July, 2003
        the
        parties executed a Settlement Agreement and a Stipulation of Discontinuance.
        The
        settlement agreement provided for the following: 1) the payment by the Company
        of $5,000 each to mssrs. DeMarco, Morley and Holland; 2) 80,000 shares of
        stock
        of IMSI owned by the Company to each of mssrs. DeMarco, Morley and Holland;
        3)
        three (3) Promissory Notes (totaling $175,000.00), requiring the Company
        to pay
        mssrs. Holland, DeMarco and Morley $58,333.33 each, two (2) years from the
        date
        in which this Settlement Agreement is executed. If the IMSI Stock referred
        to
        above is unrestricted and able to be traded on the open market, and is above
        $2.00 on the date the Notes become due, DCDC shall have no obligation to
        pay the
        Notes, and said Notes shall become null and void. Further, DCDC’s obligations on
        the Notes shall be proportionately reduced if the IMSI Stock is below $2.00.
        (For example, if the stock price is $1.90 on said date, the $175,000.00
        obligation shall be reduced by $151,000.00 leaving an obligation of $24,000.00,
        requiring DCDC to pay Holland, DeMarco and Morley $8,000.00 each. If the
        stock
        price is $1.80 on said date, the Notes shall be reduced by $127,000.00 leaving
        an obligation due of $48,000.00, requiring DCDC to pay Holland, DeMarco and
        Morley $16,000.00 each, etc.
  In
        April
        21, 2005 the Notes related to the CineBlast settlement became due and payable,
        since on that date, shares of IMSI did not trade above $2.00/share during
        the
        previous two (2) years.  Based on the above formula in the
        settlement
        agreement the total obligation due the principals of CineBlast is
        $153,600.  Management of the Company has negotiated a payout of this
        obligation under which the amount of $153,600 will be paid over six months,
        beginning July 2005, without interest, as follows: $15,000 at July 1 and
        August
        1; $30,000 at September 1, October 1 and November 1; and $33,600 at December
        1,
        2005.
 
 Pyramid
        Litigation
 
 During
        the fiscal year ended June 30, 2002, M.I.E. Hospitality Inc., a wholly
        owned subsidiary of ATI (Delaware), was a party to six actions in New York
        State
        that have been consolidated for discovery purposes in New York State Supreme
        Court in Albany County, New York. Each of these actions arises out of M.I.E.'s
        lease of certain food court premises at five Pyramid Malls across New York
        State, and Pyramid's eviction of M.I.E. in December 2000. M.I.E. commenced
        the
        action entitled M.I.E.
        v. Fred Woods, et al .,
        in
        December 2000. M.I.E. asserts four substantively identical causes of action
        with
        respect to each of the five mall locations. These causes of action are for
        breach of lease, conversion, wrongful eviction, and trespass. M.I.E. is in
        the
        process of calculating its claim for damages, which claim is anticipated
        to be
        in excess of $2,200,000, and may be awarded treble damages if it succeeds
        under
        its wrongful eviction claim under RPAPLss.853. In each of its five actions,
        which were commenced on January 3, 2001, Pyramid seeks pre-eviction rent
        and
        additional rent arrears, post eviction accelerated rent and additional rent,
        and
        attorney's fees. Pyramid's damage claims exceed $2,400,000. The actions are
        in
        the discovery phase. Documents have been produced, but depositions have not
        occurred. The Company's attorneys intend to vigorously defend the Company
        against the claims made by the plaintiffs but cannot estimate the outcome
        at
        this time. The award of substantial damages to Pyramid would have an adverse
        impact on the operations of M.I.E. and the Company. M.I.E. does not own or
        operate any of the Company's Pudgie's restaurants. PAT Services, assumed
        any
        liability or award from this legal proceeding in connection with the sale
        of ATI
        (Delaware), the Company's restaurant operations on February 28, 2002. 
        The
        Company has received no notice of any further developments in this action
        since
        2002.
 11
  PAT
        Services assumed any liability or award from this legal proceeding, in
        connection with the sale of ATI (Delaware) on February 28, 2002.
 
 The
        Company is involved in various other claims and legal actions arising in
        the
        ordinary course of business. In the opinion of management, the ultimate
        disposition of these matters will not have a material adverse effect on the
        Company's consolidated results of operations or financial position.
  Item
        4. Submission
        of Matters to a Vote of Security Holders.
 
 None.
 PART
        II
 Item
        5. Market
        for Common Equity and Related Stockholder Matters.
 
 The
        following table sets forth the high and low prices for the periods indicated
        as
        reported by the National Daily Quotation Service, Inc. between dealers and
        do
        not include retail mark-ups, mark-downs, or commissions and do not necessarily
        represent actual transactions, as reported by the National Association of
        Securities Dealers Composite Feed or other qualified inter-dealer quotation
        medium. On September 22, 2005, the closing bid price was
        $.14/share.
 Low
                
                High2000
                    Fiscal YearFirst
                    Quarter
                
                $
                .313
                
                $
                .438Second
                    Quarter
                
                
                .250
                
                
                .469Third
                    Quarter
                
                
                .344
                
                
                4.46Fourth
                    Quarter
                
                
                1.25
                
                
                3.942001
                    Fiscal YearFirst
                    Quarter
                
                
                1.31
                
                
                2.50Second
                    Quarter
                
                
                .320
                
                
                1.37Third
                    Quarter
                
                
                .320
                
                
                .900Fourth
                    Quarter
                
                
                .250
                
                
                .4202002
                    Fiscal YearFirst
                    Quarter
                
                
                .110
                
                
                .270Second
                    Quarter
                
                
                .100
                
                
                .110Third
                    Quarter
                
                
                .070
                
                
                .200Fourth
                    Quarter
                
                
                .150
                
                
                .250
 12
  The
        Common Stock was recorded on the NASD Bulletin Board with the symbol DCDC.
        On
        September 22, 2005, the number of record holders of the Company's Common
        Stock
        was 500.
 
 In
        November 2001, the Company's stock was delisted from the NASD Bulletin Board
        due
        to its failure to timely file its Form 10-KSB with the Securities and Exchange
        Commission. The stock is traded on the Pink Sheets.
 
 Dividends
 
 In
        November and December 1997, the Company consummated a private placement with
        respect to equity units consisting of shares of its Series C Preferred Stock
        and
        warrants to purchase shares of common stock for aggregate proceeds of $990,000.
        The Company sold 9,900 shares of Series C Preferred Stock with warrants to
        purchase 148,500 shares of common stock attached. The preferred stock is
        not
        convertible, but may be redeemed at the option of the Company at a redemption
        price of $100/share plus accrued and unpaid dividends, at any time. The holders
        of the preferred stock are entitled to a cumulative dividend of 10% per annum,
        payable semi-annually, if and when the Board declares a dividend. On September
        28, 1998, the Company sold 4,000 shares of Series D Preferred Stock and Common
        Stock Purchase Warrants with gross proceeds of an aggregate amount of $400,000.
        The preferred stock is convertible into 400,000 shares of common stock. The
        holders of the preferred stock are entitled to a cumulative dividend of 15%
        per
        annum, payable semi annually, if and when the Board declares a
        dividend.
 
 To
        date,
        the Company has not paid any dividends on its Common Stock or Preferred Stock.
        The payment of dividends, if any, in the future is within the discretion
        of the
        Board of Directors and will depend upon the Company's earnings, its capital
        requirements and financial condition, and other relevant factors. The Company
        does not intend to declare any dividends in the foreseeable future, but instead
        intends to retain all earnings, if any, for use in the Company's business
        operations. No dividends may be distributed with respect to the Common Stock
        so
        long as there are accrued and unpaid dividends on the Series A and Series
        C
        Preferred Stock. The amount of accumulated and unpaid dividends on the Series
        A
        Preferred Stock, Series C Preferred Stock and Series D Preferred Stock was
        approximately $634,500 as of June 30, 2002.
 
 Item
        6. Management's
        Discussion and Analysis or Plan of Operation.
 
 This
        Management's Discussion and Analysis of Financial Condition and Results of
        Operations of the Company should be read in conjunction with the Financial
        Statements and Notes thereto.
 
 Safe
        Harbor Statement Under the Private Securities Litigation Reform Act of
        1995.
 
 The
        financial and business analysis below provides information that the Company
        believes is relevant to an assessment and understanding of the Company's
        consolidated financial condition, changes in financial condition, and results
        of
        operations. This financial and business analysis should be read in conjunction
        with the consolidated financial statements and related notes.
 
 13
  "Safe
        Harbor" Statement under the Private Securities Litigation Reform Act of 1995
        Certain matters and statements made in this Annual Report on Form 10-KSB
        constitute forward-looking statements within the meaning of Section 21E of
        the
        Securities Exchange Act of 1934. All such statements are made pursuant to
        the
        safe harbor provisions of the Private Securities Litigation Reform Act of
        1995.
        Wherever possible, the Company has identified these forward-looking statements
        by words such as "anticipates," "may," "believes," "estimates," "projects,"
        "expects" "intends," and words of similar import. In addition to the statements
        included in this Annual Report on Form 10-KSB, the Company and its
        representatives may from time to time make other oral or written forward-looking
        statements. All forward-looking statements involve certain assumptions, risks
        and uncertainties that could cause actual results to differ materially from
        those included in or contemplated by the statements. These assumptions, risks,
        and uncertainties include, but are not limited to, general business conditions,
        including the timing or extent of any recovery of the economy, the highly
        competitive nature of the industry in which the Company operates, the continued
        involvement of military forces in the war on terrorism, the speed with which
        consumers regain confidence in the safety of air transportation and other
        risks
        and uncertainties. All such forward-looking statements may be affected by
        inaccurate assumptions or by known or unknown risks and uncertainties, and
        therefore, those statements may turn out to be incorrect. Consequently, no
        forward-looking statement can be guaranteed. Actual future results may vary
        materially.
 
 All
        forward-looking statements are made as of the date of filing or publication.
        We
        undertake no obligation to publicly update any forward-looking statements,
        whether as a result of new information, future events or otherwise. Investors
        are advised, however, to consult any further disclosures the Company makes
        in
        future filings with the Securities and Exchange Commission or in any of its
        press releases. This report contains certain statements of a forward-looking
        nature relating to future events or the future performance of the Company.
        Prospective investors are cautioned that such statements are only predictions
        and those actual events or results may differ materially.
  Overview
 
 Prior
        to
        February,2002 the Company's principal sources of revenues were from the
        operations of Company owned restaurants and the receipt of royalties from
        franchisees. The Company's cost of sales included food, supplies and occupancy
        costs (rent and utilities at Company owned stores). Operating expenses include
        labor costs at the Company owned stores and advertising, marketing and
        maintenance costs.
 
 Franchise
        services and selling expenses included fees payable to regional representatives
        and their expenses and the salary of the Company's Director of Franchise
        Services. General and administrative expenses include costs incurred for
        corporate support and administration, including the salaries and related
        expenses of personnel at the Company's headquarters (except the Director
        of
        Franchise Services), the costs of operating the headquarters offices (rent
        and
        utilities) and certain related costs (travel and entertainment).
 
 Since
        the
        spring of 2002, the Company has been inactive , except for its interest in
        International Microcomputer Software Inc. , the evaluation of potential
        acquisitions and the settlement of pending disputes and litigation.
 
 Results
        of Operations
 
 Fiscal
        2002 and Fiscal 2001
 
 After
        reclassifying its results for the year ended June 30,2001 to reflect the
        effect
        of operations sold or discontinued, the Company reported total revenues of
        $
        192,700 for the year ended June 30, 2002 (“Fiscal 2002”), reflecting a decrease
        of $213,300 or 53%, compared to $ 406,700 for year ended June 30, 2001 (“Fiscal
        2001”). These revenues were basically comprised of interest and dividend income
        and management fees and the decrease was primarily attributable to the company’s
        decrease in cash and dividend producing marketable securities.
 
 14
  Since
        the
        sale by the Company of its restaurant operations and the cessation of all
        of the
        Company’s operating subsidiaries, the Company’s operations for the fiscal year
        2002 are not comparable to the prior year’s results. The operations for the
        current year reflect the Company’s management of its investment in IMSI, its
        only significant investment, which resulted in a transaction gain of $ 1.6
        million upon conversion of a note receivable into 9,000,000 shares of commons
        stock. The sale of discontinued operations resulted in a gain of $ 3.6 million
        and a related loss of $ 1.0 million from the sale of a note receivable from
        that
        discontinued entity. Additionally, a settlement with the Company’s former
        executive officer resulted in a gain of $ 933,400. The
        foregoing resulted in net income of $ 3.9 million for the fiscal 2002
        year
        as compared with a net loss of $ 20.5 million in the prior year.
 
 In
        Fiscal
        2001, the Company recognized losses of $3.7 million on investments of marketable
        and non-marketable securities; investments; and advances to its entertainment
        content entities. Approximately $450,000 of write-downs for security valuations
        was recorded in Fiscal 2000.
 
 The
        loss
        from operations from the Company’s discontinued operation approximated $ 15.4
        million in fiscal 2001.
  Undeclared
        preferred stock dividends were $ 145,500 and $159,200 in Fiscal 2002 and
        Fiscal
        2001, respectively.
 
 Other
        expenses in Fiscal 2001 included charges and recognition of future payments
        of
        $2.5 million in connection with the Company’s settlement with its former CEO.
 
 The
        foregoing resulted in a loss (before preferred dividends) of $20.5 million
        for
        the year ended June 30, 2001.
  LIQUIDITY
        AND CAPITAL RESOURCES
 
 The
        Company’s current assets exceeded its current liabilities by $900,000 at
        June 30, 2002, compared to working capital of $2.0 million and non
        marketable at June 30, 2001. The Company had no cash or cash equivalents
        at
        June 30, 2002 compared to $3.2 million at June 30, 2001. However, its marketable
        securities had a market value of $ 6.8 million at June 30, 2002. Accounts
        payable and accrued expenses totaled $1.3 million at June 30, 2001. The primary
        reasons for the increase in net current assets is the sale and discontinuance
        of
        the company’s restaurant subsidiary and, additionally, the increase ion market
        value if the company’s current significant investment. On August 31, 2001, the
        Company paid $2.5 million in connection with its acquisition of IMSI’s secured
        indebtedness owed by IMSI to Union Bank of California in the principal amount
        of
        $3.6 million.
 
 Losses
        at
        the Company’s restaurant operations further adversely affected both cash and
        working capital during Fiscal 2001, the Company experienced negative cash
        flow,
        which has adversely affected its liquidity. The lack of liquidity in the
        Company
        has adversely affected the Company’s restaurant operations. The Company's
        continued losses, working capital deficiency and lack of liquidity raise
        doubt
        about its ability to continue as a going concern.
 
 Substantially
        all of the cash and short-term investments as of June 30, 2001 represent
        proceeds of the private placement by DCDC (Delaware) in 2000. The capital
        was
        raised by DCDC (Delaware) and not the Company and was intended to be used
        principally for operations and the acquisition and investment in companies
        and
        technologies that focus on the creation and delivery of entertainment
        content.
 
 The
        Company transferred its assets and liabilities related to its restaurant
        operations to ATI (Delaware) in October 2000.
 
 15
  On
        February 28, 2002, the Company sold its 80% interest in ATI (Delaware) to
        PAT
        Services, an entity controlled by Mr. Bernstein, in consideration for $100,
        assumption of liabilities and a waiver by Mr. Bernstein of his right to convert
        his shares of ATI (Delaware) common shares into shares of common stock of
        the
        Company under the conversion agreement among the Company, ATI (Delaware)
        and Mr.
        Bernstein executed in connection with the acquisition of Pudgie's in October
        2000. Contemporaneously with the sale of ATI (Delaware), ATI (Delaware)
        transferred certain property rights (including all its trademarks) and 100%
        of
        the stock of its subsidiaries, Arthur Treacher’s Franchise Systems, Inc. and
        Pudgie's Franchise Corp. to PAT Franchise Systems, an entity controlled by
        Mr.
        Bernstein, in consideration for the assumption of certain liabilities of
        ATI
        (Delaware). The two subsidiaries of ATI (Delaware) are parties to the franchise
        agreements with the franchisees in the Arthur Treacher’s and Pudgie's restaurant
        systems. While PAT Services agreed to indemnify the Company for all liabilities
        arising from the restaurant operations, the Company may still remain liable
        for
        some of ATI (Delaware)’s liabilities.
  In
        conjunction with the sale of ATI (Delaware), the secured promissory note
        executed in December 2000 by the Company, ATI (Delaware) and its subsidiary,
        M.I.E., in favor of DCDC (Delaware) was amended and restated. The amended
        promissory note had a principal balance of $1,073,310, which equals the
        outstanding principal balance and accrued and unpaid interest on the original
        note as of February 28, 2002. PAT Services, Inc. became a party to the note
        and
        pledged its 80% interest in ATI (Delaware) as collateral to secure the note.
        PAT
        Franchise became a guarantor of the note and provided DCDC (Delaware) with
        a
        first security interest in the proprietary rights transferred by ATI (Delaware)
        to PAT Franchise and in the franchise agreements to which Arthur Treacher’s and
        Pudgie's are parties. To meet various working capital needs of the company,
        on
        June 20, 2002 ,the Company sold the amended promissory note and security
        agreement to KGS Holdings, Ltd. for the total consideration of $107,131.
 
 In
        November 2001, Mr. Bernstein, the former President of the Company's Restaurant
        Division, lent the Company $50,000, bearing interest at 12% per annum. 
        The
        company made periodic payments on this debt.  In May 2004, Gary Herman
        and
        Bruce Galloway satisfied the obligation to Mr. Bernstein on behalf of the
        Company. Mr.
        Herman and Mr. Galloway have equally assumed the balance of the note and
        the
        Company and Messrs. Galloway and Herman have extended the Notes to December
        31,
        2005.
  In
        December 2001, Martin Wade, the former CEO of the Company, lent the Company
        the
        sum of $50,000, bearing interest at 10% per annum and due December 31,2001.
        As
        additional consideration for the loan, Mr. Wade was issued warrants to purchase
        500,000 shares of common stock of the Company at $.01/share which were valued
        at
        $53,900. On June 1,2005, this note was extended to December
        31,2005.
 
 16
  On
        February 28, 2002, the Company and IMSI entered into a "Mutual Termination
        Agreement and Release" with DCDC whereby the proposed merger was terminated
        and
        each company was released from all duties, rights, claims, obligations and
        liabilities arising from, in connection with, or relating to, the merger.
        The
        agreement called for the conversion of the promissory note purchased by the
        Company into 9,000,000 shares of common stock of IMSI plus $250,000 in cash
        to
        be paid in 15 monthly installments. The parties agreed to terminate the merger
        contemplated by the Merger Agreement. IMSI also agreed to prepare and file
        a
        registration statement registering 2,000,000 of the shares of common stock
        and
        to provide the Company with piggyback registration rights with respect to
        the
        remaining 7,000,000 shares. The Company may sell some of the IMSI stock to
        raise
        additional capital.
 
 The
        Company has needed to raise capital to meet various business and financial
        obligations. In November 2001, the Company raised $270,000 capital at a price
        of
        $.04/share, for a total of 6,750,000 common shares issued under the terms
        of the
        transaction.
 
 In
        January 2003, the Company borrowed the sum of $300,000 from its former chairman,
        Bruce Galloway. The term of the loan was three months with a 12% coupon.
        In
        addition, Mr. Galloway received 1,000,000 warrants with an exercise price
        of
        $.01/share and his lender, AFC Enterprises, Inc., received a warrant
        to
        purchase 1,000,000 shares of common stock at $.01/share. The loan was repaid
        in
        April, 2003. Mr. Galloway and AFC Enterprises exercised the respective
        warrants.
 
 In
        April
        2003 the Company issued $ 345,000, secured promissory notes to
        a group
        of investors. The notes mature in August 2004 with interest at
        10%. In addition, for each $60,000 of notes issued, the Company issued a
        warrant
        to purchase 1,000,000 shares of stock at an exercise price of $.01/share.
        The
        notes are collateralized by 2,000,000 shares of IMSI stock currently held
        by the
        Company. The proceeds of this offering were used to repay the loan to Mr.
        Galloway and for the company’s working capital requirements.
  The
        warrants issued in 2003 were valued at $392,500 and charged to interest
        expense.
 
 The
        holders of promissory notes, have exercised 4,750,000 warrants
        associated with their notes at a
        price
        of $.01/share. The number of shares of IMSI Common Stock pledged
        as collateral for the $345,000 of promissory notes, are subject to
        adjustment one year after the initial closing date of the issuance of the
        promissory notes based on the 30-day trailing average of the bid prices of
        shares of Common Stock of IMSI as listed on the OTC Bulletin Board or such
        other
        exchange as
        such
        shares are then listed upon. As such, the number of shares that are subject
        to the pledge agreement as of June, 2004 are 747,869 shares .
  In
        the
        Fall of 2004, all but two of the note holders granted extensions to the Company
        through December 31, 2005 with respect to the notes due in August, 2004.
        The
        principal amount of the notes subject to such extension is $225,000. The
        Company
        is attempting to negotiate  an
        extension of the maturity dates with the
        two remaining note holders, holding promissory notes in the aggregate principal
        amount of $120,000 .
        The
        Company's management is confident that such extensions can be obtained,
        but  there
        can
        be no assurances that this will occur.
 
 On
        September 10, 2003 the Company extended a bridge loan to Access Propeller,
        LLC
        ("Access") in the sum of $300,000. This loan is secured against all the assets
        of Access. Access owns 81% of Jippii (USA), n/k/a as DownPlay, Inc. DownPlay
        is
        in the business of providing downloadable mobile entertainment to cell phones
        and wireless devices. The loan bears interest at 10% and matures on February
        4,
        2004. In addition, the loan allows the Company the option to make a further
        investment of $900,000 in the form of preferred stock to acquire a total
        of
        50.1% of the outstanding stock of Access. On October 31, 2003 the Company
        converted its loan to 304,250 shares of Preferred Series A stock. In December
        2003, the Company decided not to make a further investment in Access or its
        subsidiary, DownPlay,  giving the Company an  ownership stake
        in
        Access of approximately 12%. Due to subsequent financing by Access,
        it is
        estimated that the Company's ownership stake has been reduced to approximately
        9%.
 
 17
  On
        September 18, 2003, the Company entered into a 15% one-year note (the “Note”)
        with IMSI whereby we borrowed $350,000. The note is due, with interest, on
        September 18, 2004. The note is secured by 400,000 shares of IMSI stock
        currently owned by DCDC. The agreement required that DCDC not
        to sell
        any other IMSI common stock, which it holds, with the exception of private
        sales
        of IMSI common stock, until February 15, 2004. Concurrent with this note,
        DCDC
        repaid the entire principal portion of a $50,000 note, made in favor of IMSI
        on
        February 25, 2003. That note, due on February 25, 2004 was unsecured and
        carried
        a 4% interest rate. The interest payable, amounting to $1,162, is outstanding
        as
        of the filing and is due and payable on February 18, 2004. On September 18,
        2004, the Company and IMSI entered into an amendment to the Note. The Amendment
        provides for the extension of the maturity date to May 31, 2005 as well as
        the
        payment of accrued interest by October 31, 2004 in the sum of $52,000. In
        addition, the Company provided to IMSI as additional collateral, its ownership
        stake in Access Propeller, LLC.
  On
        January 5, 2005, IMSI sold and assigned the Note to Multi-Mag
        corporation ("Multi-Mag"). On June 5, 2005, the Company and Multi-Mag executed
        Amendment #2 to the promissory note.  This amendment provides that DCDC
        shall pay all accrued interest due from September 19, 2004 through June 17,
        2005
        under the promissory note to MULTI-MAG no later than June 30, 2005. Additionally,
        interest will be paid on the Note from June 18, 2005 through the payment
        date,
        which will be no later than June 30, 2005 at the rate of $135 per day.
  On
        June
        17, 2005 the Company remitted a payment of $ 38,979.45. MULTI-MAG agreed
        to
        extend the due date for the principal and the remaining accrued interest
        on the
        note from May 31, 2005 to December 31, 2005.
  On
        September 30, 2004, the Company sold 200,000 shares of IMSI for gross proceeds
        of $200,000. The Company used $77,500 of this amount to pay certain indebtedness
        owed IMSI in the form of accrued interest and a reduction of
        principal.
 
 On
        May
        25, 2005 the Company sold 250,000 shares of IMSI for gross proceeds of $277,000.
        The Company used approximately $38,980 of this amount to pay accrued
        interest to Multi-Mag and the remainder for general working capital
        purposes.
 
 The
        Company believes that it will need additional financing and working capital
        to
        finance its operations.  Without additional financing, the Company
        will be
        unable to continue its operations. Although the Company has obtained additional
        financing in the past and believes it could meet its needs through either
        additional borrowings or the sale of additional equity, there can be no
        assurance that the Company would succeed in obtaining any such financing,
        or
        that the terms of such transactions could be effected, or that such strategy
        will be successful.
  The
        shares of IMSI owned by the Company are "restricted securities" as defined
        in
        Rule 144 under the Securities Act of 1933. Under Rule 144, the Company can
        publicly sell, within any three month period, a number of shares not to exceed
        one percent of IMSI's then outstanding shares of common stock. In the event
        that
        IMSI becomes listed on the NASDAQ or on a national securities exchange, the
        maximum amount that can be sold will be the greater of one percent of the
        outstanding shares and the average weekly trading volume of IMSI's common
        stock
        for the four weeks preceding the Company's filing of a notice of sale with
        the
        SEC.
 
 18
 
 Item
        7.  Financial
        Statements.
 
 The
        financial statements are filed as part of this Annual Report on Form
        10-KSB.
  Item
        8.  Changes
        in and Disagreements with Accountants.
 
 Effective
        June 23 ,2004, the company engaged the services of Miller Ellin & Co., LLP
        to replace the Company’s former auditor as the Company’s independent
        certifying public accountant. The Company notified its former auditor, Goldstein
        Golub & Kessler, LLP (the "Former Auditor") that the client-auditor
        relationship had ceased. The Former Auditor had served as the Company's
        independent public accountant prior to its resignation. The Former Auditors
        report on the financial statements for the past two years did not contain
        an
        adverse opinion or a disclaimer of opinion. There were no disagreements with
        the
        Former Auditor on any matter of accounting principles or practices, financial
        statement disclosures or auditing scope or procedure.
 
 Item
        8A.  CONTROLS
        AND PROCEDURES
 
 (a)
        Disclosure Controls and Procedures. Under the supervision and with the
        participation of our management, including our principal executive and financial
        officer, we have evaluated the effectiveness of the design and operation
        of our
        disclosure controls and procedures (as such term is defined in Rule 13a-15(e)
        or
        Rule 15d-15(e) under the U.S. Securities Exchange Act of 1934, as amended)
        within 90 days of the filing date of this quarterly report and, based on
        their
        evaluation, our principal executive and financial officer have concluded
        that
        these controls and procedures are not effective and do not meet the requirements
        thereof. This is as a result of (i) the difficulties in auditing the books
        and
        records of Pudgie’s, a private company acquired in October 2000, and (ii)
        turnovers experienced when the principal operating subsidiary, Arthur
        Treacher’s, Inc., was sold and subsequent changes in senior management of the
        Company and its Accounting and Finance Personnel. We are, however, working
        diligently on having these requirements met.
 
 Disclosure
        controls and procedures include, without limitation, controls and procedures
        designed to ensure that information required to be disclosed by us in the
        reports that we file under the Exchange Act is recorded, processed, summarized
        and reported, within the time periods specified in the Securities and Exchange
        Commission's rules and forms, and that such information is accumulated and
        communicated to our management, including our principal executive and financial
        officer, as appropriate to allow timely decisions regarding required
        disclosure.
 
 (b)  Changes
        in Internal Control Over Financial Reporting *.* There
        were no significant changes in our internal control over financial reporting
        identified in connection with the evaluation required by Exchange Act Rule
        13a-15(d) or Rule 15d-15(d) that occurred during the period covered by this
        quarterly report, or to our knowledge in other factors, that have materially
        affected, or are reasonably likely to materially affect, our internal control
        over financial reporting.
 
 19
 
 
 PART
        III
 
 Item
        9.  Directors,
        Executive Officers, Promoters and Control Persons.
  Name
                  Age
                  PositionGary
                      Herman
                  41
                  Chairman
                      of the Board, Chief Executive Officer, and SecretarySkuli
                      Thorvaldsson
                  64
                  Director,
                      Chief Financial Officer,TreasurerSigurdur
                    Jon Bjornsson
                  39
                  Director
  Directors
 
 Gary
        Herman .
        Mr.
        Herman was elected to the Board of Directors in May 2001 and became Chairman
        and
        Chief Executive officer in January 2002. Mr. Herman is also the Managing
        Partner
        of Galloway Capital Management, LLC and the managing director of Arcadia
        Securities LLC. Prior to this, he was an investment banker with Burnham
        Securities from 1997 to 2002. Prior to joining Burnham, he was the managing
        partner of Kingshill Group, Inc., a merchant banking and financial firm with
        offices in New York and Tokyo. Mr. Herman is currently Chairman of the Board
        of
        DataMetrics Corporation and a director of Shells Seafood Restaurant Corp.
        Mr.
        Herman has a B.S. from the State University of New York at Albany. Mr. Herman
        became a director of IMSI in August 2001 pursuant to the merger agreement
        between the Company and IMSI. Mr. Herman resigned as a director of IMSI on
        January 25, 2002.
 
 Skuli
        Thorvaldsson .
        Mr.
        Thorvaldsson has been a member of the Board of Directors since May 1996.
        He
        became Chief Financial Officer in February 2002. Mr. Thorvaldsson is a private
        entrepreneur/investor. From 1980 to 2003 Mr. Thorvaldsson was the Chief
        Executive Officer of the Hotel Holt in Reykjavík, Iceland. He is a director of
        Allied Resource Corporation, an advanced technologies industrial service
        company
        based in Wayne, PA; as well as a director of Holt Holdings s.a., a
        Luxembourg-based investment company. Mr. Thorvaldsson graduated from the
        Commercial Collage of Iceland and the University of Barcelona and holds a
        law
        degree from the University of Iceland. He became a director of IMSI in August
        2001 pursuant to the merger agreement between the Company and IMSI. Mr.
        Thorvaldsson resigned as a director of IMSI on February 26, 2002.
 Sigurdur
          Jon Bjornsson .
Mr.
          Bjornsson had been a director of the Company since March 2000. Until recently,
          Mr. Bjornsson served as the President and CEO ofFramtak
          Investment Bank, Inc., an Icelandic based firm specializing in venture
          investments. Mr. Bjornsson also serves on the boards of several European
          companiesincluding:
          Icebird Airline, Scandinavian Pizza Company "DOMINOS", New Industries,
          and
          Betware.com (chairman), Ltd. Mr. Bjornsson is a graduate ofthe
          University of Iceland with a BS in Business Finance. Mr. Bjornsson became
          a
          director of IMSI in August 2001 pursuant to the merger agreementbetween
          the Company and IMSI. Mr. Bjornsson resigned as a director of IMSI on February
          26, 2002. Mr. Bjornsson resigned from the board of the Company in April
          2005.
  Each
          Director is elected to serve until the Company's next annual meeting of
          shareholders and until his successor is duly elected and qualified. There
          are no
          agreements with respect to the election of directors. Executive officers
          are
          appointed annually by the Board of Directors and each executive officer
          serves
          at the discretion of the Board of Directors.
  Beneficial
        Ownership Reporting Compliance
 
 Section
        16 A (a) of the Securities Exchange Act of 1934 requires the Company's officers,
        directors and persons who own more than ten percent of the Company's common
        shares to file reports of ownership with the SEC and to furnish the Company
        with
        copies of these reports. Based solely upon its review of reports received
        by it,
        or upon written representations from certain reporting persons that no reports
        were required, the Company believes that during fiscal year ended June 30,
        2002
        all filing requirements were met.
 
 20
  Item
        10.  Executive
        Compensation.
 
 The
        following table provides certain summary information concerning the compensation
        paid or accrued by the Company to or on behalf of its Chief Executive Officer
        and the other named executive officers of the Company for services rendered
        in
        all capacities to the Company and its subsidiaries for the fiscal years ended
        June 30, 2002; 2001; 2000.
 
 (a)
        Summary Compensation Table
 
 Annual
                  Compensation
              
              
              
              
              
              
              
              Awards
                  Payouts
              
              Payouts
              
              long-term
                  CompensationRestricted
              
              SecuritiesName
                  and Principal
              
              
              
              
              
              
              
              Other
                  Annual
              
              Stock
              
              Underlying
              
              LTIP
              
              All
                  OtherPosition
              
              Year
              
              Salary
              
              Bonus
              
              Compensation
              
              Award(s)
              
              Options/SARs
              
              Payouts
              
              CompensationGary
                Herman, CEO
              
              
              2002
              
              $
              0
              
              $
              0
              
              $
              0
              
              
              -
              
              
              500,000
              
              $
              0
              
              $
              0Bruce
                  Galloway Chairman & CFO
              
              
              2002
              
              $
              0
              
              $
              0
              
              $
              0
              
              
              -
              
              
              10,000
              
              $
              0
              
              $
              02001
              
              $
              14,000
              
              $
              0
              
              $
              0
              
              
              -
              
              
              311,329
              
              $
              0
              
              $
              02000
              
              $
              110,000
              
              $
              0
              
              $
              0
              
              
              -
              
              
              10,000
              
              $
              0
              
              $
              0Martin
                  Wade III
              
              
              2002
              
              $
              108,000
              
              $
              0
              
              $
              0
              
              
              -
              
              
              100,000
              
              $
              0
              
              $
              02001
              
              $
              216,667
              
              $
              0
              
              $
              0
              
              
              -
              
              
              1,000,000
              
              $
              0
              
              $
              02000
              
              $
              0
              
              $
              0
              
              $
              0
              
              
              -
              
              
              -
              
              $
              0
              
              $
              0Vincent
                  DeLorenzo
              
              
              2002
              
              $
              87,500
              
              $
              0
              
              $
              0
              
              
              -
              
              
              137,500
              
              $
              0
              
              $
              02001
              
              $
              108,285
              
              $
              0
              
              $
              0
              
              
              -
              
              
              -
              
              $
              0
              
              $
              02000
              
              $
              0
              
              $
              0
              
              $
              0
              
              
              -
              
              
              -
              
              $
              0
              
              $
              0Jeffrey
                  Bernstein President & CEO of Arthur Treacher's
              
              
              2002
              
              $
              73,000
              
              $
              0
              
              $
              0
              
              
              -
              
              
              -
              
              $
              0
              
              $
              02001
              
              $
              146,154
              
              $
              0
              
              $
              0
              
              
              -
              
              
              -
              
              $
              0
              
              $
              02000
              
              $
              0
              
              $
              0
              
              $
              0
              
              
              -
              
              
              -
              
              $
              0
              
              $
              0Ralph
                  Sorrentino Former President & CEO - Terminated
              
              
              2002
              
              $
              0
              
              $
              0
              
              $
              0
              
              
              -
              
              
              -
              
              $
              0
              
              $
              225,2622001
              
              $
              75,000
              
              $
              0
              
              $
              0
              
              
              -
              
              
              5,000,000
              
              $
              0
              
              $
              02000
              
              $
              0
              
              $
              0
              
              $
              0
              
              
              -
              
              
              -
              
              $
              0
              
              $
              0
 
 
 21
 
  (b)
            Option/SAR Grants in Last Fiscal Year
 Name
              
              Number
                      of Securities Underlying Options/SARs granted
              
              Percentage
                      of total  options/SARs granted to  employees
                      in fiscal year
              
              Exercise
                  or base price
              
              Expiration
                  dateGary
                Herman
              
              
              500,000
              
              
              16.4
              %
              $
              0.01
              
              
              12/7/06Bruce
                  Galloway
              
              
              10,000
              
              
              4.0
              %
              $
              0.31
              
              
              1/1/06Bruce
                  Galloway
              
              
              500,000
              
              
              16.4
              %
              $
              0.01
              
              
              12/7/06Martin
                  Wade III
              
              
              500,000
              
              
              16.4
              %
              $
              0.01
              
              
              12/7/06Vincent
                  DeLorenzo
              
              
              175,000
              
              
              5.0
              %
              $
              0.01
              
              
              12/7/06
  (c)
          Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End
          None
 Name
              
              Shares
                    acquired on exercise
              
              Value
                  Realize
              
              Number
                      of Unexercised  options/SARs at June 30, 2002
              
              
              In-The-Money
                      Options/SARs at June 30, 2002Bruce
                  Galloway
              
              
              -
              
              $
              0
              
              
              639,455
              Options
              
              $
              57,600639,455
              Exercisable
 
 Executive
        Compensation
 
 Martin
        Wade served as President and Chief Executive Officer of the Company and DCDC
        (Delaware) pursuant to an employment agreement dated as of June 1, 2000.
        Mr.
        Wade receives a base salary of $200,000 per year for the initial term of
        the
        agreement, which expires on November 30, 2002. Upon execution of the agreement,
        he received options to purchase 1,000,000 shares of the Company’s common stock
        at a price of $1.00/share through May 31, 2006. Mr. Wade resigned from the
        Company on December 31, 2001 and the exercise price of his options was reduced
        to $.01/share.
 
 22
  Jeff
        Bernstein served as President and Chief Executive Officer of ATI (Delaware)
        and
        the various Pudgies entities pursuant to an employment agreement dated as
        of
        June 1, 2000. Mr. Bernstein receives a base salary of $200,000 per year for
        the
        initial term of the agreement, which expires on October 19, 2005. Commencing
        on
        October 19, 2002 and upon each anniversary of his employment thereafter,
        Mr.
        Bernstein is entitled to an increase equal to the greater of five percent
        of the
        base salary per year or the annual percentage increase of the Consumer Price
        Index. The term is renewable for an additional five-year period by ATI
        (Delaware) upon a minimum of 180 days notice. Mr. Bernstein resigned his
        position with the company on February 28, 2002 upon the sale of ATI
        (Delaware).
 
 Gary
        Herman and an affiliate, GH Ventures LLC, an entity of which Gary Herman
        is the
        sole member, provides services as the Company's Chairman, Chief Executive
        Officer, Secretary and Consultant. Due to the limited available working capital
        of the Company, he has received minor compensation since taking office in
        January 2002.
 
 Skuli
        Thorvaldsson is the Company's Chief Financial Officer. He has received no
        cash
        compensation for his services as Chief Finaincial Officer or as a consultant
        to
        the Company, since taking office in February 2002 due to the Company’s lack of
        working capital.
  In
        June,
        2005, the Company awarded both Mr. Herman and Mr. Thorvaldsson options to
        purchase 1,250,000 shares of common stock at an exercise price of $.01 per
        share
        and expiring in June 2015.  These options were awarded for past services
        to
        the Company during the fiscal year ended June 30, 2002.  The options
        were
        valued at approximately $290,000 and charged to earnings in the fiscal year
        ended June 30, 2005.
  Further,
          the Company intends to grant Messrs. Herman and Thorvaldsson additional
          compensation in the form of cash and /or stock options in connection with
          their
          services as Directors and for management services to the Company for the
          fiscal
          years commencing July 1, 2001. However, the amount and nature of such additional
          compensation is subject to an evaluation by an independent third party
          consultant engaged by the Company.
  Item
        11.
        Security Ownership of Certain Beneficial Owners and Management
 
 The
        following table sets forth information as of September 22, 2005, with respect
        to
        officers, directors and persons who are known by the Company to be beneficial
        owners of more than 5% of the Company's Common Stock. Except as otherwise
        indicated, the Company believes that the beneficial owners of the Common
        Stock
        listed below, based on information furnished by such owners, have sole
        investment and voting power with respect to such shares, subject to community
        property laws where applicable.
  Shareholder
                
                Shares
                
                PercentageBruce
                    R. Galloway (1)
                
                
                9,412,177
                
                
                18.0Skuli
                  Thorvaldsson (2)
                
                
                1,650,000
                
                
                3.1Gary
                  Herman (3)
                
                
                2,355,000
                
                
                4.4Officers
                    and Directors as a Group
                
                
                4,005,000
                
                
                7.27Total
                    Outstanding Shares
                
                
                51,689,165
 
 23
   (1)
        Bruce
        R. Galloway was the Chairman of the Board of the Company until January 2002.
        Includes (i) options to purchase 1,750,000 shares of Common Stock,
        which
        are exercisable at an exercise price of $.01/share through June 30, 2015;
        (ii)
        1,040,404 shares of common stock held by Jacombs Trading, Inc. and 544,100
        shares of common stock owned by his wife and children. Excludes 2,000,000
        shares
        owned by Burnham International, Inc. Bruce Galloway is a managing director
        of
        Burnham Securities Inc., which previously owned 49% of Burnham International,
        Inc.
 
 (2)
              Gives
              effect to the conversion of 400,000 shares of Series D Preferred Stock
              into
              400,000 shares of common stock for no additional consideration.
 
 
 (3)
              Includes options to purchase 1,750,000 shares of common stock at $.01
              through
              June 30, 2015.
 
 
 The
              Company intends to grant Messrs. Herman and Throvaldsson additional
              compensation
              in the form of cash and/or stock options in connection with their services
              as
              Directors and for management services to the Company for the fiscal
              years
              commencing July 1, 2001, but the amount and nature of such compensation
              is
              subject to an evaluation by an independent third party consultant engaged
              by the
              Company.
 Item
        12.
        Certain Relationships and Related Transactions.
 
 On
        September 30, 1999, the Company issued 12% promissory notes in the aggregate
        principal amount of $289,000 including notes in the principal amount of
        $105,000, $84,000, $50,000 and $50,000 from Bruce Galloway, NTS Financial
        Services, Ltd., Evan Binn and Europa International, Inc. Knoll Capital
        Management, Inc., is the investment manager for Europa. Mr. Knoll is the
        sole
        shareholder of Knoll Capital Management, Inc. Interest accrues at a rate
        of 12%
        per annum. In addition, the debt and interest was convertible into
        shares
        of common stock at $.21/share commencing September 30, 2000. In conjunction
        with
        the promissory notes the Company issued 481,667 warrants at an exercise price
        of
        $.30/share, which warrants are exercisable through September 30, 2004. All
        noteholder converted their promissory notes and all accrued interest
        thereon in to common stock on November 1, 2001.
 
 On
        October 21, 1999, the Company issued 12% promissory notes in the aggregate
        principal amount of $221,000 included notes in the principal amount of $50,000
        from each of Bruce Galloway, NTS Financial Services, Ltd., Ralph Sorrentino
        and
        Europa International, Ltd. Knoll Capital Management, Inc., is the investment
        manager for Europa. Mr. Knoll is the sole shareholder of Knoll Capital
        Management, Inc., respectively. Interest accrues at a rate of 12% per annum.
        In
        addition, the debt and interest on each note is convertible into shares of
        common stock at $.21/share commencing October 21, 2000. In conjunction with
        the
        promissory notes, each of the four investors received 83,333 warrants at
        an
        exercise price of $.30/share, which warrants are exercisable through October
        21,
        2004. All noteholders converted their promissory notes and all accrued interest
        thereon in to common stock on November 1, 2001.
 
 24
  On
        December 1, 1999, the Company issued 12% promissory notes in the aggregate
        principal amount of $75,000 from Bruce Galloway the Company's former CEO
        and
        Chairman of the Board and a note in the principal amount of $25,000 to Jacombs
        Trading, Inc., an affiliate of Mr. Galloway. Interest accrued at a rate of
        12%
        per annum. In addition, the debt and interest is convertible into shares
        of
        common stock at $.28/share commencing December 1, 2000. In conjunction with
        the
        promissory notes, the Company issued 131,578 warrants at an exercise price
        of
        $.38/share, which warrants are exercisable through December 1, 2004. Mr.
        Galloway and Jacombs converted the promissory notes and all accrued interest
        thereon in to 439,268 shares of common stock on November 1, 2001.
 
 On
        January 5, 2000, the Company issued 12% promissory notes in the aggregate
        principal amount of $50,000 from NTS Financial Services, Ltd. Interest accrued
        at a rate of 12% per annum. In addition, the debt and interest was convertible
        into common stock at $.28/share commencing January 5, 2001. In conjunction
        with
        the promissory notes the Company issued 65,789 warrants at an exercise price
        of
        $.38/share, which warrants are exercisable through January 5, 2005. In February
        2001, NTS Financial Services, Ltd. converted its promissory note and all
        accrued
        interest thereon into 200,000 shares of common stock.
 
 On
        February 5, 2000, the Company issued 12% promissory notes in the aggregate
        principal amount of $395,000 included notes in the principal amount of $50,000
        from each of Bruce Galloway, NTS Financial Services Ltd., Evan Binn, Ralph
        Sorrentino and Europa International Inc. (Knoll Capital Management, Inc.,
        is the
        investment manager for Europa. Mr. Knoll is the sole shareholder of Knoll
        Capital Management Inc.). Interest accrues at a rate of 12% per annum. In
        addition, the debt and interest on each $50,000 note is convertible into
        shares
        of common stock at $.24/share commencing February 5, 2001. In conjunction
        with
        the promissory notes the Company issued 83,333 warrants to each holder of
        a
        $50,000 note at an exercise price of $.30/share, which warrants are exercisable
        through February 5, 2005. NTS Financial Services Ltd. and Mr. Binn each
        converted their his promissory notes and all accrued interest thereon in
        to
        233,333 shares of common stock in February 2001 and Mr. Galloway converted
        his
        promissory note and all accrued interest thereon into 251,729 shares of common
        stock on November 1, 2001. Mr. Sorrentino was repaid in cash in March
        2001.
 
 In
        May
        2000, the Company granted Mr. Wade options to purchase 1,000,000 shares of
        common stock at an exercise price of $.37/share. See "Item 10. Executive
        Compensation."
 
 In
        February 2002, Bruce Galloway purchased 4,344,300 shares of common stock
        in a
        private placement at a purchase price of $.04/share.
 
 On
        February 28, 2002, the Company sold its 80% interest in ATI (Delaware) to
        PAT
        Services, an entity controlled by Mr. Bernstein, in consideration for $100,
        assumption of liabilities and a waiver by Mr. Bernstein of his right to convert
        his shares of ATI (Delaware) common shares into shares of common stock of
        the
        Company under the conversion agreement among the Company, ATI (Delaware)
        and Mr.
        Bernstein executed in connection with the acquisition of Pudgie's in October
        2000. Contemporaneously with the sale of ATI (Delaware), ATI (Delaware)
        transferred certain property rights (including all its trademarks) and 100%
        of
        the stock of its subsidiaries, Arthur Treacher’s Franchise Systems, Inc. and
        Pudgie's Franchise Corp. to PAT Franchise, an entity controlled by Mr.
        Bernstein, in consideration for the assumption of certain liabilities of
        ATI
        (Delaware). The two subsidiaries of ATI (Delaware) are parties to the franchise
        agreements with the franchisees in the Arthur Treacher’s and Pudgie's restaurant
        systems.
 
 In
        conjunction with the sale of ATI, the secured promissory note executed in
        December 2000 by the Company, ATI (Delaware) and its subsidiary, M.I.E.,
        in
        favor of DCDC (Delaware) was amended and restated. The amended promissory
        note
        has a principal balance of $1,073,310, which equals the outstanding principal
        balance and accrued and unpaid interest on the original note as of February
        28,
        2002. PAT Services became a party to the note and pledged its 80% interest
        in
        ATI (Delaware) as collateral to secure the note. PAT Franchise became a
        guarantor of the note and provided DCDC (Delaware) with a first security
        interest in the proprietary rights transferred by ATI (Delaware) to PAT
        Franchise and in the franchise agreements to which Arthur Treacher’s and
        Pudgie's are parties. The note is due on December 1, 2004 and bears interest
        at
        the rate of 12% per year, with the interest payable monthly commencing April
        30,
        2002.
 
 25
  Item
        13.
        Exhibits and Report
 
 (a)
        Exhibits
 
 3.1.1
                Certificate
                    of Incorporation.1
 
 3.1.2
                Agreement
                    and Plan of Reorganization and First Addendum dated December
                    5,
                    1983.1
 
 3.1.3
                Certificate
                    of Merger dated January 23, 1984.1
 
 3.1.4
                Articles
                    of Merger dated January 27, 1984.1
 
 3.1.5
                Articles
                    of Amendment to Articles of Incorporation dated January 27,
                    1984.1
 
 3.1.6
                Amendment
                    to Articles of Incorporation dated January 27, 1986.1
 
 3.1.7
                Articles
                    of Amendment to Articles of Incorporation dated June 28, 1996.1
 
 3.1.8
                Articles
                    of Amendment to Articles of Incorporation dated July 31, 2000.3
 
 3.2
                Bylaws.1
 
 4.2
                Certificate
                    of Designation of Series A Preferred Stock.1
 
 4.10
                Certificate
                    of Designation of Series B Preferred Stock.1
 
 4.4
                Certificate
                    of Designation of Series C Preferred Stockof
                    Warrant to Burnham Securities Inc.1
 
 4.5
                Certificate
                    of Designation of Series D Preferred Stock.1
 
 10.9
                Uniform
                    Franchise Offering Circular dated January 1, 1997.1
 
 10.10
                Form
                    of Franchise Agreement dated January 1, 1997.1
 
 10.11
                Form
                    of Warrant exercisable at $1.51 per share.1
 
 10.12
                Form
                    of Warrant to Burnham Securities Inc.1
  26
 10.13
                *Uniform
                    Franchise Offering Circular dated January 1,
                    1997.
 
 10.14
                *Form
                    of Franchise Agreement dated January 1,
                    1997.
 
 10.15
                *Form
                    of Warrant exercisable at $1.51 per
                    share.
 
 10.16
                *Form
                    of Warrant to Burnham Securities
                    Inc.
 
 10.13
                Form
                    of Stock Option to Employees.1
 
 10.18
                Form
                    of agreement with holders of Series A Preferred Stock.1
 
 10.20
                Co-Branding
                    Agreement between the Company and Miami Subs Corp. dated August
                    13,
                    1998.2
  10.21
                Letter
                    Agreement to co-brand between the Company and Miami Subs Corp.
                    dated April
                    30, 1999.3
 
 10.24
                Purchase
                    Agreement among the Company, TI (Delaware) and Jeffrey Bernstein,
                    dated
                    October 2, 2000.3
 
 10.25.
                Agreement
                    and Plan of Merger between the Company and IMSI dated August
                    31,
                    2001.4
 
 10.26
                Loan
                    Purchase Agreement between the Company and Union Bank of California
                    dated
                    August 22, 2001.4
 
 10.29
                Option
                    Agreement with Martin Wade dated June 1,
                    2001.
  10.30
                Memorandum
                    of Agreement between the Company, Ralph Sorrentino and RJS Consulting
                    Corp. dated October 30, 2001.
  10.31
                  Purchase
                      Agreement between ATI (Delaware) and PAT Franchise dated February
                      28,
                      2002.5
  10.32
                  Common
                      Stock Purchase Agreement among the Company, DCDC (Delaware)
                      and PAT
                      Services, dated February 28, 2002.4
  10.33
                  Guaranty
                      and security Agreement between PAT Franchise and the Company
                      dated
                      February 28, 2002.5
  10.34
                    Pledge
                        Agreement between PAT Services and the Company dated February
                        28,
                        2002.5
 10.35
                Amended
                    and Restated Senior Secured Promissory Note in favor of the Company
                    dated
                    February 28, 2002.5
  10.36
                Promissory
                    Note Conversion and General Release dated February 28, 2002 between
                    the
                    Company and IMSI.5
  10.37
                Sale
                    Agreement between International Microcomputer Software, Inc.
                    and the
                    Company dated November, 2001_for the sale of Keynomics,
                    Inc.
 
 10.38
                Note
                    Purchase Agreement between the Company and KGS Holdings, Ltd.
                    dated June,
                    2002.
 
 10.39
                Settlement
                    Agreement between the Company and Ralph Sorrentino dated January,
                    2003.
  
 27
  10.40
                Settlement
                    Agreement between the Company and Raymond DeMarco, Michael Morley
                    and Gil
                    Holland dated March, 2003.
 
 10.42
                Promissory
                    Note in favor of IMSI dated September 18, 2003.6
 
 10.43
                Promissory
                    Note issued by Access Propeller, LLC in favor of the Company
                    dated
                    September,2003.6
 
 10.44
                Amendment
                    No.1 to the Promissory Note in favor of IMSI dated September18,
                    2003.6
 
 10.45
                Assignment
                    Agreement of the Promissory Note between the Company, InternationalMicrocomputerSoftware,
                    Inc. and Multi Mag Corporation dated as of February 3,
                    2005
 
 10.46
                Amendment
                    No.2 to the Promissory Note in favor of Multi Mag dated September,
                    2003
 
 21.
                List
                    of Subsidiaries (3)
 1  Previously Filed with Form 10-SB Declared Effective on August 12,
        1997
 2  Previously filed with Form 10-KSB for the year ended June 30, 1999
 3  Previously filed with Form 10-KSB for the year ended June 30, 2000
 4  Previously filed with Form 8-K filed on September 19, 2001
 5  Previously filed with Form 8-K filed on March 15, 2002
 6  Previously filed with Form 8-K filed on October 20, 2004
  
 28
 
 SIGNATURES
 
 In
        accordance with the Securities Exchange Act of 1934, the registrant caused
        this
        report to be signed on its behalf by the undersigned, thereunto duly
        authorized.
   DIGITAL
                    CREATIVE DEVELOPMENT CORPORATION
                  (Registrant)Date: November
                  17, 2005
                By:
                Gary
                  HermanGary
                    Herman
                  Chairman
                    and Chief Executive OfficerBy:
                Skuli
                  ThorvaldssonSkuli
                    Thorvaldsson
                  Chief
                    Financial Officer
 **Name**
                
                **Title**
                **Date**Gary
                      Herman
                ,
                Chairman
                    and CEO
                November
                    17, 2005Gary
                    HermanSkuli
                      Thorvaldsson
                ,
                Director
                November
                    17, 2005Skuli
                    Thorvaldsson
  29




Digital
                  Creative Development CorporationIndex
                  to Consolidated Financial StatementsReport
                  of independent accounting firm
              
              
              
              
              
              F-2Consolidated
                  Balance Sheets
              
              
              
              
              
              F-3Consolidated
                  Statements of Operations
              
              
              
              
              
              F-4Consolidated
                  Statements of Stockholders' Equity (Deficiency)
              
              
              
              
              
              F-5Consolidated
                  Statements of Cash Flows
              
              
              
              
              F-6Notes
                  to Consolidated Financial Statements
              
              
              
              
              
              F-7
                  to F-25




F-1




**REPORT
        OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
 
 
 **To
        the Stockholders**
 **Digital
        Creative Development Corporation** **and
        Subsidiary**
 We
        have
        audited the accompanying consolidated balance sheet of Digital Creative
        Development Corporation
        & Subsidiary as of June 30, 2002, and the related consolidated statements
        of operations,
        stockholders' equity, and cash flows for the year ended June
        30,2002. The
        consolidated financial statements are the responsibility of the Company's
        management. Our
        responsibility is to express
        an opinion on these financial statements based on our audits.
  We
        conducted our audit in accordance with the standards of the Public Company
        Accounting Oversight
        Board (United States). Those standards require that we plan and perform the
        audit to obtain
        reasonable assurance about whether the financial statements are free of material *misstatement* An
        audit
        includes examining, on a test basis, evidence supporting the amounts and
        disclosures in the financial *statements.* An
        audit
        also includes assessing the accounting principles used and significant estimates
        made by management, as well as evaluating the overall financial *statement* presentation. We
        believe that our audits provide a reasonable basis for our opinion.
  In
        our
        opinion, the consolidated financial statements referred to above present
        fairly,
        in all material respects,
        the financial position of Digital Creative Development Corporation and
        Subsidiary as of June
        30,
        2002, and the result of its operations and its cash flows for the year in
        the
        period ended June 30,
        2002,
        in conformity with U.S. generally accepted accounting principles.
  /s/
                  MILLER, ELLIN & COMPANY, LLP
                CERTIFIED
                  PUBLIC ACCOUNTANTS
  New
        York,
        New York July
        13,
        2005




F-2


**DIGITAL
                  CREATIVE DEVELOPMENT CORPORATION****CONSOLIDATED
                  BALANCE SHEETS****JUNE
                  30, 2002 AND 2001****ASSETS****(in
                  thousands)****2002**
              
              **2001****Audited**
              
              **Unaudited****CURRENT
                  ASSETS**Cash
                  and cash equivalents
              
              $
              -
              
              $
              3,242.7Marketable
                  securities
              
              
              1,212.0
              
              
              60.0Notes
                  receivable----Related Party
              
              
              250.1
              
              
              -**TOTAL
                  CURRENT ASSETS**
              
              
              1,462.1
              
              
              3,302.7**OTHER
                  ASSETS**Marketable
                  and non-marketable securities and advances, net of
                  allowanceof
                  $ 3,560,000 in both years
              
              
              5,600.0**TOTAL
                  ASSETS**
              
              **$**
              **7,062.1**
              
              **$**
              **3,302.7****LIABILITIES
                  AND STOCKHOLDERS' (DEFICIENCY)****CURRENT
                  LIABILITIES**Accounts
                  payable,accrued expenses and other liabilities
              
              $
              232.0
              
              $
              200.0Current
                  maturities of long term debt
              
              
              -
              
              
              1,065.6Due
                  to former executive
              
              
              341.2
              
              
              -**TOTAL
                  CURRENT LIABILITIES**
              
              
              573.2
              
              
              1,265.6**NET
                  LIABILITIES OF DISCONTINUED OPERATIONS**
              
              
              -
              
              
              3,920.6**LONG
                  TERM DEBT--RELATED PARTIES , NET OF CURRENT
                  MATURITIES**
              
              
              123.0
              
              
              1,862.1**TOTAL
                  LIABILITIES**
              
              
              696.2
              
              
              7,048.3**STOCKHOLDERS'
                  EQUITY (DEFICIENCY)**Preferred
                  Stock 2,000,000 Shares AuthorizedSeries
                  A Convertible, Par Value $ 1 ;2,200 Shares Issued andOutstanding;
                  Involuntary Liquidation Preference of $ 1 Per SharePlus
                  Accrued and Unpaid Dividends
              
              
              2.2
              
              
              2.2Series
                  C, Par Value $ 100 ;9,900 Shares Issued andOutstanding;
                  Involuntary Liquidation Preference of $ 100 Per SharePlus
                  Accrued and Unpaid Dividends
              
              
              852.7
              
              
              852.7Series
                  D, Par Value $ 100 ;4,000 Shares Issued andOutstanding;
                  Involuntary Liquidation Preference of $ 100 Per SharePlus
                  Accrued and Unpaid Dividends
              
              
              400.0
              
              
              400.0Common
                  Stock, Par Value $ .01; Authorized 75,000,000 Shares;
                  Issuedand
                  Outstanding:44,399,165 Shares at June 30,2002;32,505,945
                  Sharesat
                  June 30,2001
              
              
              444.0
              
              
              325.1Additional
                  paid in capital
              
              
              37,380.2
              
              
              35,923.3Deferred
                  compensation
              
              
              -
              
              
              (1,488.3
              )Unrealized
                  gains or losses
              
              
              2,913.4
              
              
              (240.0
              )Accumulated
                  deficit
              
              
              (35,626.6
              )
              
              (39,520.6
              )**TOTAL
                  STOCKHOLDERS' EQUITY (DEFICIENCY)**
              
              
              6,365.9
              
              
              (3,745.6
              )**TOTAL
                  LIABILITIES AND STOCKHOLDERS' EQUITY**
              
              **$**
              **7,062.1**
              
              **$**
              **3,302.7****See
                  accompanying Notes to Consolidated Financial
                  Statements**




F-3


**DIGITAL
                  CREATIVE DEVELOPMENT CORPORATION****CONSOLIDATED
                  STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME****FOR
                  THE THE YEARS ENDED JUNE 30, 2002 AND 2001****(in
                  thousands)****2002**
              
              **2001****Audited**
              
              **Unaudited****TOTAL
                  REVENUE**Dividend,
                  and interest income, and other income
              
              $
              102.9
              
              $
              406.0Management
                  fee income
              
              
              89.8
              
              
              -192.7
              
              
              406.0**OPERATING
                  EXPENSES**General
                  and administrative expenses
              
              
              1,477.3
              
              
              1,813.3**LOSS
                  FROM OPERATIONS**
              
              
              (1,284.6
              )
              
              (1,407.3
              )**OTHER
                  INCOME (EXPENSE)**Interest
                  expense, net and other
              
              
              (53.5
              )
              
              (8.7
              )Net
                  realized gain (loss) on investments and notes receivable
              
              
              568.0
              
              
              (2,963.5
              )Settlement
                  of litigation with former executive
              
              
              933.4
              
              
              (2,499.3
              )**TOTAL
                  OTHER INCOME (EXPENSES)**
              
              
              1,447.9
              
              
              (5,471.5
              )**INCOME
                  (LOSS) FROM CONTINUING OPERATIONS**
              
              
              163.3
              
              
              (6,878.8
              )**DISCONTINUED
                  OPERATIONS**Gain
                  on disposal of discontinued operations
              
              
              3,730.7
              
              
              -Operating
                  loss of discontinued operations
              
              
              -
              
              
              (13,616.1
              )**INCOME
                  (LOSS) FROM DISCONTINUED OPERATIONS AND NON-RECURRING
                  OPERATIONS**
              
              
              3,730.7
              
              
              (13,616.1
              )**NET
                  INCOME (LOSS)**
              
              $
              3,894.0
              
              $
              (20,494.9
              )**UNDECLARED
                  PREFERRED STOCK DIVIDENDS**
              
              
              (145.5
              )
              
              (159.2
              )**NET
                  INCOME ( LOSS) ATTRIBUTABLE TO COMMON
                  SHAREHOLDERS**
              
              $
              3,748.5
              
              $
              (20,654.1
              )**WEIGHTED
                  AVERAGE NUMBER OF OUTSTANDING SHARES FOR****BASIC
                  EARNINGS PER SHARE**
              
              
              38,965.5
              
              
              22,607.4**WEIGHTED
                  AVERAGE NUMBER OF OUTSTANDING SHARES FOR****DILUTED
                  EARNINGS PER SHARE**
              
              
              41,184.5
              
              
              22,607.4**BASIC
                  INCOME (LOSS) PER SHARE****CONTINUING
                  OPERATIONS**
              
              $
              -
              
              $
              (0.31
              )**DISCONTINUED
                  OPERATIONS**
              
              $
              0.10
              
              $
              (0.60
              )$
              0.10
              
              $
              (0.91
              )**DILUTED
                  INCOME (LOSS) PER SHARE****CONTINUING
                  OPERATIONS**
              
              $
              -
              
              $
              (0.31
              )**DISCONTINUED
                  OPERATIONS**
              
              $
              0.09
              
              $
              (0.60
              )$
              0.09
              
              $
              (0.91
              )**NET
                  INCOME (LOSS)**
              
              $
              3,894.0
              
              $
              (20,494.9
              )**Other
                  comprehensive operations****Unrealized
                  Gain (Loss) on marketable securities**
              
              
              3,153.4
              
              
              (240.0
              )**Comprehensive
                  net income (loss)**
              
              $
              7,047.4
              
              $
              (20,734.9
              )




**See
        accompanying Notes to Consolidated Financial
        Statements**




F-4


**DIGITAL
                    CREATIVE DEVELOPMENT CORPORATION****CONSOLIDATED
                    STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)****FOR
                    THE YEARS ENDED JUNE 30,2002 AND 2001****(in
                    thousands)****Accumulated****Additional**
                
                **Other****Preferred
                    Stock**
                
                **Common**
                
                **Paid-in**
                
                **Comprehensive**
                
                **Accumulated**
                
                **Deferred****Series
                    A**
                
                **Series
                    B**
                
                **Series
                    C**
                
                **Series
                    D**
                
                **Stock**
                
                **Capital**
                
                **Operations**
                
                **Deficit**
                
                **Compensation**
                
                **Total****Balance
                    at June 30,2000**
                
                
                **Unaudited**
                
                **$**
                **2.2**
                
                **$**
                **490.0**
                
                **$**
                **852.7**
                
                **$**
                **400.0**
                
                **$**
                **164.7**
                
                **$**
                **19,941.7**
                
                **$**
                **-**
                
                **$**
                **(19,025.7**
                **)**
                **$**
                **-**
                
                **$**
                **2,825.6**Issuance
                    of common stock for acquisition
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                22.5
                
                
                6,997.0
                
                
                
                
                
                -
                
                
                -
                
                
                7,019.5Exercise
                    of stock warrants
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                0.6
                
                
                25.8
                
                
                
                
                
                
                
                
                
                
                
                26.4Issuance
                    of common stock of subsidiary
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                75.0
                
                
                
                
                
                
                
                
                -
                
                
                75.0Conversion
                    of Preferred B Shares
                
                
                
                
                
                
                
                
                (490.0
                )
                
                
                
                
                
                
                
                7.7
                
                
                482.3
                
                
                
                
                
                
                
                
                
                
                
                -Issuance
                    of common stock to acquire
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                -
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                -
                
                
                -minority
                    interest
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                118.8
                
                
                5,078.7
                
                
                
                
                
                
                
                
                
                
                
                5,197.5Conversion
                    of long term debt
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                -
                
                
                10.4
                
                
                274.8
                
                
                
                
                
                
                
                
                -
                
                
                285.2Issuance
                    of common stock for services
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                -
                
                
                0.4
                
                
                10.8
                
                
                
                
                
                
                
                
                -
                
                
                11.2Compensation
                    charges for issuance of
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                -stock
                    options
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                3,037.2
                
                
                
                
                
                
                
                
                (1,488.3
                )
                
                1,548.9Unrealized
                    loss on investments
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (240.0
                )
                
                
                
                
                
                
                
                (240.0
                )Net
                    loss
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (20,494.9
                )
                
                
                
                
                (20,494.9
                )**Balance
                    at June 30,2001**
                
                
                **Unaudited**
                
                
                **2.2**
                
                
                **-**
                
                
                **852.7**
                
                
                **400.0**
                
                
                **325.1**
                
                
                **35,923.3**
                
                
                **(240.0**
                **)**
                
                **(39,520.6**
                **)**
                
                **(1,488.3**
                **)**
                **$**
                **(3,745.6**
                **)**Issuance
                    of common stock in connection with conversionof
                    long term debt
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                35.9
                
                
                782.3
                
                
                
                
                
                
                
                
                
                
                
                818.2Sale
                    of common stock and warrants
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                69.7
                
                
                200.3
                
                
                
                
                
                
                
                
                
                
                
                270.0Issuance
                    of common stock for services
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                1.0
                
                
                14.0
                
                
                
                
                
                -
                
                
                
                
                
                15.0Exercise
                    of common stock options
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                12.3
                
                
                135.3
                
                
                
                
                
                
                
                
                
                
                
                147.6Interest
                    and compensation charges for issuance
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                -of
                    stock options and warrants
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                325.0
                
                
                
                
                
                
                
                
                
                
                
                325.0Unrealized
                    gain on investments
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                3,153.4
                
                
                
                
                
                
                
                
                3,153.4Stock
                    based compensation
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                1,488.3
                
                
                1,488.3Net
                    profit
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                3,894.0
                
                
                
                
                
                3,894.0**Balance
                    at June 30,2002**
                
                
                **Audited**
                
                **$**
                **2.2**
                
                **$**
                **-**
                
                **$**
                **852.7**
                
                **$**
                **400.0**
                
                **$**
                **444.0**
                
                **$**
                **37,380.2**
                
                **$**
                **2,913.4**
                
                **$**
                **(35,626.6**
                **)**
                **$**
                **-**
                
                **$**
                **6,365.9**
  **See
        accompanying Notes to Consolidated Financial
        Statements**




F-5


**DIGITAL
                  CREATIVE DEVELOPMENT CORPORATION****CONSOLIDATED
                  STATEMENTS OF CASH FLOWS****FOR
                  THE THE YEARS ENDED JUNE 30, 2002 AND 2001****(in
                  thousands)****2002**
              
              **2001****Audited**
              
              **Unaudited****INCOME
                  (LOSS) FROM CONTINUING OPERATIONS**
              
              $
              163.3
              
              $
              (6,878.8
              )Adjustments
                  to reconcile net gain (loss) to net cash provided byoperating
                  activities:Amortization
                  of options and warrants issued
              
              
              325.0
              
              
              -Gain
                  on conversion of notes receivable
              
              
              (1,498.6
              )
              
              -Loss
                  on abandonment of furniture and fixtures
              
              
              26.4
              
              
              -Bad
                  debt expense
              
              
              6.0Loss
                  on investments
              
              
              -
              
              
              3,485.4Issuance
                  of common stock for services
              
              
              15.0
              
              
              11.2Issuance
                  of compensatory stock options
              
              
              147.6
              
              
              1,548.9Noncash
                  settlement of litigation with former executive
              
              
              (933.4
              )
              
              2,124.3Decrease
                  in prepaid expenses and other
              
              
              6.5
              
              
              -Decrease
                  in accrued expenses
              
              
              (32.1
              )
              
              -Net
                  cash (used in) provided by operating activities
              
              
              (1,774.3
              )
              
              291.0**INVESTING
                  ACTIVITIES**Purchases
                  of investments
              
              
              (2,500.0
              )
              
              (500.0
              )Proceeds
                  from sale of subsidiary and merger termination settlement
              
              
              200.0Acquisitions
                  of subsidiaries, net of cash and cash equivalents
              
              
              -
              
              
              (544.9
              )Net
                  cash used in investing activities
              
              
              (2,300.0
              )
              
              (1,044.9
              )**FINANCING
                  ACTIVITIES**Proceeds
                  from issuance of common stock
              
              
              270.0
              
              
              101.4Issuance
                  or increase of notes payable - related parties
              
              
              123.0
              
              
              (730.9
              )Payments
                  of amounts due to former executive
              
              
              (435.0
              )
              
              -Net
                  cash (used in) provided by financing activities
              
              
              (42.0
              )
              
              (629.5
              )**NET
                  (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
                  FROM****CONTINUING
                  OPERATIONS**
              
              $
              (4,116.3
              )
              $
              (1,383.4
              )**EFFECT
                  OF DISCONTINUED AND NON-RECURRING OPERATIONS**
              
              
              873.6
              
              
              (3,613.3
              )**CASH
                  AND EQUIVALENTS,beginning of period**
              
              
              3,242.7
              
              
              8,239.4**CASH
                  AND EQUIVALENTS,end of period**
              
              $
              -
              
              $
              3,242.7**Supplemental
                  disclosure of cash flow information:**Cash
                  paid for interest
              
              $
              -
              
              $
              119.9**Supplemental
                  disclosure of noncash transactions:**Issuance
                  of common stock for acquisition of minority interest
              
              $
              -
              
              $
              5,197.5Issuance
                  of common stock for acquisition of subsidiaries
              
              $
              -
              
              $
              7,019.5Issuance
                  of common stock in connection with the conversion of B
                  shares
              
              $
              -
              
              $
              492.0Issuance
                  of common stock in connection with the conversion oflong
                  term debt
              
              $
              818.2
              
              $
              285.2Issuance
                  of common stock for services
              
              $
              15.0
              
              $
              -




**See
        accompanying Notes to Consolidated Financial Statements**


F-6






DIGITAL
      CREATIVE DEVELOPMENT CORPORATION AND


SUBSIDIARIES


**NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **June
        30, 2002 (Audited) and 2001 (Unaudited)**


**1.** **SUMMARY
      OF SIGNIFICANT ACCOUNTING** **POLICIES:**




**PRINCIPLES
      OF CONSOLIDATION**





The
      consolidated financial statements include the accounts of Digital Creative
      Development Corporation and its wholly owned subsidiaries, (collectively the
      "Company").The wholly-owned subsidiary at June 30,2002 is Digital Creative
      Development Company (Delaware); at June 30,2001, wholly owned subsidiaries
      were:
      Keynomics, Inc.; ATI (Delaware); CineBlast!; and Tune In Media, Inc. All
      significant inter-company accounts and transactions have been eliminated in
      consolidation.




The
      financial statements for the year ended June 30, 2001 are being presented as
      unaudited. The audit for the year ended June 30, 2001 has not been completed,
      and the Company believes that it would be extremely difficult with unreasonable
      expense to complete it. The former Chief Executive Officer, two principal
      financial officers and all employees employed by the Company during such period
      are no longer with the Company and obtaining the financial records would be
      extremely difficult. The majority of the Company's financial information for
      the
      2001 fiscal year pertains to the Company's discontinued operations, Arthur
      Treacher's Inc., Keynomics, Inc.; CineBlast!; and Tune In Media, Inc. Since
      the
      disposal of the Company's operating subsidiaries during fiscal 2002, the
      Company's only significant asset has been its investment in International
      MicroComputer Software Inc., a computer software company that is registered
      under the Securities Act of 1933.




**ORGANIZATION**





Digital
      Creative Development Corporation (the "Company" or "Digital") was originally
      founded in 1969 as Arthur Treacher's Fish & Chips,
      Inc., a Delaware corporation. In 1979, Mrs. Paul's, Inc, ("Mrs. Paul's")
      purchased Arthur Treacher’s Fish & Chips,
      Inc. In 1982, Lumara Foods of America, Inc. ("Lumara") acquired the assets
      of
      Arthur Treacher's Fish & Chips,
      Inc. from Mrs. Paul's. Lumara sought bankruptcy protection in 1983. In December
      1983, Arthur Treacher's Inc., an Ohio corporation entered into an agreement
      to
      purchase the assets of Lumara, during Chapter XI bankruptcy proceedings. In
      February 1984, Arthur Treacher's Inc., merged into El Charro, Inc., a Utah
      corporation, which consummated the acquisition of the assets of Lumara and
      changed its name to Arthur Treacher's, Inc. On May 31, 1996, an investor group
      organized by Mr. Bruce Galloway, the former chairman of the board, acquired
      control of the Company. In February 2000, the Company formed a subsidiary,
      Digital Creative Development Corporation, a Delaware corporation ("DCDC
      (Delaware)"), for the purpose of acquiring and investing in entities engaged
      in
      the creation of software and traditional entertainment content. In March 2000,
      Digital formed the subsidiary, Arthur Treacher's, Inc., a Delaware corporation
      ("ATI (Delaware)") to own and operate the restaurant business. In August 2000,
      Digital, a Utah corporation, changed its name from Arthur Treacher's, Inc.
      to
      Digital Creative Development Corporation.





The
      Company owned, operated and franchised quick-service restaurants under the
      names
      "Arthur Treacher's Fish & Chips"
      and "'Pudgie's Famous Chicken". In addition, the Company acquired and made
      investments in traditional entertainment content entities and invested and
      formed joint ventures with Web design, Web consulting and other companies
      that create and transmit digital broadband content.





On
      December 28, 2000, the Company filed Form 1O-SB with
      the
      Securities and Exchange Commission. The purpose of this registration statement
      was the distribution of common stock to separate the restaurant business from
      the Company's entertainment business, in order (i) to allow the restaurant
      business to focus on its core strengths and (ii) to permit customers,
      stockholders and other constituencies to better evaluate the respective
      businesses. The Company and its restaurant subsidiary had entered into a series
      of agreements, contingent on the completion of the distribution, relating to
      the
      distribution and the relationship of the entities thereafter. This registration
      statement was not declared effective and the proposed spin-off did not occur.





F-7




DIGITAL
        CREATIVE DEVELOPMENT CORPORATION AND
 SUBSIDIARIES
  On
        February 28, 2002, the Company sold its 80% interest in ATI (Delaware). (See
        “Discontinued Operations”).





The
      Company currently has no active business. However, the Company is involved
      in
      acquiring and investing in software and high technology companies, with a focus
      on acquiring controlling interests and has entered into the software technology
      industry through the investment of International Microcomputer Software, Inc.
      ("IMSI"). Since 1982, IMSI has been a developer and publisher of productivity
      software in precision design, graphics design and other related business
      applications, as well as graphics and CAD (Computer Aided Design) software
      and
      internet technology.





**IMPAIRMENT
      OF LONG-LIVED ASSETS**





In
      accordance with SFAS No. 144, Accounting for the Impairment or Disposal of
      Long-lived Assets, the Company continually evaluates the fair value of
      long-lived assets for impairment whenever events or changes in circumstances
      indicate that the carrying amount of an asset may not be recoverable. Material
      impairments were determined to have occurred during the year ended June 30,
      2001.




**STOCK-BASED
      COMPENSATION**





Since
      July 1, 2002, the Company has accounted for stock-based compensation in
      accordance with the provisions of SFAS No. 123, "Accounting for Stock-Based
      Compensation," which provided guidance for the recognition of compensation
      expense as it related to the issuance of stock options and warrants. In
      addition, the Company adopted the provisions of SFAS No. 148, "Accounting for
      Stock-Based Compensation - Transition and Disclosure - an amendment of SFAS
      No.
      123." SFAS No. 148 amended SFAS No. 123 to provide alternative methods of
      transition for a voluntary change to the fair value based method of accounting
      for stock-based employee compensation provided by SFAS No. 123.  In
      addition, SFAS No. 148 amended the disclosure requirements of SFAS No. 123
      to
      require prominent disclosures in both annual and interim financial statements
      about the method of accounting for stock-based employee compensation and the
      effect of the method used on reported results. SFAS No. 148 also amended the
      manner by which a company accounts for the transition to the fair value based
      method recommended by SFAS No. 123. As permitted by SFAS No. 148, the Company
      has adopted the fair value method recommended by SFAS No. 123 to effect a change
      in accounting for stock-based employee compensation. Prior to July 1,2002,
      the
      Company accounted for stock-based employee compensation under the recognition
      and measurement provisions of Accounting Principles Board Opinion No. 25,
      "Accounting for Stock Issued to Employees," and related Interpretations.





F-8




DIGITAL
        CREATIVE DEVELOPMENT CORPORATION AND
 SUBSIDIARIES
  **CASH
          AND CASH EQUIVALENTS**
 
 The
          Company considers all short term investments in interest bearing accounts
          ,
          securities and other investments with an original maturity of three months
          or
          less to be a cash equivalent.
 
 **FAIR
          VALUE OF FINANCIAL INSTRUMENTS**
 
 In
          determining the fair value of its financial instruments, the Company uses
          a
          variety of methods and assumptions that are based on market conditions
          and risks
          existing as of each balance sheet date. For the majority of financial
          instruments, including receivables, long-term debt, and stock options and
          warrants, standard market conventions and techniques, such as discounted
          cash
          flow analysis, option pricing models, replacement cost and termination
          cost, are
          used to determine fair value. All methods of assessing fair value result
          in a
          general approximation of value, and such value may never be actually
          realized.




**USE
      OF ESTIMATES**





The
      preparation of financial statements in conformity with generally accepted
      accounting principles in the United States requires management to make estimates
      and assumptions that affect the reported amounts of assets and liabilities,
      the
      disclosure of contingent assets and liabilities, and the reported amounts of
      revenues and expenses during the reporting period. Actual results could differ
      from those estimates. Significant estimates include the allowance for impairment
      of investment assets and the valuation allowance against deferred tax
      assets.


****NEW
      ACCOUNTING
      PRONOUNCEMENTS********





In
      2005,2004, 2003, and 2002 the FASB issued the following new statements and
      interpretations:





Statement
      No. 132 (revised 2003), Employers' Disclosures about Pensions and Other
      Postretirement Benefits--an amendment of FASB Statements No. 87, 88, and
      106.





Statement
      No. 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB
      Statement No. 13, and Technical Corrections





Statement
      No. 146, Accounting for Costs Associated with Exit or Disposal
      Activities.





Statement
      No. 147, Acquisitions of Certain Financial Institutions—an amendment of FASB
      Statements No. 72 and 144 and FASB Interpretation No. 9.





Statement
      No. 148, Accounting of Stock-Based Compensation - Transition and Disclosure,
      an
      amendment of FASB Statement No. 123.





Statement
      No. 149, Amendment of Statement No. 133 on Derivative Instruments and Hedging
      Activities.





Statement
      No. 150, Accounting for Certain Financial Instruments with Characteristic's
      of
      Both Liabilities and Equity.





Statement
      No. 151, Inventory Costs--an amendment of ARB No. 43, Chapter 4.


Statement
        No. 152 Accounting for Real Estate Time-Sharing Transactions.
 
 Statement
        No. 153 Exchanges of Nonmonetary Assets.
  Statement No. 154,Accounting
        Changes and Error Corrections - a replacement of APB Opinion No.20 and FASB
        Statement No. 3.


FASB
      Interpretation ("FIN") No. 45, Guarantor's Accounting and Disclosure
      Requirements for Guarantees, Including Indirect Guarantees of Indebtedness
      of
      Others--an interpretation of FASB Statements No. 5,57, and 107 and rescission
      of
      FASB Interpretation No. 34.





FASB
      Interpretation 46, Consolidation of Variable Interest Entities--an
      interpretation of ARB No. 51.




FASB
      Interpretation 46(R), Consolidation of Variable Interest Entities (revised
      December 2003)--an interpretation of ARB No. 51.


FASB
      Interpretation 47, Accounting for Contingent Asset Retirement Obligations-
      an
      interputation of FASB Statement No 143.




F-9




DIGITAL
        CREATIVE DEVELOPMENT CORPORATION AND
 SUBSIDIARIES




In
      addition, in 2005,2004, 2003, and 2002 the American Institute of Certified
      Public Accountants ("AICPA") issued the following new accounting statements
      of
      position:





Statement
      of Position (SOP) 02-2: Accounting for Derivative Instruments and Hedging
      Activities by Not-for-Profit Health Care Organizations, and Clarification of
      the
      Performance Indicator.





Statement
      of Position (SOP) 03-1: Accounting and Reporting by Insurance Enterprises for
      Certain Nontraditional Long-Duration Contracts and for Separate
      Accounts.





Statement
      of Position (SOP) 03-3: Accounting for Certain Loans or Debt Securities Acquired
      in a Transfer.





Statement
      of Position (SOP) 03-4: Reporting Financial Highlights and Schedule of
      Investments by Nonregistered Investment Partnerships - An Amendment to the
      Audit
      and Accounting Guide "Audits of Investment Companies" and AICPA Statement of
      Position 95-2, "Financial Reporting by Nonpublic Investment
      Partnerships."





Statement
      of Position (SOP) 03-5: Financial Highlights of Separate Accounts - An Amendment
      to the Audit and Accounting Guide "Audits of Investment Companies."




Statement
      of Position (SOP) 04-02: Accounting for Real Estate Time-Sharing
      Transactions.


None
      of
      these pronouncements had or are expected to have a material impact on the
      Company's financial position and results of operations.





**INVESTMENTS**





Investments
      in marketable securities are carried at fair market value and classified as
      available for sale. Investments in non-marketable debt securities are
      carried at cost or fair value as determined by management.




**INCOME
      TAXES**





The
      Company utilizes the asset and liability method of accounting for income taxes.
      Under this method, 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. In addition, the method requires the recognition of future
      tax benefits, such as net operating loss carry forwards, to the extent that
      realization of such benefits is more likely than not. 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. The effect on deferred tax assets and liabilities of
      a
      change in tax rates is recognized in income in the period that includes the
      enactment date.








F-10


DIGITAL
        CREATIVE DEVELOPMENT CORPORATION AND
 SUBSIDIARIES




**PER
      SHARE DATA**





Net
      income or loss per share of common stock is computed based upon the weighted-
      average number of common shares and potential common shares outstanding during
      the year.





**CONCENTRATIONS
      AND CREDIT RISK**





The
      Company maintains cash balances in banks and money market accounts, which,
      at
      times, may exceed the limits of amounts insured by the Federal Deposit Insurance
      Corporation (FDIC); however, because deposits are maintained at high quality
      financial institutions, management does not believe that there is a significant
      risk of loss of uninsured amounts.





**2.
      DISCONTINUED OPERATIONS**


During
      the year ended June 30, 2002, the Company sold ATI (Delaware) and discontinued
      or sold its operating subsidiaries, Keynomics, Inc.; Tune-In Media; and
      CineBlast. Accordingly, the related results of operations and cash flows have
      been reflected as discontinued operations in the accompanying consolidated
      financial statements. For the year ended June 30, 2001, the Company's
      discontinued operations contributed net sales of $12.5 million.





On
      February 28, 2002, the Company sold its 80% interest in ATI (Delaware) to PAT
      Services, Inc. (“PAT Services”) for the consideration of $100, assumption of
      liabilities and a waiver by Mr. Jeff Bernstein ( the then president of ATI
      (Delaware) of his right to convert his shares of ATI (Delaware) into shares
      of
      common stock of the Company under the conversion agreement with the Company,
      ATI
      (Delaware) and Mr. Bernstein executed in connection with the acquisition of
      Pudgie's in October 2000. Contemporaneously with the sale of ATI (Delaware),
      ATI
      (Delaware) transferred certain property rights (including all its trademarks)
      and 100% of the stock of its subsidiaries, Arthur Treacher’s Franchise Systems,
      Inc. and Pudgie's Franchise Corp. to PAT Franchise Systems, Inc. (“PAT
      Franchise”), an entity controlled by Mr. Bernstein, in consideration for the
      assumption of certain liabilities of ATI (Delaware). The two subsidiaries of
      ATI
      (Delaware) are parties to the franchise agreements with the franchisees in
      the
      Arthur Treacher’s and Pudgie's restaurant systems.





In
      conjunction with the sale of ATI (Delaware), the secured promissory note
      executed in December 2000 by the Company, ATI (Delaware) and its subsidiary,
      M.I.E. Hospitality, Inc. (“MIE”) in favor of DCDC (Delaware) was amended and
      restated. The amended promissory note had a principal balance of $1,071,310,
      which equaled the outstanding principal balance and accrued and unpaid interest
      on the original note as of February 28, 2002. PAT Services became a party to
      the
      note and pledged its 80% interest in ATI (Delaware) as collateral to secure
      the
      note. PAT Franchise became a guarantor of the note and provided DCDC (Delaware)
      with a first security interest in the proprietary rights transferred by ATI
      (Delaware) to PAT Franchise and in the franchise agreements to which Arthur
      Treacher’s and Pudgie's are parties. The note was due on December 1, 2004 with
      interest at the rate of 12% per year, with the interest payable monthly
      commencing April 30, 2002. The Company and PAT Services executed interest
      payment waivers for the months of April, May and June 2002.





F-11




DIGITAL
        CREATIVE DEVELOPMENT CORPORATION AND
 SUBSIDIARIES




On
      June
      22, 2002, to meet various working capital needs, the Company sold the amended
      promissory note to KGS Holdings, Ltd for the total consideration of $107,000,
      resulting in a loss of $1 million.





Effective
        October 1, 2001, the Company sold its Keynomics subsidiary to IMSI. The total
        aggregate purchase price of Keynomics was $450,000. The purchase price was
        payable as follows: (i) $50,000 paid at closing; (ii) $150,000 paid in equal
        monthly installments of $25,000 commencing 35 days after closing: (iii) $100,000
        was deemed paid by crediting against the Purchase Price the payments made
        by
        IMSI to the Company in October and November 2001; and (iv) $150,000 was paid
        by
        offsetting amounts the Company owed to Keynomics. Additionally, the sales
        contract included certain provisions for the Company to receive additional
        compensation based upon Keynomics financial results.




On
        July
        30, 2004, IMSI announced the sale of Keynomics, resulting in a termination
        of
        the additional compensation provisions of the sale.




On
      November 5, 2001, after experiencing less than anticipated results from the
      operations of Tune-In Media, the Company entered into a memorandum agreement
      to
      transfer certain assets and liabilities of Tune-In to its management
      team.





In
        December, 2001 the Company entered into an agreement with the principals
        of
        CineBlast! to transfer 100% of the shares of CineBlast to the principals
        for the
        reduction of sums of their various consulting and employment agreements.
        In
        January, 2003 the principals of CineBlast filed an action against the Company
        and DCDC (Delaware) alleging among other things, breach of contract. On July,
        2003 the parties executed a Settlement Agreement and a Stipulation of
        Discontinuance. On
        April
        21, 2005 the Notes Payable related to the CineBlast settlement of $175,000
        became due and payable. And based upon the formula in the settlement agreement
        the total obligation due the principals of CineBlast is $153,600. 
        Management of the Company has negotiated a payout of this obligation under
        which
        the amount of $153,600 will be paid over six months, beginning July 2005,
        without interest, as follows: $15,000 at July 1 and August 1; $30,000 at
        September 1, October 1 and November 1; and $33,600 at December 1.
 
 Additionally,
        in November 2001 the Company discontinued the operations of its affiliate,
        EyeCandy.
 
 The
        resultant gain on the disposal or discontinuance of the aforementioned entities
        totaled $3.7 million.


F-12




DIGITAL
        CREATIVE DEVELOPMENT CORPORATION AND
 SUBSIDIARIES





3.
        NOTES
        RECEIVABLE--Related
        Party
 
 At
        June
        30, 2002 , the
        Company had two notes receivable from IMSI in an amount totaling $ 250,100,
        resulting, primarily, from the termination agreement discussed in Note 2
        and
        also from the sale of Keynomics to that entity.
 
 Notes
        receivable at June 30, 2002 and 2001 are as follows:


2002
            
            2001
                (Unaudited)Note
                receivable from IMSI from termination agreement
            
            $
            200,000
            
            $
            -0-Note
                receivable from IMSI from sale of Keynomics
            
            
            50,100
            
            $
            -0-Total
            
            $
            250,100
            
            $
            -0-





**4.
      INVESTMENTS IN MARKETABLE SECURITIES AND NONMARKETABLE SECURITIES:**





On
      August
      31, 2001, the Company signed a merger agreement (the “Merger Agreement”) with
      IMSI. The Company was to merge into a wholly owned subsidiary of IMSI.
      Shareholders of the Company were to exchange shares of common stock of the
      Company for IMSI common stock constituting approximately 51% of the issued
      and
      outstanding common stock of IMSI. Upon execution of the Merger Agreement, the
      Company purchased a promissory note in the principal amount of $3,580,000 for
      $2,500,000, owed by IMSI to Union Bank of California, which note was to have
      been cancelled upon consummation of the merger.





In
        January 2002, the parties agreed to terminate the merger contemplated by
        the
        Merger Agreement. IMSI also agreed to prepare and file a registration statement
        registering 2,000,000 shares of common stock and to provide the Company with
        piggyback registration rights with respect to the remaining 7,000,000 shares.
        Effective January 31, 2002, certain members of the Boards of Directors of
        the
        Company and IMSI resigned, with no directors serving on the boards of both
        companies.
 
 On
        February 28, 2002, the Company and IMSI entered into an agreement, which
        provided for the conversion of the promissory note purchased by the Company
        into
        9,000,000 shares of common stock of IMSI plus $250,000 in cash to be paid
        in 15
        monthly installments. Based upon the share price of IMSI at February 28,
        2002,
        the date of the exchange of the note for IMSI shares, the Company realized
        a
        gain of $ 1,575,000.
 
 The
        Company had investments and advances in certain marketable and non-marketable
        securities at June 30,2002 and 2001, as follows:


F-13




DIGITAL
      CREATIVE DEVELOPMENT CORPORATION AND


SUBSIDIARIES




**Securities
              not readily marketable,  Nonmarketable Securities and
              Advances**
            
            June
                30,2002
            
            June
                30,2001
              **(Unaudited)**IMSI
            
            $
            3,169,600
            
            $
            -0-MadeMyWay.com,
                Inc.
            
            
            1,200,000
            
            
            1,200,000Interactive
                Pager Media, Inc
            
            
            1,000,000
            
            
            1,000,000Our
                Yearbook Corporation
            
            
            610,000
            
            
            610,000Heavy.com
            
            
            500,000
            
            
            500,000Liquor.com
            
            
            250,000
            
            
            250,000Sub
                total
            
            
            6,729,600
            
            
            3,560,000Unrealized
              gain or non-marketable securities
            
            
            2,430,400
            
            
            -Less
                allowance for impairment
            
            
            (3,560,000
            )
            
            (3,560,000
            )Total
            
            $
            5,600,000
            
            $
            -0-**Marketable
                Securities:**IMSI
            
            $
            679,200
            
            $
            -0-Thinking
                Tools, Inc.
            
            
            300,000
            
            
            300,000Unrealized
                gain (loss) on marketable securities
            
            
            232,800
            
            
            (240,000
            )Total
            
            $
            1,212,000
            
            $
            60,000




An
      impairment loss of non-marketable securities has been recorded because
      the
      Company has concluded that recoverability of its investments in such entities
      is
      unlikely and improbable based upon its review of the current financial status
      of
      each entity.




The
      shares of IMSI owned by the Company are "restricted securities" as defined
      in
      Rule 144 under the Securities Act of 1933. Under Rule 144, the Company can
      publicly sell, within any three month period, a number of shares not to exceed
      one percent of IMSI's then outstanding shares of common stock. In the event
      that
      IMSI becomes listed on the NASDAQ or on a national securities exchange, the
      maximum amount that can be sold will be the greater of one percent of the
      outstanding shares and the average weekly trading volume of IMSI's common stock
      for the four weeks preceding the Company's filing of a notice of sale with
      the
      SEC. Since these shares are restricted, the shares which can be sold within
      one
      year are shown as a current asset and the balance of the shares are shown in
      other assets on the balance sheet.




A
      total
      of 400,000 shares of IMSI stock secures the Company's 15% 350,000 Promissory
      Note to Multi Mag Corporation and 747,869 shares of IMSI stock secure the
      $345,000 note to investors. See "Subsequent Events."


**5.
      ACCOUNTS PAYABLE AND ACCRUED EXPENSES**:


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


F-14


DIGITAL
        CREATIVE DEVELOPMENT CORPORATION AND
 SUBSIDIARIES




**6.
      LONG-TERM DEBT
      -Related Parties**




At
      June
      30, 2002 and 2001, the Company’s long term debt consisted of the
      following:




2002
            
            2001
                (Unaudited)Debt
                due to former executive in conjunction with settlement agreements.
                Non-interest bearing at June 30.2002; at June 30,2001 , interest
                rates
                range from 7.75% to 10.6% (See “Settlement With Officer”)
            
            $
            341,200
            
            $
            2,109,600Related
                Party Convertible Notes Payable , bearing interest ranging from 10%
                to 12%
                In July 2001, the Notes were converted into 3,588,920 shares of the
                Company’s common stock.
            
            
            -0-
            
            
            818,100Notes
                payable to certain former executives
            
            
            123,000
            
            
            -0-Total
            
            $
            464,200
            
            $
            2,927,700Less
                : Current portion
            
            
            341,200
            
            
            1,065,600Net
                Long term debt
            
            $
            123,000
            
            $
            1,862,100





The
      Company considers the carrying value of its long-term debt to be a reasonable
      estimation of its ** fair
      value based on the current market rates available to the Company for debt of
      the
      same remaining maturities.


In
        December 2001, Martin Wade, the Company’s former CEO, lent the Company $50,000
        bearing interest at 12%, and due on December 31,2001.As additional consideration
        for the loan, Mr. Wade was issued warrants to purchase 500,000 shares of
        common
        stock of the Company at $0.01 per share, which was valued at $53,900 and
        included as interest expense. On July 1, 2005, the maturity date of this
        loan
        was extended to December 31, 2005.
 
 In
        November 2001, Mr. Bernstein, the former President of the Company's Restaurant
        Division advanced the Company $50,000 bearing interest at 12%.  The
        Company
        made periodic payments on this debt, totaling approximately $ 21,500 leaving
        approximately $28,500.  In May 2004, Gary Herman and Bruce Galloway
        satisfied the remaining obligation to Mr. Bernstein on behalf of the Company
        .
        Mr. Herman and Mr. Galloway have equally assumed the balance of the note
        and the
        Company and Messrs. Galloway and Herman are negotiating to extend the note.
        The
        Company's management is confident that such extension can be
        obtained.
  Throughout
        the period from July 1, 2001 through June 20, 2004, Mr. Bruce Galloway, the
        Company's former Chairman had advanced the monies at !2% to allow the Company
        to
        satisfy operating expenses. The amount outstanding to Mr. Galloway totalled
        $25,000 on June 30, 2002.


Related
        interest expense approximated $53,500 and $85,800 for the years ended June
        30,
        2002 and 2001, respectively.
 **7.
        INCOME TAXES:**





For
      the
      years ended June 30, 2002 and 2001, a reconciliation of income taxes computed
      at
      the United States federal statutory income tax rate to the provision for income
      taxes reflected in the Statements of Operations is presented below:






F-15


DIGITAL
        CREATIVE DEVELOPMENT CORPORATION AND
 SUBSIDIARIES


**2002**
            
            **2001**
              **(Unaudited)**Federal
                statutory rate
            
            
            34
            %
            
            34
            %Valuation
                allowance on net operating loss carryforwards, and investment
                write-downs
            
            
            -34
            %
            
            -34
            %Effective
                income tax rate
            
            
            0
            %
            
            0
            %






Deferred
      income taxes reflect the net tax effect of temporary differences between the
      carrying amounts of assets and liabilities for financial reporting purposes
      and
      the amounts used for income tax purposes. Deferred tax assets result primarily
      from net operating loss carry-forwards. The components of the Company’s deferred
      tax assets and liabilities at June 30, 2002 and 2001 are as
      follows:




**2002**
            
            **2001****Deferred
                tax assets:**Operating
                loss carryforwards
            
            $
            2,085,000
            
            $
            11,135,000Reserve
                accounts
            
            
            -
            
            
            37,000Write-down
                of investments
            
            
            1,424,000
            
            
            1,567,000Total
                Deferred Tax Asset
            
            
            3,509,000
            
            
            12,739,000Valuation
                Allowance
            
            
            (3,509,000
            )
            
            (12,739,000
            )$
            -
            
            $
            -




A
      full
      valuation allowance is provided against all deferred tax assets due to the
      uncertainty as to their future realization.




Deferred
      taxes were not provided on accumulated other comprehensive income as management
      expects that the NOL will be sufficient to offset future
      gains.




As
      of
      June 30, 2002, the Company has federal net operating loss carry forwards
      totaling approximately $5,212,000 available to offset future federal taxable
      income. The federal net operating loss carry-forwards expire in varying amounts
      through 2022.




The
      Company is in the process of filing its tax returns for the current and all
      applicable prior years.







F-16


DIGITAL
        CREATIVE DEVELOPMENT CORPORATION AND
 SUBSIDIARIES


**8
      - PER SHARE INFORMATION:**




In
        accordance with SFAS No. 128, "Earnings Per Share", basic net income (loss)
        per
        common share ("Basic EPS") is computed by dividing the net income (loss)
        attributable to common shareholders by the weighted-average number of common
        shares outstanding. Diluted net income (loss) per common share ("Diluted
        EPS")
        is computed by dividing the net income (loss) attributable to common
        shareholders by the weighted-average number of common shares and dilutive
        common
        share equivalents on convertible securities, options, and warrants then
        outstanding. SFAS No. 128 requires the presentation of both Basic EPS and
        Diluted EPS on the face of the Company's Consolidated Statements of Operations.
        There were 11,918,732 and 13,452,123 stock options and warrants excluded
        from
        the computation of Diluted EPS for the years ended June 30,2002 and 2001
        ,respectively, as their effect on the computation of Diluted EPS would have
        been
        anti-dilutive. Convertible Preferred Stock outstanding were not "assumed
        converted" for the 2001 year as the effect on the computation of Diluted
        EPS
        would also have been anti-dilutive.


The
      following table sets forth the computation of basic and diluted per share
      information:




June
                  30,2002
              
              2001
                  (unaudited)(in
                  thousands)**Numerator:***Basic
                  and Diluted:*Income
                  (loss) attributable to common shareholders
              
              $
              163.3
              
              
              ($6,878.8)
              )Income
                  (loss) from discontinued operations
              
              
              3,730.7
              
              
              (13,616.1
              )Net
                  income (loss) attributable to common shareholders
              
              $
              3,894.0
              
              
              ($20,494.9
              )**Denominator:**Weighted
                  average common shares outstanding
              
              
              38,965.5
              
              
              22,607.4Dilutive
                  effect of stock options and warrants
              
              
              2,219.0
              
              
              -----Weighted
                  average common shares outstanding, assuming dilution
              
              
              41,184.5
              
              
              22,607.4**Basic
                  Per Share Information:**Income
                  (loss) from continuing operations
              
              $
              ---
              
              
              ($.31
              )Income
                  (loss) from discontinued operations
              
              $
              .10
              
              
              ($.60
              )Net
                  income (loss)
              
              $
              .10
              
              
              ($.91
              )
 
 **Diluted
                  Per Share Information**Income
                  (loss) from continuing operations
              
              $
              ---
              
              
              ($.31
              )Income
                  (loss) from discontinued operations
              
              $
              .09
              
              
              ($.60
              )Net
                  income (loss)
              
              $
              .09
              
              
              ($.91
              )







F-17




DIGITAL
        CREATIVE DEVELOPMENT CORPORATION AND
 SUBSIDIARIES




**9.
      STOCK OPTIONS** **AND
      STOCK** **WARRANTS**




During 2002
        and
        2001, the Company granted 3,050,000 and 3,200,000 nonqualified stock options
        and
        warrants, respectively, at an exercise prices of $0.01 per share,
        to lenders in conjunction with the issuance of debt by the
        Company. The
        2002 warrants were valued at $325,000 and were charged to expense in that
        year.
 
 These
        options were granted as compensation and the number of options granted was
        determined based on specific individual circumstances. The shares issuable
        under
        these option grants are nonregistered shares and the Company has no requirement
        to register such shares.
 
 In
        November 2000, the Company adopted a Stock Purchase and Option Plan (the
        "Plan")
        that permits the issuance of options to selected employees and directors
        of, and
        consultants to, the Company. The Plan reserves 15,000,000 shares of Common
        Stock
        for issuance underlying the grants of stock options and warrants. Options
        general1y become exercisable over vesting periods of up to three years and
        expire five years from the date of grant.




F-18


DIGITAL
        CREATIVE DEVELOPMENT CORPORATION AND
 SUBSIDIARIES (formerly
        Arthur Treacher's, Inc.)





A
      summary
      of the options and warrants issued under the Plan is presented in the table
      below:




Options
              
              Weighted
                  Average Exercise Price
              
              Warrants
              
              Weighted
                  Average Exercise PriceOutstanding
                  , June 30,2000(unaudited)
              
              
              8,947,268
              
              $
              .
                  90
              
              
              2,874,893
              
              $
              .81Expired
              
              
              (1,510,038
              )
              $
              .96
              
              
              -------
              
              
              ------Excersised
              
              
              (
                  60,000
              )
              $
              .44
              
              
              --------
              
              
              ------
 
 Issuances
              
              
              3,200,000
              
              $
              .44
              
              
              --------
              
              
              ----------Outstanding
                  , June 30,2001(unaudited)
              
              
              10,577,230
              
              $
              .
                  45
              
              
              2,874,893
              
              $
              .
                  81Expired
              
              
              (2,632,000
              )
              $
              .33
              
              
              (721,391
              )
              $
              2.01




Excersised
              
              
              (1,230,000
              )
              $
              .
                  01
              
              
              -------
              
              
              ------Issued
              
              
              2,550,000
              
              $
              .
                  01
              
              
              500,000
              
              $
              .
                  01Outstanding
                  , June 30,2002
              
              
              9,265,230
              
              $
              .
                  42
              
              
              2,653,502
              
              $
              .
                  33







Stock-based
      compensation cost of approximately $275,000 is reflected in the accompanying
      Statement of Operations for the year ended June 30,2002. Prior to July 1,2002,
      the Company accounted for stock-based employee compensation under the
      recognition and measurement provisions of Accounting Principles Board Opinion
      No. 25, "Accounting for Stock Issued to Employees," and related Interpretations.
      Had the Company elected to recognize compensation cost based on the fair value
      of the options granted at the grant date as prescribed by SFAS No. 123, the
      Company's net loss and net loss per share amount for the year ended June 30,
      2001 would have been as follows:






Net
                  loss:As
                  reported
              
              $
              (
                  20,494,900
              )Pro
                  forma
              
              $
              (
                  20,636,000
              )







Certain
      options granted to key employees were granted at option prices below market
      price. In accordance with APB Opinion No. 25, compensation expense has been
      recorded based on the difference between the option price and the market price
      on the date of the option. The total amount of such compensation for 2001 was
      approximately $1,549,000 . Stock-based compensation cost of approximately
      $275,000 is reflected in the accompanying Statement of Operations for the year
      ended June 30,2002.




F-19




DIGITAL
        CREATIVE DEVELOPMENT CORPORATION AND
 SUBSIDIARIES




All
      of
      the options exercised in the 2002 period were exercised by the principals of
      a
      discontinued subsidiary , CineBlast!. The warrants of 500,000 were issued to
      Martin Wade, the Company’s former CEO, in consideration for his $ 50,000 loan to
      the Company (See Long Term Debt). Current officers and directors received
      1,000,000 of the 2,550,000 options issued during the 2002 period.





At
      June
      30,2002, current officers and directors were the beneficial owners of 520,000
      options.




**10.
      COMMITMENTS AND CONTINGENCIES**




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




**11.
      STOCKHOLDERS' EQUITY**




DCDC
      (Delaware) (the”Subsidiary”) was formed in February 2000. Approximately
      12,000,000 common shares or approximately 45% of the outstanding common stock
      of
      the Subsidiary were sold to third parties. Under the terms of the stock sale,
      the Subsidiary's common stock may be converted into the Company's stock, in
      whole or in part, at any time, at the option of the holder. The Company may
      elect at any time to convert the Subsidiary's common stock into the Company’s
      common stock provided that, certain conditions related to market listing and
      reporting are met. Effective January 25, 2001 *,* the
      Company notified holders of common shares of the Subsidiary that it was
      converting 11,869,957 shares of common stock outstanding into shares of the
      Company's common stock on a one-for-one basis.




In
      November and December 1997, the Company consummated a private placement to
      investors with respect to equity units consisting of shares of its Series C
      Preferred Stock, with warrants to purchase shares of common stock attached,
      for
      aggregate proceeds of $990,000, On November 25, 1997, the Company sold 8,100
      shares of Series C Preferred Stock, with warrants to purchase 121,500 shares
      of
      common stock attached. On December 23, 1997, the Company sold 1,800 shares
      of
      Series C Preferred Stock, with warrants to purchase 27,000 shares of common
      stock attached. The Company allocated approximately $137,000 of
      the
      proceeds to the value of the warrants and approximately $853,000 to the value
      of
      the preferred stock. The preferred stock is not convertible, but may be redeemed
      at the option of the Company at a redemption price of $100 per
      share
      plus accrued and unpaid dividends, at any time after October 31, 1999. The
      holders of the preferred stock are entitled to a cumulative dividend of 10% per
      annum, payable semiannually, if and
      when
      the board declares a dividend. At June 30, 2002 and 2001, the Company had
      accumulated and unpaid dividends of approximately $286,000 and $201,000,
      respectively, on this series of preferred stock. The warrants entitle the holder
      to purchase one share of common stock at an exercise price of $3.125 per share
      of common stock. The Company utilized the proceeds for working capital needs.






F-20




DIGITAL
          CREATIVE DEVELOPMENT CORPORATION AND
 SUBSIDIARIES




The
      holders of the Series A Preferred Stock are entitled to a cumulative dividend
      of $0.1 0
      per
      share per annum. Such dividends accrue annually but are payable if and when
      the
      Company declares a dividend. The Company has not paid any dividends with respect
      to the Series A Preferred Stock. The 2,200 outstanding shares of Series A
      Preferred Stock are convertible into 3,300 shares of Common Stock for no
      additional consideration at the option of the holder of the stock. The Series
      A
      Preferred Stock is entitled to a liquidation preference of $1.00 per
      share, plus any accrued and unpaid dividends. The Series A Preferred Stock
      may
      be redeemed by the Company at a redemption price of $1. 00
      per
      share plus all accrued and unpaid dividends. The amount of accumulated and
      unpaid dividends was approximately $ 24,200 and $24,000 for the years ended
      June
      30, 2002 and 2001, respectively.




The
        holders of the Series D Preferred Stock are entitled to a cumulative dividend
        of 15%
        per share
        per annum. Such dividends accrue annually but are payable if and when the
        Company declares a dividend. The Company has not paid any dividend with respect
        to the Series D Preferred Stock. The 4,000 outstanding shares of Series D
        Preferred Stock arc convertible into 400,000 shares of Common Stock for no
        additional consideration at the option of the holder of the stock The amount
        of
        accumulated and unpaid dividends was approximately $ 225,000 and $
        165 ,000
        at
        June 30, 2002 and 2001, respectively.
  For
        the
        years ended June 30, 2002 and 2001, the Company issued the following common
        shares:






June
                30,2002
            
            June
                30,2001(unaudited)Issuance
                of common stock for acquisition
            
            
            
            
            
            2,250,000Exercise
                of stock warrants
            
            
            
            
            
            60,000Conversion
                of Preferred B Shares
            
            
            
            
            
            770,000Issuance
                of common stock to acquire minority interest
            
            
            
            
            
            11,880,000Conversion
                of long term debt
            
            
            3,590,000
            
            
            1,040,000Issuance
                of common stock for services
            
            
            100,000
            
            
            40,000Exercise
                of common stock options
            
            
            1,230,000Sale
                of common stock
            
            
            6,970,000Total
            
            
            11,890,000
            
            
            16,040,000







F-21




DIGITAL
        CREATIVE DEVELOPMENT CORPORATION AND
 SUBSIDIARIES


**12
      SETTLEMENT WITH OFFICER**





On
      or
      about May 9, 2001, Ralph Sorrentino, the former President and Chief Executive
      Officer of the Company commenced an action, RJS
      Consulting Corp. and Ralph J. Sorrentino v. Digital Creative Development
      Corporation, et. al. The
      Demand for Arbitration alleged that the Executive Consulting Agreement between
      the Company and RJS Consulting Corp. was terminated without cause and that
      Mr.
      Sorrentino had “good reason” to terminate the agreement. The Demand for
      Arbitration sought monetary damages in an amount not less than $5,000,000
      arising out of the alleged breach of the Executive Consulting Agreement and
      compensatory and punitive damages in an amount to be proved at the arbitration
      arising out of the alleged defamation of Mr. Sorrentino by agents of the
      Company.





The
      Company, DCDC (Delaware), RJS Consulting Corp. and Mr. Sorrentino executed
      a
      Memorandum of Agreement on October 30, 2001. Pursuant to the Memorandum, the
      Company agreed to buy out Mr. Sorrentino’s interest under the Executive
      Consulting Agreement and related documents and Mr. Sorrentino agreed to
      surrender all of his options to purchase common stock of the Company, including
      the option for 5,000,000 shares of common stock issued in connection with the
      Executive Consulting Agreement. Under the Memorandum, the Company agreed to
      pay
      Mr. Sorrentino $270,000 and to assume an aggregate of $1,669,600 in indebtedness
      from Mr. Sorrentino, including two mortgages in favor of Wells Fargo for an
      aggregate of $570,600, a mortgage in favor of Fleet Mortgage Group in the
      principal amount of $1,000,000 and lease in favor of Chase Automotive Finance
      in
      the principal amount of $99,792. Such payments were to be made over a period
      of
      fifteen (15) years in monthly installments, except for Chase Automotive Finance,
      which was for a period of two (2) years. Upon satisfaction of the obligation
      to
      Chase Automotive Finance, the Company has agreed to pay Mr. Sorrentino an
      aggregate of $4,653 payable in 36 equal monthly installments. The Company agreed
      that upon the consummation of the merger with IMSI, the Company’s obligations to
      Mr. Sorrentino would be secured by the assets of IMSI, such security interest
      to
      be subordinated to existing secured bank debt and certain other creditors who
      had previously agreed to restructure their indebtedness in order to facilitate
      the merger with IMSI. This resulted in the Company recording a loss of
      approximately $ 2.5 million as of June 30,2001.





In
      the
      event that the merger with IMSI was not consummated, the Company agreed under
      the Memorandum to enforce its rights under the promissory note, which the
      Company purchased from Union Bank of California in August 2001, and, upon
      foreclosure on the promissory notes, IMSI shall be obligated to make payments
      to
      the Company of $50,000 per month for 60 months, in turn, remitting payment
      to
      Sorrentino.





Subsequently,
      on July 25, 2002, Mr. Sorrentino and RJS Consulting Corp., filed an action
      in
      New York State Supreme Court, New York County (Index # 602399/02) against the
      Company, DCDC (Delaware), various officers and directors, alleging among other
      things, breach of contract and fraud. On February, 2003 the Parties entered
      into
      a settlement agreement and dismissal of the action. The settlement provided
      for
      general mutual releases between the parties, a payment of $300,000 to Mr.
      Sorrentino, plus 500,000 restricted common shares of IMSI stock valued at
      $565,000 for a total fair value of $865,000. The aforementioned resulted in
      a
      gain of $ 933,400.




F-22




DIGITAL
        CREATIVE DEVELOPMENT CORPORATION AND
 SUBSIDIARIES




**13
      SUBSEQUENT EVENTS**





In
      January, 2003 the principals of CineBlast, Raymond DeMarco, Michael Morley
      and
      Gil Holland entered an action in New York State Supreme Court, New York County
      (Index# 100192/03) against the Company and DCDC (Delaware), alleging among
      other
      things, breach of contract and fraud. On March 31, 2003 the parties executed
      a
      Settlement Agreement, which provided for a, Mutual General Release and a
      Stipulation of Discontinuance. In addition, mssrs. DeMarco, Morley and Holland
      each received a payment of $5,000, 80,000 restricted shares of IMSI and a
      promissory note for $58,333.33, with a two year maturity. The terms of the
      Note
      provide that if on the date of maturity, the shares of IMSI transferred to
      mssrs. DeMarco, Morley and Holland are unrestricted and trading above $2.00
      per
      share, the Company shall have no obligation to pay the notes, which shall become
      null and void. If on the date of maturity, the price of IMSI is below
      $2.00/share, the balance of the Note shall be proportionately reduced. (e.g.
      If
      the stock price is $1.90/share on said date, the $175,000 obligation shall
      be
      reduced by $151,000, leaving an obligation of $24,000).




In
        April
        21, 2005 the Notes related to the CineBlast settlement became due and payable,
        since on that date, shares of IMSI did not trade above $2.00/share. 
        Based
        on the above formula in the settlement agreement the total obligation
        due
        the principals of CineBlast is $153,600.  Management of the Company
        has
        negotiated a payout of this obligation under which the amount of $153,600
        will
        be paid over six months, beginning July 2005, without interest, as follows:
        $15,000 at July 1 and August 1; $30,000 at September 1, October 1 and November
        1; and $33,600 at December 1, 2005.
  In
      January 2003, the Company borrowed the sum of $300,000 from its former chairman,
      Bruce Galloway to satisfy certain obligations of the Company. The term of the
      loan was three months with a 12% coupon. In addition, Mr. Galloway received
      a
      warrant to purchase 1,000,000 shares of common stock of the Company with an
      exercise price of $.01/share. Mr. Galloway borrowed the funds from AFC
      Enterprises, Inc. For this, Mr. Galloway received a warrant to purchase
      1,000,000 shares of common stock with an exercise price of $.01/share. In
      addition, his lender, received a warrant to purchase 1,000,000 shares of common
      stock at $.01/share. The loan was repaid in April 2003. Mr. Galloway and AFC
      Enterprises have exercised their respective warrants.


In
      April
      2003 the Company raised $345,000, in the form of secured promissory notes from
      a
      group of investors. The terms of the notes provide for a maturity date of 16
      months from the date of issue with an interest rate of 10%. In addition, each
      $60,000 unit was issued a warrant to purchase 1,000,000 shares of stock at
      an
      exercise price of $.01/share. Total warrants representing 5,750,000 shares
      were
      exercised at a price of $.01/share. These warrants were valued at $392,500
      and charged to interest expense. The notes were collateralize by
      2,053,571 shares of IMSI stock currently held by the Company. The proceeds
      of
      this offering were used to repay the loan to Mr. Galloway and for the Company’s
      working capital requirements.




In
        addition, the holders of promissory
        notes exercised 4,750,000 warrants associated with their
        notes.
        Total warrants representing 5,750,000 shares were available to be exercised
        at a price of $.01/share. The number of shares of IMSI Common Stock pledged
        as collateral for the Company’s obligation to pay $345,000 in principal amount
        of promissory notes, bearing interest at the rate of 10 % per annum, shall
        be
        subject to adjustment one year after the initial closing date of the issuance
        of
        the promissory notes based on the 30-day trailing average of the bid prices
        of
        shares of Common Stock of IMSI as listed on the OTC Bulletin Board or such
        other
        exchange as
        such
        shares are then listed upon. As such, the number of shares that are subject
        to the pledge agreement as of June, 2004 are 747,869 shares .
  In
        the
        Fall of 2004, all but two of the note holders granted extensions to the Company
        through December 31, 2005 with respect to the notes due in August, 2004.
        The
        principal amount of the notes subject to such extension is $225,000. The
        Company
        is attempting to negotiate  an
        extension of the maturity dates with the
        two remaining note holders, holding promissory notes in the aggregate principal
        amount of $120,000 .
        The
        Company's management is confident that such extensions can be obtained,
        but  there
        can
        be no assurances that this will occur.
 
 On
        September 10, 2003 the Company extended a bridge loan to Access Propeller,
        LLC
        ("Access") in the sum of $300,000. This loan is secured against all the assets
        of Access. Access owns 81% of Jippii (USA), n/k/a as DownPlay, Inc. DownPlay
        is
        in the business of providing downloadable mobile entertainment to cell phones
        and wireless devices. The loan bears interest at 10% and matures on February
        4,
        2004. In addition, the loan allows the Company the option to make a further
        investment of $900,000 in the form of preferred stock to acquire a total
        of
        50.1% of the outstanding stock of Access. On October 31, 2003 the Company
        converted its loan to 304,250 shares of Preferred Series A stock. In December
        2003, the Company decided not to make a further investment in Access or its
        subsidiary, DownPlay. As of the date of this filing, the ownership stake
        in
        Access is approximately 13%.




On
        September 18, 2003, the Company entered into a 15% one-year note (the “Note”)
        with IMSI whereby the Company borrowed $350,000. The note is
        due, with
        interest, on September 18, 2004. The note is secured by 400,000 shares of
        IMSI
        stock currently owned by the Company. The agreement provided that
        the
        Company cannot sell any other IMSI common stock, which it holds, with
        the
        exception of private sales of IMSI common stock, until February 15, 2004.
        Concurrent with this note, DCDC repaid the entire principal portion of a
        $50,000
        note, made in favor of IMSI on February 25, 2003. That note, due on February
        25,
        2004 was unsecured and carried a 4% interest rate. The interest payable,
        amounting to $1,712, was paid in June 29, 2004.
 On
          September 18, 2004, the Company and IMSI entered into an amendment to the
          Note.
          The Amendment provides for the extension of the maturity date to May 31,
          2005 as
          well as the payment of accrued interest by October 31, 2004 in the sum
          of
          $52,000. In addition, the Company provided to IMSI as additional collateral,
          its
          ownership stake in Access Propeller, LLC. On October 18 , 2004 the accrued
          interest payment was made to IMSI as well as an additional payment of $25,000
          credited towards a reduction of principal.
 On
        January 5, 2005, IMSI sold and assigned the Note to Multi-Mag
        corporation ("Multi-Mag").On June 5, 2005, the Company and Multi-Mag executed
        Amendment #2 to the promissory note.  This amendment provides that DCDC
        shall pay accrued interest of $38,900 no later than June 30, 2005.
 
 Additionally,
        interest will be paid on the Note from June 18, 2005 through the payment
        date,
        which will be no later than June 30, 2005 at the rate of $135 per day. On
        June
        17., 2005, the Company remitted the interest payment. MULTI-MAG agreed
        to
        extend the due date upon for the principal and the remaining accrued interest
        on
        the note from May 31, 2005 to December 31, 2005.
  On
        September 30, 2004, the Company sold 200,000 shares of IMSI for gross proceeds
        of $200,000. The Company used $77,500 of this amount to pay certain indebtedness
        owed IMSI in the form of accrued interest and a portion of
        principal.
 
 On
        May
        25, 2005, the Company sold 250,000 shares of IMSI for gross proceeds of
        $277,000. The Company used approximately $35,000 of this amount to
        pay
        accrued interest to Multi-Mag and the remainder for general working capital
        purposes.
 In
        June,
        2005, the Company awarded to each of its current directors, Gary Herman and
        Skuli Thorvaldsson, options to purchase 1,250,000 shares of common stock
        at an
        exercise price of $.01 per share and expiring in June 2015. These options,
        awarded for past services to the Company, were valued at approximately $290,000
        and charged to earnings in the fiscal year ended June 30,
        2005.




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