##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 Form 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2010
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from ___________ to _________
 Commission file number 000-50621
 DOLPHIN DIGITAL MEDIA INC.
  Nevada
(State of incorporation)
    
    86-0787790
(I.R.S. employer identification no.)
 
 
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ
 o þ




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DOLPHIN DIGITAL MEDIA INC. AND SUBSIDIARIES
TABLE OF CONTENTS
 PART I  FINANCIAL INFORMATION
    
    
    2ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
    
    
    2ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    
    15ITEM 4. CONTROLS AND PROCEDURES
    
    
    18PART II  OTHER INFORMATION
    
    
    19ITEM 1. LEGAL PROCEEDINGS
    
    
    19ITEM 2. UNREGISTERED SALES OF EQUITY
SECURITIES AND USE OF PROCEEDS
    
    
    20ITEM 3. DEFAULTS UPON SENIOR SECURITIES
    
    
    20ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS
    
    
    20ITEM 5. OTHER INFORMATION
    
    
    20ITEM 6. EXHIBITS
    
    
    20Exhibit 31.1Exhibit 32.1




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ITEM 1. FINANCIAL INFORMATION
 DOLPHIN DIGITAL MEDIA INC AND SUBSIDIARIES
Consolidated Balance Sheets
 September 30,
    
    
    December 31,2010
    
    
    2009(Unaudited)ASSETSCurrentCash
    
    $
    81,006
    
    
    $
    3,218Inventory
    
    
    8,276
    
    
    
    91,860Prepaid Expenses
    
    
    
    
    
    
    211,128Advances
    
    
    170,500
    
    
    
    Other Current assets
    
    
    694
    
    
    
    635Total Current Assets
    
    
    260,476
    
    
    
    306,841Intangible Assets
    
    
    1,994,998
    
    
    
    1,208,268Total Assets
    
    $
    2,255,474
    
    
    $
    1,515,109LIABILITIESCurrentCash overdraft
    
    $
    
    
    
    $
    14,087Accounts payable
    
    
    1,467,298
    
    
    
    1,573,028Other current liabilities
    
    
    360,235
    
    
    
    315,350Deferred licensing  fees
    
    
    275,000
    
    
    
    Loans from related party
    
    
    804,000
    
    
    
    1,079,000Note payable
    
    
    100,000
    
    
    
    Notes payable  Convertible (Net of discount of $21,000 and $84,000,
respectively)
    
    
    279,000
    
    
    
    216,000Total Current Liabilities
    
    
    3,285,533
    
    
    
    3,197,465Long Term LiabilitiesNotes payable convertible (Net of discount of $60,331 and $73,032, respectively)
    
    
    239,669
    
    
    
    230,143Total Liabilities
    
    
    3,525,202
    
    
    
    3,427,608STOCKHOLDERS DEFICITCommon stock, $0.015 par value, 100,000,000 shares
authorized, 64,190,987 and 56,959,454 issued and outstanding as of
September 30, 2010 and December 31 2009
    
    
    962,865
    
    
    
    897,141Preferred stock $0.001 par value, 10,000,000
shares authorized, 500,000 shares issued and outstanding
    
    
    500
    
    
    
    500Additional Paid-In Capital
    
    
    28,185,863
    
    
    
    24,854,441Accumulated Deficit
    
    
    (30,156,891
    )
    
    
    (27,529,526
    )Accumulated Comprehensive loss
    
    
    (262,065
    )
    
    
    (135,055
    )Total Stockholders Deficit
    
    
    (1,269,728
    )
    
    
    (1,912,499
    )Total Liabilities and Stockholders Deficit
    
    $
    2,255,474
    
    
    $
    1,515,109
 
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DOLPHIN DIGITAL MEDIA INC AND SUBSIDIARIES
Unaudited Consolidated Statements of Operations
 For the Three Months Ended
    
    
    For the Nine Months EndedSeptember 30.
    
    
    September 30.2010
    
    
    2009
    
    
    2010
    
    
    2009Revenues
    
    $
    498
    
    
    $
    
    
    
    $
    976
    
    
    $
    Cost of Sales
    
    
    
    
    
    
    
    
    
    
    320
    
    
    
    Gross Profit
    
    
    498
    
    
    
    
    
    
    
    656
    
    
    
    Expenses:General and Administrative
    
    
    222,507
    
    
    
    1,701,461
    
    
    
    794,274
    
    
    
    3,415,503Legal and Professional Fees
    
    
    155,440
    
    
    
    149,832
    
    
    
    716,173
    
    
    
    353,539Depreciation
    
    
    
    
    
    
    8,080
    
    
    
    
    
    
    
    22,691Total Expenses
    
    
    377,947
    
    
    
    1,859,373
    
    
    
    1,510,447
    
    
    
    3,791,733Loss from Operations
    
    $
    (377,449
    )
    
    $
    (1,859,373
    )
    
    
    (1,509,791
    )
    
    $
    (3,791,733
    )Other ExpensesFinance charges
    
    
    
    
    
    
    
    
    
    
    987,649
    
    
    
    Income Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3
    )Interest Expense
    
    
    54,184
    
    
    
    113,327
    
    
    
    129,925
    
    
    
    158,518Total Other Expenses
    
    $
    54,184
    
    
    $
    113,327
    
    
    
    1,117,574
    
    
    
    158,515Net loss from operations
    
    $
    (431,633
    )
    
    $
    (1,972,700
    )
    
    $
    (2,627,365
    )
    
    $
    (3,950,248
    )Foreign Currency Adjustments
    
    $
    (105,143
    )
    
    $
    (5,237
    )
    
    
    (127,010
    )
    
    
    16,130Comprehensive Loss
    
    $
    (536,776
    )
    
    $
    (1,977,937
    )
    
    $
    (2,754,375
    )
    
    $
    (3,934,118
    )Basic and Diluted Loss per Share
    
    $
    (0.01
    )
    
    $
    (0.04
    )
    
    $
    (0.05
    )
    
    $
    (0.08
    )Basic and Diluted Weighted Average Number of Shares Outstanding
during
the Period
    
    
    62,107,736
    
    
    
    53,855,596
    
    
    
    60,786,041
    
    
    
    52,322,109
 
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DOLPHIN DIGITAL MEDIA INC. AND SUBSIDIARIES
 Unaudited Consolidated Statements of Cashflows
 For the Nine Months Ended September 30,2010
    
    
    2009CASH FLOWS FROM OPERATING ACTIVITIES:Net loss
    
    $
    (2,627,365
    )
    
    $
    (3,950,248
    )Adjustments to reconcile net loss to net cash used in
operating activities:Depreciation
    
    
    
    
    
    
    22,691Amortization of debt discount
    
    
    72,526
    
    
    
    66,175Common Stock issued for compensation
    
    
    
    
    
    
    323,591Warrants issued for financing
    
    
    945,614
    
    
    
    Shares Issued  Services Rendered
    
    
    128,500
    
    
    
    994,870Changes in operating assets and liabilities:(Increase) Decrease in prepaid expenses
    
    
    211,128
    
    
    
    (57,127
    )(Increase) Decrease in other current assets
    
    
    (59
    )
    
    
    79(Increase) Decrease in Inventory
    
    
    83,584
    
    
    
    35,550Increase in deferred revenue
    
    
    275,000
    
    
    
    Increase (Decrease) in accounts payable
    
    
    (105,730
    )
    
    
    837,644Increase (Decrease) in other current liabilities
    
    
    44,917
    
    
    
    (10,375
    )Increase (Decrease) in accrued expenses
    
    
    
    
    
    
    (30,940
    )Net Cash Used In Operating Activities
    
    
    (971,885
    )
    
    
    (1,768,090
    )CASH FLOWS FROM INVESTING ACTIVITIES:Purchase of computers
    
    
    
    
    
    
    (5,264
    )Advances
    
    
    (170,500
    )
    
    
    Purchase of intangible assets
    
    
    (786,730
    )
    
    
    (874,068
    )Net Cash Used In Investing Activities
    
    
    (957,230
    )
    
    
    (879,332
    )CASH FLOWS FROM FINANCING ACTIVITIES:Decrease is cash overdraft
    
    
    (14,087
    )
    
    
    Proceeds from convertible notes payable
    
    
    
    
    
    
    300,000Proceeds from notes payable
    
    
    100,000
    
    
    
    Proceeds from sale of common stock
    
    
    1,123,000
    
    
    
    1,510,452Advances from Related Party
    
    
    45,000
    
    
    
    708,819Repayments to Related Party
    
    
    (320,000
    )
    
    
    Proceeds from exercise of warrants
    
    
    1,200,000
    
    
    
    Proceeds from note payable
    
    
    
    
    
    
    300,000Net Cash Provided By Financing Activities
    
    
    2,133,913
    
    
    
    2,819,271Foreign Currency Adjustments
    
    
    (127,010
    )
    
    
    16,131NET INCREASE IN CASH AND CASH EQUIVALENTS
    
    
    77,788
    
    
    
    187,980CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    
    
    3,218
    
    
    
    51,014CASH AND CASH EQUIVALENTS, END OF PERIOD
    
    $
    81,006
    
    
    $
    238,994SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION:Interest paid
    
    $
    
    
    
    $
    95,512Income taxes
    
    $
    
    
    
    
    SUPPLEMENTAL DISCLOSURES OF NON CASH FLOWS
INVESTING AND FINANCING ACTIVITIES:Conversion of accounts payable to equity
    
    $
    
    
    
    $
    994,870
 
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Basis of Presentation and Organization
             Principles of Consolidation
   5




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Use of Estimates
  Reclassification
  Revenue Recognition
   Cash and Cash Equivalents
  Inventories
  Property and Equipment
  Depreciation/AmortizationAsset Category
    
    PeriodFurniture and Fixture
    
    5 YearsComputer equipment
    
    3 YearsLeasehold improvements
    
    5 Years
  6




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Goodwill and Intangible Assets
  Impairment of Long-Lived Assets
  Comprehensive
Income (Loss)
   Foreign Currency Translation
  Loss per share
  Business Segments
  1)
    
    Dolphin Digital Media (USA): The Companys primary
business model is monthly and annual membership fees in
the US for subscription to Dolphinsecure.com.2)
    
    Dolphin Digital Media (Canada): The Companys primary
business model is monthly and annual membership fees in
Canada for subscription to Dolphinsecure.com.
 Fair Value of Financial Instruments
   7




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Concentration of Credit Risk
  Recent Accounting Pronouncements
  Equity (Topic 505)  Accounting for
Distributions to Shareholders with Components of Stock and Casha consensus of the FASB Emerging
Issues Task Force,
 Ownership of a Subsidiarya Scope Clarification, Consolidation.
  8




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Fair Value Measurements and Disclosures
(Topic 820):  Improving Disclosures about Fair Value
Measurements
         September 30,
    
    
    December 31,2010
    
    
    2009Other intangible assets
    
    $
    29,924
    
    
    $
    29,924Dolphin Secure Websites
    
    
    1,965,074
    
    
    
    1,178,344Total
    
    $
    1,994,998
    
    
    $
    1,208,268
  9




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September 30,
    
    
    December 31,2010
    
    
    2009Note Amount
    
    $
    300,000
    
    
    $
    300,000Discount
    
    
    (21,000
    )
    
    
    (84,000
    )Net
    
    $
    279,000
    
    
    $
    216,000
       September 30,
    
    
    December 31,2010
    
    
    2009Note Amount
    
    $
    300,000
    
    
    $
    300,000Discount
    
    
    (60,331
    )
    
    
    (69,857
    )Net
    
    $
    239,669
    
    
    $
    230,143
  10




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a)
    
    650,000 shares of common stock exercisable at $0.72 per share.b)
    
    1,500,000 shares of common stock exercisable at $1.00 per share.c)
    
    1,500,000 shares of common stock exercisable at $2.00 per share.
  
    
    Warrant A for 650,000 shares;
    
    Warrant B for 1,500,000 shares;
    
    Warrant C for 1,500,000 shares; and,
    
    Warrant 4 for 384,615 shares.
     11




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Common stock issued for services
            13




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14




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ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Business Summary
  Our Signature Product
  How Dolphin Secure Works: Fingerprint Log-In
     Dolphin Surf
   Dolphin Groups 
    15




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Pricing & Availability
   Approach to Market
    16




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Dolphin Digital Studios
    Results for the three months ended September 30, 2010 compared to the three months ended
September 30, 2009
       17




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Results for the nine months ended September 30, 2010 compared to the nine months ended
September 30, 2009
       Liquidity and Capital Resources
  
 ITEM 4. CONTROLS AND PROCEDURES
 Evaluation of Controls and Procedures
    18




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Changes in Internal Controls
  Limitations on the Effectiveness of Controls
  
 PART II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
    19




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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
   
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. REMOVED AND RESERVED
  
 ITEM 5. OTHER INFORMATION
  
 ITEM 6. EXHIBITS
 No.31.1
    
    
    Certification of the Principal Executive Officer and
Principal Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 200232.1
    
    
    Certification of the Chief Executive Officer and Principal
Financial Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
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Dolphin Digital Media Inc.By:
    /s/ William ODowd IVName:
    William ODowd IV 
Chief Executive Officer  21