##### 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 March 31, 2011
 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
    
    86-0787790(State of incorporation)
    
    (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
 PAGEPART I  FINANCIAL INFORMATION
    
    
    2ITEM 1. FINANCIAL INFORMATION
    
    
    2Condensed Consolidated Balance Sheets as of March 31, 2011 (unaudited) and December 31, 2010
    
    
    2Condensed Consolidated Statements of Operations for the three month periods ended March 31, 2011 and March 31, 2010 (unaudited)
    
    
    3Condensed Consolidated Statements of Cash Flows for the three month periods ended March 31, 2011 and March 31, 2010 (unaudited)
    
    
    4Notes to Condensed Consolidated Financial Statements (unaudited)
    
    
    5ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    
    16ITEM 4. CONTROLS AND PROCEDURES
    
    
    28PART II  OTHER INFORMATION
    
    
    29ITEM 1. LEGAL PROCEEDINGS
    
    
    29ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
    
    
    30ITEM 3. DEFAULTS UPON SENIOR SECURITIES
    
    
    30ITEM 4. REMOVED AND RESERVED
    
    
    30ITEM 5. OTHER INFORMATION
    
    
    30ITEM 6. EXHIBITS
    
    
    30Exhibit 31.1Exhibit 32.1




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PART I  FINANCIAL INFORMATION
 
 ITEM 1.
    
    FINANCIAL INFORMATION
 DOLPHIN DIGITAL MEDIA INC AND SUBSIDIARIES
 
 Condensed Consolidated Balance Sheets
 March 31,
    
    
    December 31,2011
    
    
    2010(Unaudited)ASSETSCurrentCash
    
    $
    332,228
    
    
    $
    1,467Inventory
    
    
    8,256
    
    
    
    8,256Other current assets
    
    
    724
    
    
    
    724Total Current Assets
    
    $
    341,208
    
    
    $
    10,447Total Assets
    
    $
    341,208
    
    
    $
    10,447LIABILITIES AND STOCKHOLDERS DEFICITCurrentAccounts payable
    
    $
    1,296,145
    
    
    $
    1,388,395Other current liabilities
    
    
    299,521
    
    
    
    480,599Deferred revenue
    
    
    439,073
    
    
    
    352,823Advances
    
    
    459,000
    
    
    
    Loans from related party
    
    
    1,286,361
    
    
    
    930,145Notes payable  Convertible
    
    
    95,000
    
    
    
    100,000Total Current Liabilities
    
    
    3,875,100
    
    
    
    3,251,962STOCKHOLDERS DEFICITCommon stock, $0.015 par value, 100,000,000 shares
authorized, 64,190,987 and 64,190,987 issued and outstanding as of
March 31, 2011 and December 31, 2010, respectively
    
    
    962,865
    
    
    
    962,750Preferred stock $0.001 par value, 10,000,000
shares authorized, 1,042,753 and 1,042,753 shares issued and
outstanding
as of March 31, 2011 and December 31, 2010, respectively
    
    
    1,043
    
    
    
    1,043Additional Paid-In Capital
    
    
    29,128,041
    
    
    
    29,028,156Accumulated deficit
    
    
    (33,560,606
    )
    
    
    (33,168,229
    )Accumulated comprehensive loss
    
    
    (65,235
    )
    
    
    (65,235
    )Total Stockholders Deficit
    
    
    (3,533,892
    )
    
    
    (3,241,515
    )Total Liabilities and Stockholders Deficit
    
    $
    341,208
    
    
    $
    10,447
   2




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DOLPHIN DIGITAL MEDIA INC AND SUBSIDIARIES
 
 Condensed Consolidated Statement of Operations
 (Unaudited)
 For The Three Months EndedMarch 31,2011
    
    
    2010Revenues
    
    $
    13,750
    
    
    $
    Cost of Sales
    
    
    
    
    
    
    Gross Profit
    
    
    13,750
    
    
    
    Expenses:General and administrative
    
    
    380,288
    
    
    
    586,210Total Expenses
    
    
    380,288
    
    
    
    586,210Loss from Operations
    
    
    (366,538
    )
    
    
    (586,210
    )Other ExpensesFinance charges
    
    
    
    
    
    
    966,649Interest expense
    
    
    25,839
    
    
    
    38,108Total Other Expenses
    
    
    25,839
    
    
    
    1,004,757Net loss
    
    $
    (392,377
    )
    
    $
    (1,590,967
    )Foreign currency adjustments
    
    
    
    
    
    
    266Comprehensive Loss
    
    $
    (392,377
    )
    
    $
    (1,590,701
    )Basic and Diluted Loss per Share
    
    $
    (0.01
    )
    
    $
    (0.03
    )Basic and Diluted Weighted Average
Number of Shares Outstanding during
the Period
    
    
    64,190,987
    
    
    
    59,997,836
   3




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DOLPHIN DIGITAL MEDIA INC. AND SUBSIDIARIES
 
 Condensed Consolidated Statements of Cashflows
 (Unaudited)
 For The Three Months Ended March 31,2011
    
    
    2010CASH FLOWS FROM OPERATING ACTIVITIES:Net loss
    
    $
    (392,377
    )
    
    $
    (1,590,967
    )Adjustments to reconcile net loss to net cash used in
operating activities:Amortization of debt discount
    
    
    
    
    
    
    24,175Common Stock issued for compensation
    
    
    
    
    
    
    72,500Warrants repricing
    
    
    
    
    
    
    945,615Changes in operating assets and liabilities:Decrease in prepaid expenses
    
    
    
    
    
    
    204,065Increase in other current assets
    
    
    
    
    
    
    (59
    )Decrease in Inventory
    
    
    
    
    
    
    3,440Increase in deferred revenue
    
    
    86,250
    
    
    
    Decrease in accounts payable
    
    
    (92,250
    )
    
    
    (81,916
    )Increase in accrued expenses
    
    
    26,138
    
    
    
    49,717Net Cash Used In Operating Activities
    
    
    (372,239
    )
    
    
    (373,430
    )CASH FLOWS FROM INVESTING ACTIVITIES:Payment for intangible assets
    
    
    
    
    
    
    (239,564
    )Net Cash Used In Investing Activities
    
    
    
    
    
    
    (239,564
    )CASH FLOWS FROM FINANCING ACTIVITIES:Decrease in cash overdraft
    
    
    
    
    
    
    (14,087
    )Proceeds from sale of common stock
    
    
    
    
    
    
    685,500Repayment of note payable
    
    
    (5,000
    )
    
    
    Advances from related party
    
    
    174,500
    
    
    
    45,000Repayment to related party
    
    
    (25,500
    )Proceeds from revenue sharing agreements
    
    
    459,000
    
    
    
    Proceeds from reduction in warrant pricing
    
    
    100,000
    
    
    
    200,000Net Cash Provided By Financing Activities
    
    
    703,000
    
    
    
    916,413Foreign Currency Adjustments
    
    
    
    
    
    
    (127,008
    )NET INCREASE IN CASH AND CASH EQUIVALENTS
    
    
    330,761
    
    
    
    176,411CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    
    
    1,467
    
    
    
    3,218CASH AND CASH EQUIVALENTS, END OF PERIOD
    
    $
    332,228
    
    
    $
    179,629SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION:Interest paid
    
    $
    17,534
    
    
    $
    Income taxes
    
    $
    
    
    
    $
    SUPPLEMENTAL DISCLOSURES OF NON CASH FLOWS
INVESTING AND FINANCING ACTIVITIES:Conversion of accrued interest to note payable
    
    $
    207,216
    
    
    $
    
   4




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Basis of Presentation and Organization
            5




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Principles of Consolidation
  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 Other Intangibles
  Long-Lived Assets
  Comprehensive Income (Loss)
  Foreign Currency Translation
  Loss per share
  Business Operations
  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 Studios as a new division of the Company.
Dolphin Digital Studios will create original programming
that premieres online, with an initial focus on content
geared toward tweens and teens. Dolphin Digital Studios
received $359,000 through an Equity Finance Agreement for
productions costs of web series.
  7




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Fair Value of Financial Instruments
           Concentrations of Credit Risk
  Advertising
   8




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Recent Accounting Pronouncements
     Improving Disclosures about Fair Value
Measurements
 Accounting and Reporting for Decreases in
Ownership of a Subsidiarya Scope Clarification
  Multiple
Deliverable Revenue Arrangements  A Consensus of the FASB Emerging Issues Task Force.
 Software Revenue Recognition.
  9




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March 31,
    
    
    December 31,2011
    
    
    2010Note Amount
    
    $
    100,000
    
    
    $
    600,000Repayments
    
    
    (5,000
    )
    
    
    Conversion to preferred stock
    
    
    
    
    
    
    (500,000)
    )Balance
    
    $
    95,000
    
    
    $
    100,000
    10




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Common stock issued for services
      Warrants
 th
 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.
   12




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1 2
  13




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Warrants OutstandingWeighted AverageNumber
    
    
    Remaining ContractualExercise Prices
    
    
    Outstanding
    
    
    Life (Years)$
    .0001
    
    
    
    231,000
    
    
    
    1.75.0214
    
    
    
    7,000,000
    
    
    
    1.75.80
    
    
    
    1,461,794
    
    
    
    1.30$
    1.00
    
    
    
    1,921,213
    
    
    
    1.8510,614,007
    
    
    
    1.66
  WeightedAverageShares
    
    
    Exercise PriceOutstanding at December 31, 2009
    
    
    6,824,145
    
    
    $
    1.11Granted
    
    
    7,824,477
    
    
    
    .14Exercised
    
    
    
    
    
    
    Expired or cancelled
    
    
    (4,034,615
    )
    
    
    (1.31
    )Outstanding at December 31, 2010
    
    
    10,614,007
    
    
    $
    .31Granted
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Expired or cancelled
    
    
    
    
    
    
    Outstanding at March 31, 2011
    
    
    10,614,007
    
    
    $
    .31
       14




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ITEM 2.
    
    MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Special Note Regarding Forward Looking Statements
   Business Summary
  Dolphin Secure
  Safer Surfing with Dolphin Secure
  Safer Chat with Dolphin Secure
  
    
    Everyone within the Dolphin Surf social network.
    
    Only children of a specific gender.
  16




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
    
    Only other children within a specific age range chosen by the parent.
    
    Only a select group of hand-picked friends.
    
    No one at all.
  How Dolphin Secure Works: Fingerprint Log-In
     Dolphin Surf
     17




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Dolphin Groups
        The Need for Dolphin Secure
 reactive
  18




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proactive
 Pricing & Availability
   Target Market
  
    
    In Canada, there are 3.71 million girls and boys aged 5-15. This
represents 11.19% of the Canadian population.
    
    In the United States, there are 40.13 million girls aged 5-15. This
represents 13.21% of the US population.
 International Expansion  Germany
    Dolphin Digital Studios
    19




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Warner Bros. Digital Distribution Partnership
 Zoey 101
 H+: The
Series X-Men Superman Returns The Usual Suspects House Aim High Charlies Angels Terminator: Salvation Chuck Supernatural
 H+: The Series
 H+
  H+ House Gilmore
Girls Sorority Row Yucatan H+
  20




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Aim High
 Aim High
  Aim High Wizards of Waverly Place Living with Abandon / Scary Godmother Living
with Abandon Hotel for Dogs/
Diary of a Wimpy Kid Yucatan
 Twilight Friday Night Lights
 Aim High Lost Megadrive Highlander Thats So Raven Ally McBeal
 Management Expertise
  Zoey 101 Neds Declassified School
Survival Guide
  Results for the three months ended March 31, 2011 compared to the three months ended March 31,
2010
   21




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Liquidity and Capital Resources
       22




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Critical Accounting Policies
 Principles of Consolidation
  Use of Estimates
  Reclassification
  Revenue Recognition
   Cash and Cash Equivalents
  Inventories
   23




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Property and Equipment
  Depreciation/AmortizationAsset Category
    
    PeriodFurniture and Fixture
    
    5 YearsComputer equipment
    
    3 YearsLeasehold improvements
    
    5 Years
 Goodwill and Other Intangibles
  Long-Lived Assets
  Comprehensive Income (Loss)
  Foreign Currency Translation
   24




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Loss per share
  Business Operations
  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 Studios as a new division of the Company. Dolphin
Digital Studios will create original programming that premieres
online, with an initial focus on content geared toward tweens and
teens. Dolphin Digital Studios received $359,000 through an Equity
Finance Agreement for productions costs of web series.
  Fair Value of Financial Instruments
       25




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Concentrations of Credit Risk
  Advertising
  Recent Accounting Pronouncements
      26




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Improving Disclosures about Fair Value
Measurements
 Accounting and Reporting for Decreases in
Ownership of a Subsidiarya Scope Clarification
  Multiple
Deliverable Revenue Arrangements  A Consensus of the FASB Emerging Issues Task Force.
 Software Revenue Recognition.
  Off-Balance Sheet Arrangements
   27




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ITEM 4.
    
    CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Controls
  Limitations on Effectiveness of Controls and Procedures
   28




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PART II  OTHER INFORMATION
 
 ITEM 1.
    
    LEGAL PROCEEDINGS
    29




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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 Principal Executive Officer and
Principal Financial Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
  30




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Dolphin Digital Media Inc.By:
    /s/ William ODowd IVName:
    William ODowd IVChief Executive Officer  31