##### 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 June 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
    
    
    1ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
    
    
    1ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    
    12ITEM 4. CONTROLS AND PROCEDURES
    
    
    15PART II  OTHER INFORMATION
    
    
    16ITEM 1. LEGAL PROCEEDINGS
    
    
    16ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND
USE OF PROCEEDS
    
    
    17ITEM 3. DEFAULTS UPON SENIOR SECURITIES
    
    
    17ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
    
    
    17ITEM 5. OTHER INFORMATION
    
    
    17ITEM 6. EXHIBITS
    
    
    17Exhibit 31.1Exhibit 32.1




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ITEM 1. FINANCIAL INFORMATION
 DOLPHIN DIGITAL MEDIA INC AND SUBSIDIARIES
Consolidated Balance Sheets
 June 30,
    
    
    December 31,2010
    
    
    2009(Audited)ASSETSCurrentCash
    
    $
    796
    
    
    $
    3,218Inventory
    
    
    88,276
    
    
    
    91,860Prepaid Expenses
    
    
    9,295
    
    
    
    211,128Advances
    
    
    57,000
    
    
    
    Other Current assets
    
    
    694
    
    
    
    635Total Current Assets
    
    
    156,061
    
    
    
    306,841Intangible Assets
    
    
    1,757,161
    
    
    
    1,208,268Total Assets
    
    $
    1,913,222
    
    
    $
    1,515,109LIABILITIESCurrentCash overdraft
    
    $
    22,597
    
    
    $
    14,087Accounts payable
    
    
    1,785,719
    
    
    
    1,573,028Other current liabilities
    
    
    368,472
    
    
    
    315,350Advances from Related Parties
    
    
    904,000
    
    
    
    1,079,000Notes payable (Net of discount of $42,000 and $84,000, respectively
    
    
    258,000
    
    
    
    216,000Total Current Liabilities
    
    
    3,338,788
    
    
    
    3,197,465Long Term LiabilitiesNotes payable convertible (Net of discount of $63,506 and $73,032,
respectively
    
    
    236,494
    
    
    
    230,143Total Liabilities
    
    
    3,575,282
    
    
    
    3,427,608STOCKHOLDERS DEFICITCommon Share Capital, $0.015 par value, 100,000,000 shares
authorized, 61,223,411 issued and outstanding as of June 30, 2010
and 56,959,454 issued and outstanding as of December 31 2009
    
    
    937,246
    
    
    
    897,141Preferred Share Capital $0.001 par value, 10,000,000
shares authorized, 500,000 shares issued and outstanding
    
    
    500
    
    
    
    500Additional Paid-In Capital
    
    
    27,386,451
    
    
    
    24,854,441Accumulated Deficit
    
    
    (29,724,192
    )
    
    
    (27,529,526
    )Comprehensive Loss / Income
    
    
    (262,065
    )
    
    
    (135,055
    )Total Stockholders Deficit
    
    
    (1,662,060
    )
    
    
    (1,912,499
    )Total Liabilities and Stockholders Deficit
    
    $
    1,913,222
    
    
    $
    1,515,109
   1




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DOLPHIN DIGITAL MEDIA INC AND SUBSIDIARIES
Consolidated Income Statements
For the three and six Months Ended June 30, 2010 and 2009
 For the Three Months Ended
    
    
    For the Six Months EndedJune 30,
    
    

June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Revenues
    
    $
    222
    
    
    $
    
    
    
    $
    478
    
    
    $
    Cost of Sales
    
    
    80
    
    
    
    
    
    
    
    320
    
    
    
    Gross Profit
    
    
    142
    
    
    
    
    
    
    
    158
    
    
    
    Expenditures:General and Administrative
    
    
    200,860
    
    
    
    602,060
    
    
    
    571,084
    
    
    
    1,714,042Legal and Professional Fees
    
    
    344,731
    
    
    
    60,349
    
    
    
    560,733
    
    
    
    203,707Depreciation
    
    
    
    
    
    
    7,531
    
    
    
    
    
    
    
    14,611Total Expense
    
    
    545,591
    
    
    
    669,940
    
    
    
    1,131,817
    
    
    
    1,932,360Loss from Operations
    
    
    (545,449
    )
    
    
    (669,940
    )
    
    
    (1,131,659
    )
    
    
    (1,932,360
    )Other ExpensesFinance charges
    
    
    21,000
    
    
    
    
    
    
    
    987,649
    
    
    
    Income (Income)
    
    
    
    
    
    
    (3
    )
    
    
    
    
    
    
    (3
    )Interest Expense
    
    
    37,633
    
    
    
    22,937
    
    
    
    75,741
    
    
    
    45,191Total Other Expenses
    
    
    58,633
    
    
    
    22,934
    
    
    
    1,063,390
    
    
    
    45,188Net (Loss) / Profit from operations
    
    
    (604,082
    )
    
    
    (692,874
    )
    
    
    (2,195,049
    )
    
    
    (1,977,548
    )Foreign Currency Adjustments
    
    
    (21,601
    )
    
    
    11,103
    
    
    
    266
    
    
    
    21,867Comprehensive (Loss) / Profit
    
    $
    (625,683
    )
    
    $
    (681,771
    )
    
    $
    (2,194,783
    )
    
    $
    (1,955,681
    )Basic and Diluted Loss per Share
    
    $
    (0.01
    )
    
    $
    (0.01
    )
    
    $
    (0.04
    )
    
    $
    (0.04
    )Basic and Diluted Weighted AverageNumber of Shares Outstanding during
the Period
    
    
    61,076,413
    
    
    
    51,412,261
    
    
    
    60,540,104
    
    
    
    52,942,556
   2




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DOLPHIN DIGITAL MEDIA INC. AND SUBSIDIARIES
Consolidated Statements of Cash flows
For the Six Months Ended June 30, 2010 and 2009
 For the Six Months Ended June 30,2010
    
    
    2009CASH FLOWS FROM OPERATING ACTIVITIES:Net loss
    
    $
    (2,195,049
    )
    
    $
    (1,977,548
    )Adjustments to reconcile net loss to net cash used in
operating activities:Depreciation
    
    
    
    
    
    
    14,611Amortization of debt discount
    
    
    48,351Common Stock issued for compensation
    
    
    
    
    
    
    370,000Warrants issued for financing
    
    
    945,614Shares Issued  Services Rendered
    
    
    128,500
    
    
    
    Changes in operating assets and liabilities:Increase / (Decrease) in prepaid expenses
    
    
    201,832
    
    
    
    69Increase / (Decrease) in other current assets
    
    
    (59
    )
    
    
    79Increase / (Decrease) in Inventory
    
    
    3,584
    
    
    
    (2,557
    )Increase / (Decrease) in accounts payable
    
    
    213,076
    
    
    
    638,115Increase / (Decrease) in other current liabilities
    
    
    53,122
    
    
    
    (34,065
    )Increase / (Decrease) in accrued expenses
    
    
    
    
    
    
    7,651Net Cash (Used In) Operating Activities
    
    
    (601,029
    )
    
    
    (983,645
    )CASH FLOWS FROM INVESTING ACTIVITIES:Purchase of computers
    
    
    
    
    
    
    (4,489
    )Advances
    
    
    (57,000
    )
    
    
    Purchase of intangible assets
    
    
    (548,893
    )
    
    
    (249,233
    )Net Cash (Used In) Investing Activities
    
    
    (605,893
    )
    
    
    (253,722
    )CASH FLOWS FROM FINANCING ACTIVITIES:Decrease in cash overdraft
    
    
    8,510
    
    
    
    Proceeds from sale of common stock
    
    
    698,000
    
    
    
    643,199Advances from Related Party
    
    
    45,000
    
    
    
    483,387Repayments to Related Party
    
    
    (220,000
    )
    
    
    Proceeds from exercise of warrants
    
    
    800,000
    
    
    
    Proceeds from note payable
    
    
    
    
    
    
    300,000Net Cash Provided By Financing Activities
    
    
    1,331,510
    
    
    
    1,426,586Foreign Currency Adjustments
    
    
    (127,010
    )
    
    
    21,866NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
    
    
    (2,422
    )
    
    
    211,085CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    
    
    3,218
    
    
    
    51,014CASH AND CASH EQUIVALENTS, END OF PERIOD
    
    $
    796
    
    
    $
    262,099SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION:Interest paid
    
    $
    
    
    
    $
    45,185Income taxes
    
    $
    
    
    
    
    SUPPLEMENTAL DISCLOSURES OF NON CASH FLOWS
INVESTING AND FINANCING ACTIVITIES:Conversion of debt to equity
    
    $
    
    
    
    $
    300,000Conversion of accounts payable to equity
    
    $
    
    
    
    $
    370,000
   3




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Basis of Presentation and Organization
            Principles of Consolidation
   4




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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
 Goodwill and Intangible Assets
  Impairment of Long-Lived Assets
   5




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Comprehensive Income
   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
         6




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Concentration of Credit Risk
  Recent Accounting Pronouncements
         June 39,
    
    
    December 31,2010
    
    
    2009Other intangible assets
    
    $
    29,924
    
    
    $
    29,924Dolphin Secure Websites
    
    
    1,727,237
    
    
    
    1,178,344Total
    
    $
    1,757,161
    
    
    $
    1,208,268
  7




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June 30,
    
    
    December 31,2010
    
    
    2009Note Amount
    
    $
    300,000
    
    
    $
    300,000Discount
    
    
    (42,000
    )
    
    
    (84,000
    )Net
    
    $
    258,000
    
    
    $
    216,000
       June 30,
    
    
    December 31,2010
    
    
    2009Note Amount
    
    $
    300,000
    
    
    $
    300,000Discount
    
    
    (63,506
    )
    
    
    (69,857
    )Net
    
    $
    236,494
    
    
    $
    230,143
        8




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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.
      New Warrant E:
    
    Amount:
    
    7,000,000 sharesExercise price:
    
    $0.2214 per shareExpiration Date:
    
    12/31/2012New Warrant D:
    
    Amount:
    
    231,000 sharesExercise price:
    
    $0.0001 per shareExpiration Date:
    
    2/31/2012
      9




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Common stock issued for services
            10




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11




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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
   12




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 Dolphin Groups 
       Pricing & Availability
   Approach to Market
   13




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Results for the three months ended June 30, 2010 compared to the three months ended June 30,
2009
       Results for the six months ended June 30, 2010 compared to the six months ended June 30,
2009
   14




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Liquidity and Capital Resources
  
 ITEM 4T. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
   15




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PART II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
     16




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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
  17




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Dolphin Digital Media Inc.By:
    /s/ William ODowd IVName:
    William ODowd IVChief Executive Officer  18