SOURCE: Tumbleweed Holdings, Inc.

Digital Creative Development Corporation - 10-Q

BONANZA GOLD CORP. (Form: 8-K, Received: 05/10/2012 16:57:08)

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

_________________

FORM 10-Q

_________________

 ?    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: March 31, 2012

or

?     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from: ______ to ______

_________________

Digital Creative Development Corporation

(Exact name of registrant as specified in its charter) 

_________________

Utah

000-22315

34-1413104

(State or Other Jurisdiction

(Commission

(I.R.S. Employer

of Incorporation or Organization)

File Number)

Identification No.)

720 Fifth Avenue 10th Floor, New York, New York 10019
(Address of Principal Executive Offices) (Zip Code)

(212) 247-0581
(Registrant’s telephone number, including area code)

N/A
(Former name or former address and former fiscal year, if changed since last report)

_________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ??????No ??

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

Large accelerated filer  ?

Accelerated filer  ?

Non-accelerated filer  ?

Smaller reporting company  ?

 Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ??????No ??

APPLICABLE ONLY TO CORPORATE ISSUERS

As of May 10, 2013, there were 53,864,165 shares of the registrant’s common stock, par value $0.01 per share, outstanding.

 

 

PART I —

 

 

 

 

 

 

 

DIGITAL CREATIVE DEVELOPMENT CORPORATION AND SUBSIDIARY

FOR THE THREE MONTHS ENDED

March 31, 2013

 

INDEX

 

Part I - FINANCIAL INFORMATION

 

 

 

Item 1.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

F-1

 

 

 

 

Condensed Consolidated Balance Sheets as March 31, 2013 (Unaudited) and June 30, 2012

F-1

 

 

 

 

Condensed Consolidated (Unaudited) Statements of Operations and Comprehensive Loss for the three months and nine months ended March 31, 2013 and 2012

F-2

 

 

 

 

Condensed Consolidated (Unaudited) Statement of Stockholders’ Equity for the nine months ended March 31, 2013

F-3

 

 

 

 

Condensed Consolidated (Unaudited) Statements of Cash Flows for the nine months ended March 31, 2013 and 2012

F-4

 

 

 

 

Notes to Condensed Consolidated Financial Statements

F-5 - F-8

 

 

 

Item 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION

3

 

 

 

Item 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

4

 

 

 

Item 4.

CONTROLS AND PROCEDURES

4

 

 

 

Part II

OTHER INFORMATION

 

 

 

 

Item 1.

LEGAL PROCEEDINGS

5

 

 

 

Item 1A.

RISK FACTORS

5

 

 

 

Item 2.

UNREGISTERED SALES OF EQUITY SECURITIES

5

 

 

 

Item 3.

DEFAULTS UPON SENIOR SECURITIES

5

 

 

 

Item 4.

SUBMISSION OF MATTERS TO A VOTE

5

 

 

 

Item 5.

OTHER INFORMATION

5

 

 

 

Item 6.

EXHIBITS AND REPORTS ON FORM 8-K

6

 

 

 

 

Signatures

7

 

 

 

 

Certifications— pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002.

 

 

 

 

 

 

 

 

2

 


 

 

 

 

PART 1---FINANCIAL INFORMATION

 

ITEM 1.   CONSOLIDATED FINANCIAL STATEMENTS

 

 

 

 

ASSETS

 

 

 

 

 

 

 

March 31, 2013

 

June 30, 2012

 

 

(unaudited)

 

(audited)

 

 

(in thousands)

CURRENT ASSETS

 

 

 

 

Cash and cash equivalents

 

$-

 

$-

Investments in securities

 

-

 

-

TOTAL CURRENT ASSETS

 

-

 

-

 

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

$-

 

$-

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

 

 

Accrued expenses and other liabilities

 

$

777.9

 

 

$

702.9

 

Accrued interest

 

 

1,317.8

 

 

 

1,145.3

 

Notes payable--related parties

 

 

808.1

 

 

 

808.1

 

TOTAL CURRENT LIABILITIES

 

 

2,903.8

 

 

 

2,656.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS' EQUITY (DEFICIT)

 

 

 

 

 

 

 

 

Preferred Stock 15,000,000 Shares Authorized

 

 

 

 

 

 

 

 

  Series A Convertible, Par Value $1 ; 2,200 Shares Issued and

 

 

 

 

 

 

 

 

     Outstanding; Involuntary Liquidation Preference of $ 1 Per Share

 

 

 

 

 

 

 

 

     Plus Accrued and Unpaid Dividends

 

 

2.2

 

 

 

2.2

 

  Series C, Par Value $100 ; 9,900 Shares Issued and

 

 

 

 

 

 

 

 

     Outstanding; Involuntary Liquidation Preference of $100 Per Share

 

 

 

 

 

 

 

 

     Plus Accrued and Unpaid Dividends

 

 

990.0

 

 

 

990.0

 

  Series D, Par Value $100 ; 4,000 Shares Issued and

 

 

 

 

 

 

 

 

     Outstanding; Involuntary Liquidation Preference of $100 Per Share

 

 

 

 

 

 

 

 

     Plus Accrued and Unpaid Dividends

 

 

400.0

 

 

 

400.0

 

Common Stock, Par Value $.01; Authorized 600,000,000 Shares; Issued and Outstanding:

 

 

 

 

 

 

 

 

     53,864,165 Shares at March 31, 2013 and June 30 , 2012

 

 

538.6

 

 

 

538.6

 

Additional paid in capital

 

 

38,242.8

 

 

 

38,242.8

 

Accumulated other comprehensive loss

 

 

(2,723.0

)

 

 

(2,723.0

)

Accumulated deficit

 

 

(40,354.4

)

 

 

(40,106.9

)

TOTAL STOCKHOLDERS' EQUITY (DEFICIT)

 

 

(2,903.8

)

 

 

(2,656.3

)

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND  STOCKHOLDERS' EQUITY (DEFICIT)

 

$

  

 

 

$

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes to  Condensed Consolidated Financial Statements

 

 

 

 

 

 

F-1

 

 

 

 

 

 

 

 

DIGITAL CREATIVE DEVELOPMENT CORPORATION AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

For the Nine Months Ended March 31 ,

 

For the Three Months Ended December 31,

 

 

2013

 

2012

 

2013

 

2012

 

 

(in thousands)

 

(in thousands)

 

 

 

 

 

 

 

 

 

REVENUE

 

$

  

 

 

$

  

 

 

$

  

 

 

$

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative expenses

 

 

(75.0

)

 

 

(75.0

)

 

 

(25.0

)

 

 

(25.0

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(LOSS) FROM OPERATIONS

 

 

(75.0

)

 

 

(75.0

)

 

 

(25.0

)

 

 

(25.0

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER INCOME (EXPENSE)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net and other

 

 

(172.5

)

 

 

(156.2

)

 

 

(57.4

)

 

 

(52.1

)

Realized losses on marketable securities available for sale

 

 

  

 

 

 

(0.4

)

 

 

  

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL OTHER INCOME (EXPENSE)

 

 

(172.5

)

 

 

(156.6

)

 

 

(57.4

)

 

 

(52.1

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET LOSS

 

 

(247.5

)

 

 

(231.6

)

 

 

(82.4

)

 

 

(77.1

)

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

UNDECLARED PREFERRED STOCK DIVIDENDS

 

 

(109.1

)

 

 

(109.1

)

 

 

(36.3

)

 

 

(36.4

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET LOSS APPLICABLE TO COMMON SHAREHOLDERS

 

$

(356.6

)

 

$

(340.7

)

 

$

(118.7

)

 

$

(113.5

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE NUMBER OF OUTSTANDING SHARES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FOR BASIC AND DILUTED EARNINGS PER SHARE

 

 

53,864.2

 

 

 

53,864.2

 

 

 

53,864.2

 

 

 

53,864.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BASIC AND DILUTED LOSS PER SHARE

 

$

(0.00

)

 

$

(0.00

)

 

$

(0.00

)

 

$

(0.00

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS)

 

$

(247.5

)

 

$

(231.6

)

 

$

(82.4

)

 

$

(77.1

)

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

               Unrealized gain (loss) on marketable securities

 

 

  

 

 

 

(17.3

)

 

 

  

 

 

 

(3.0

)

COMPREHENSIVE INCOME (LOSS)

 

$

(247.5

)

 

$

(248.9

)

 

$

(82.4

)

 

$

(80.1

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes to Condensed Consolidated Financial Statements

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

F-2

 

 

 

 

 

 

DIGITAL CREATIVE DEVELOPMENT CORPORATION AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

FOR THE NINE MONTHS ENDED MARCH 31, 2013 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

Additional

Other

 

 

 

 

Preferred Stock

Common 

Paid-in

Comprehensive

Accumulated 

 

 

 

Series A

Series C

Series D

Stock

Capital

Operations

Deficit

Total

 

 

 

 

 

 

 

 

 

 

Balance at June 30, 2012 (audited)

 $           2.2

 $             990.0

 $             400.0

 $             538.6

 $                38,242.8

 $                     (2,723.0)

 $                  (40,106.9)

 $                (2,656.3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

                              -  

 

 Net loss 

 

 

 

 

 

 

                          (247.5)

                      (247.5)

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2013 (unaudited)

 $           2.2

 $             990.0

 $             400.0

 $             538.6

 $                38,242.8

 $                     (2,723.0)

 $                  (40,354.4)

 $                (2,903.8)

See accompanying Notes to  Condensed Consolidated Financial Statements

 

 

F-3

 

 

 

 

 

 

 

 

 

 

 

DIGITAL CREATIVE DEVELOPMENT CORPORATION AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED MARCH 31

 

 

 

 

 

 

 

 

2013 (unaudited)

 

2012 (unaudited)

 

 

(in thousands)

 

 

 

 

 

CASH FLOWS FROM OPERATING ACTIVITES:

 

 

 

 

 

 

 

 

Net loss

 

$

(247.5

)

 

$

(231.6

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Net realized  losses  on marketable securities

 

 

  

 

 

 

0.4

 

 

 

 

 

 

 

 

 

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Increase in accounts payable, accrued expenses and other liabilities

 

 

247.5

 

 

 

230.6

 

 

 

 

 

 

 

 

 

 

NET CASH USED IN OPERATING ACTIVITIES

 

 

  

 

 

 

(0.6

)

 

 

 

 

 

 

 

 

 

NET CASH PROVIDED BY INVESTING ACTIVITES:

 

 

  

 

 

 

  

 

 

 

 

 

 

 

 

 

 

NET CASH PROVIDED BY FINANCING ACTIVITIES

 

 

  

 

 

 

  

 

 

 

 

 

 

 

 

 

 

NET CHANGE IN CASH AND CASH EQUIVALENTS

 

$

  

 

 

$

(0.6

)

 

 

 

 

 

 

 

 

 

CASH AND EQUIVALENTS, beginning of period

 

 

  

 

 

 

0.6

 

 

 

 

 

 

 

 

 

 

CASH AND EQUIVALENTS, end of period

 

$

  

 

 

$

  

 

 

 

 

 

 

 

 

 

 

See accompanying Notes to Condensed Consolidated Financial Statements

 

 

 

  

F-4

 

 

 

 

 

DIGITAL CREATIVE DEVELOPMENT CORPORATION AND SUBSIDIARY

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2013

(unaudited)

($’s in thousands)

 

NOTE 1- BASIS OF PRESENTATION

 

The condensed consolidated financial statements include the accounts of Digital Creative Development Corporation and its wholly owned subsidiary (collectively, the "Company").

 

The accompanying condensed consolidated financial statements as of  March 31, 2013 and for the nine months ended March 31, 2013 and 2012 are unaudited and have been prepared by the Company in accordance with the rules and regulations of the Securities and Exchange Commission relating to interim financial statements. The accompanying condensed consolidated balance sheet as of June 30, 2012 and other information as of June 30, 2012 have been derived from the Company's audited annual financial statements. These condensed consolidated financial statements do not include all disclosures provided in the Company's annual financial statements. The condensed consolidated financial statements should be read in conjunction with the condensed consolidated financial statements and notes thereto for the year ended June 30, 2012 contained in the Company's Form 10-K filed with the Securities and Exchange Commission. All adjustments of a normal recurring nature, which, in the opinion of management, are necessary to present a fair statement of results for the periods presented have been made. The results of operations for the nine months ended March 31, 2013 are not necessarily indicative of the results to be expected for the full year.

 

NOTE 2- DOUBT AS TO CONTINUING AS A GOING CONCERN

 

Our condensed consolidated unaudited financial statements were prepared on the assumption that we will continue as a going concern. We currently have a working capital and equity deficit of $2,903.8 and are in default of our notes payable. Our ability to obtain resources sufficient to continue to meet our obligations as they come due is dependent on raising cash through the sale of Broadcaster, Inc. shares, and/or raising additional equity, and/or obtaining forbearance of our debt holders. We intend to use our cash as well as other funds, to the extent that they are available on commercially reasonable terms, to finance our activities. Although we can provide no assurance that these additional funds will be available in the amounts or at the times we may require, management believes that it can obtain the additional funds necessary to continue its operations.

 

NOTE 3- PRINCIPLES OF CONSOLIDATION

 

The Company has no active business. However, the Company has been 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 in International Microcomputer Software, Inc. (“IMSI”), (n/k/a Broadcaster, Inc). Since 1982, IMSI (n/k/a Broadcaster, Inc.) had 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. Broadcaster, Inc. also operates an Internet entertainment network.

 

NOTE 4- INVESTMENTS IN SECURITIES

 

The Company had an investment in the common stock of Broadcaster, Inc. at March 31, 2013 (unaudited) and June 30, 2012 (audited) on which it has recognized an unrealized loss for the entire cost of $2,723.0.

 

Generally Accepted Accounting Principles in the United States (‘GAAP’) includes a framework for measuring fair value and disclosing fair value measurements.  Under GAAP, fair value is the price that would be received for an investment in a current sale, which assumes an orderly transaction between market participants on the measurement date. In determining the fair value of its financial instruments, GAAP requires the Company to assume that the portfolio investment is sold in a principal market between market participants, or in the absence of a principal market, the most advantageous market, which may be a hypothetical market. Market participants are defined as buyers and sellers in the principal or most advantageous market that are independent, knowledgeable, and willing and able to transact.

 

 

 

F-5


 

 

 

 

 

 

DIGITAL CREATIVE DEVELOPMENT CORPORATION AND SUBSIDIARY

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2013

(unaudited)

($’s in thousands)

 

In accordance with GAAP, the Company has considered its principal market as the market in which the Company exits its portfolio investments with the greatest volume and level of activity.  GAAP specifies a hierarchy of valuation techniques based on the extent to which the inputs to those valuation techniques are observable or unobservable.  These inputs are summarized in the three broad levels listed below:

 

Level 1 – Valuations based on quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.

 

Level 2 – Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

 

Level 3 – Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

 

In addition to using the above inputs in investment valuations, we continue to employ the valuation policy approved by our board of directors that is consistent with GAAP.  Consistent with our valuation policy, we evaluate the source of inputs, including any markets in which our investments are trading or any markets in which securities with similar attributes are trading, in determining fair value. Our valuation policy considers the fact that because there is not a readily available market value for the investments in our portfolio, the fair value of the investments must typically be determined using unobservable inputs.

 

The fair value of our investments may fluctuate from period to period. Additionally, the fair value of our investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values that we may ultimately realize. Further, such investments are generally subject to legal and other restrictions on resale or otherwise are less liquid than publicly traded securities.

 

In addition, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different than the valuations currently assigned.

 

The following table presents fair value measurements of investments as of March 31, 2013:

 

 

 

 

Fair Value Measurements Using

 

 

Total

 

Level 1

 

Level 2

 

Level 3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

There were no changes in investments that use Level 2 inputs for the nine months ended March 31, 2013. As of March 31, 2013, the net unrealized loss on the investments that use Level 2 inputs was $2,723.0

 

NOTE 5- ACCRUED EXPENSES AND OTHER LIABILITIES

 

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

 

 

 

F-6


 

 

 

 

 

DIGITAL CREATIVE DEVELOPMENT CORPORATION AND SUBSIDIARY

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2013

 (unaudited)

($’s in thousands)

 

NOTE 6- NOTES PAYABLE - RELATED PARTIES

 

At March 31, 2013 (unaudited) and June 30, 2012 (audited) the Company’s long term debt consisted of the following:

 

 

March 31, 2013

 

 

June 30,

2012

 

 

 

(Unaudited)

 

 

(Audited)

 

Promissory Note with Interest at 15% (1)

 

$

325.0

 

 

$

325.0

 

Promissory Notes with Interest at 10% (2)

 

 

345.0

 

 

 

345.0

 

Notes payable to certain former executives and related parties

 

 

 

 

 

 

 

 

   with interest at 10%, due on various dates

 

 

138.1

 

 

 

138.1

 

 

 

 

808.1

 

 

 

808.1

 

Less: Current portion

 

 

808.1

 

 

 

808.1

 

Long-term portion

 

$

-0-

 

 

$

-0-

 

 

(1)  

On May 30, 2007, the Company and the lender (“Multi-Mag”) executed Amendment #5 to this Promissory Note to extend the maturity date of the Note to December 31, 2007.    Although extensions were obtained in the past, there can be no assurance that the Company will be able to obtain further extensions.  Interest expense in the amount of $36.6 was charged to operations in the nine months ended March 31, 2013.  The note is secured by 200,000 shares of Broadcaster, Inc. common stock.

 

(2)  

Of the $345.0 Secured Promissory Notes, all but three of these note holders whose notes total $195.0 have extended the due dates of their notes to December 31, 2008.  There can be no assurance that the Company will be able to obtain further extensions of the due dates of these notes.    These notes are currently in default.  Interest expense in the amount of $125.5 was charged to operations in the nine months ended M