Solar Park Initiatives (SOPV) 10-Q 2010 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2010

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from ______________ to _____________

Commission file number 333-143672

CRITICAL DIGITAL DATA, INC.

(Exact name of small business issuer as specified in its charter)

Nevada	80-0189455
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

7770 Regents Road, Suite 113-129, San Diego, CA 92122

(Address of principal executive offices)

858-518-0447

(Issuer’s telephone number)

 (Former name, former address and former fiscal year, if changed since last report)

Check whether the issues (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 S     No £

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes £     No £

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes S     No £

APPLICABLE ONLY TO CORPORATE ISSUES

Indicate the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date:

As of May 13, 2010 the Company had 4,377,000 shares of $0.001 par value common stock issued and outstanding.

Indicate by check mark whether the Registrant is a large accelerated filer, an accredited filer, a non-accredited filer,(or a  smaller reporting company in Rule 12b-2 of the Exchange Act.(check one)

Large Accredited filer £ Accelerated filer £

Non-accredited filer£ Smaller reporting company S

CRITICAL DIGITAL DATA, INC.

TABLE OF CONTENTS

			Page
Part I    FINANCIAL INFORMATION
	Item 1.	Condensed Financial Statements:	1
		Condensed Balance Sheets at March 31, 2010 (unaudited) and September 30, 2009 (audited)	1
		Condensed Statements of Operations for the three and six months ended March 31, 2010 and 2009 and the period from May 2, 2008 (inception) to March 31, 2010 (unaudited)	2
		Condensed Statements of Cash Flows for the six months ended March 31, 2010 and 2009 and the period from May 2, 2008 (inception) to March 31, 2010 (unaudited)	3
		Notes to Condensed Financial Statements (unaudited)	4
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	8
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	16
	Item 4.	Controls and Procedures	16
Part II  OTHER INFORMATION			16
	Item 1.	Legal Proceedings	16
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	16
	Item 6.	Exhibits	16
		Signatures	17

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PART I – FINANCIAL INFORMATION

ITEM 1. Financial Statements

CRITICAL DIGITAL DATA, INC.
(A Development Stage Company)
CONDENSED BALANCE SHEETS
ASSETS
	March 31, 2010			September 30, 2009
	(Unaudited)			(Audited)
Current assets:
Cash	$	4,036		$	9,361
Accounts receivable, net		4,733			-
Prepaid assets		3,127			4,635
Total current assets		11,896			13,996
Website in development, net		37,783			44,478
Total assets	$	49,679		$	58,474
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	11,852		$	9,568
Accounts payable and accrued expenses-related parties		5,190			2,930
Notes payable  - related party		21,672			15,172
Total current liabilities		38,714			27,670
Total liabilities		38,714			27,670
Commitments
Stockholders’ equity
Preferred stock, $0.001 par value; 10,000,000 shares
authorized; no shares issued and outstanding		-			-
Common stock, $0.001 par value; 100,000,000 shares
authorized; 4,377,000 and 4,323,667 shares issued and outstanding  at March 31, 2010 and September 30, 2009, respectively		4,377			4,324
Additional paid-in capital		170,054			137,725
Deficit accumulated during development stage		(163,466	)		(111,245	)
Total stockholders’ equity		10,965			30,804
Total liabilities and stockholders’ equity	$	49,679		$	58,474
See accompanying notes to condensed financial statements

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CRITICAL DIGITAL DATA, INC.
(A Development Stage Company)
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
	Three Months Ended March 31,						Six Months Ended March 31,						May 2, 2008 (inception) to
	2010			2009			2010			2009			March 31, 2010
Revenues	$	14,076		$	-		$	15,826			-		$	15,826
Cost of goods sold		2,240			-			2,240			-			2,240
Gross margin		11,836			-			13,586			-			13,586
Operating expenses
Professional fees		4,932			12,148			27,917			13,123			64,190
Software licensing costs		-			18,982			-			18,982			18,982
Marketing		980			801			2,295			1,563			17,844
Corporate fees		5,320			640			10,948			1,541			13,832
General and administrative		11,489			3,510			23,789			5,091			57,541
Total operating expenses		22,721			36,081			64,949			40,300			172,389
Loss from operations		(10,885	)		(36,081	)		(51,363	)		(40,300	)		(158,803	)
Taxes		-			-			-			-			1,600
Interest expense-related party		392			374			858			757			3,063
Net loss	$	(11,277	)	$	(36,455	)	$	(52,221	)	$	(41,057	)	$	(163,466	)
Weighted average number of
common shares outstanding - basic and fully diluted		4,377,000			4,151,259			4,373,191			4,029,249			4,071,890
Net loss per share - basic and
fully diluted	$	(0.01	)	$	(0.01	)	$	(0.01	)	$	(0.01	)	$	(0.04	)
See accompanying notes to condensed financial statements

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 CRITICAL DIGITAL DATA, INC.

 (A Development Stage Company)

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six Months Ended March 31,						May 2, 2008 (inception) to
	2010			2009			March 31, 2010
Cash flows from operating activities
Net loss	$	(52,221	)	$	(41,057	)	$	(163,466	)
Adjustments to reconcile net loss to net cash used in operating activities
Stock based compensation		16,383			9,474			31,999
Depreciation		14,695			-			23,167
Software licensing costs		-			18,982			18,982
Accounts receivable		(4,733	)		-			(4,733	)
Prepaid assets		1,508			(1,483	)		(3,127	)
Accounts payable and accrued expenses		2,283			(1,159	)		13,223
Accounts payable and accrued expenses-related parties		2,260			1,035			5,190
Net cash used in operating activities		(19,825	)		(14,208	)		(78,765	)
Cash flows from investing activities
Purchase of website development		(8,000	)		(16,023	)		(47,149	)
Net cash used in investing activities		(8,000	)		(16,023	)		(47,149	)
Cash flows from financing activities
Proceeds from notes payable		6,500			-			6,500
Payments on Founders'receivable		-			-			350
Proceeds from issuance of common stock		16,000			35,000			123,100
Net cash provided by financing activities		22,500			35,000			129,950
Net increase (decrease) in cash		(5,325	)		4,769			4,036
Cash, beginning of period		9,361			35,457			-
Cash, end of period	$	4,036		$	40,226		$	4,036
Supplemental disclosure of cash flow information:
Income taxes paid	$	-		$	-		$	-
Interest paid	$	-		$	-		$	-
Supplementary disclosure of  noncash financing activities:
Issuance of common stock for founders' receivable	$	-		$	-		$	350
Issuance of note payable for development of website and marketing of Company	$	-		$	-		$	15,172

See accompanying notes to condensed financial statements

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CRITICAL DIGITAL DATA, INC.

(A Development Stage Company)

Notes to the Condensed Financial Statements

March 31, 2010

NOTE 1 - ORGANIZATION AND OPERATIONS

Critical Digital Data, Inc. is a Nevada Corporation (the “Company” or “CDD”) incorporated on May 2, 2008, with its principal place of business in San Diego, California.  CDD is a development stage company that is developing and operating a direct-to-consumer online data storage service (“HomeDataGuard Personal Digital Vault Application,” or “Digital Vault”) specifically for data preservation and disaster recovery. As well, CDD is developing, marketing and licensing the HomeDataGuard Personal Digital Vault Application as an OEM/private label solution. The Digital Vault enables subscribers to create a “back-up” copy of their most critical documents and electronic personal da ta, in an off-site secure location.  We are operating the direct-to-consumer business of CDD under the service and brand name “HomeDataGuard” (sometimes herein referred to as “HDG”).

NOTE 2 - GOING CONCERN

No assurance can be given that a market for the CDD product will develop, or that customers will be willing to pay for the CDD product.  For the six months ended March 31, 2010, the Company incurred net losses totaling $52,221; had net cash used in operating activities totaling $19,825; and had an accumulated deficit of $163,466 as of March 31, 2010.  If the Company is unable to generate sufficient cash flow from operations and/or continue to obtain financing to meet its working capital requirements, it may have to curtail its business sharply or cease business altogether.

The accompanying condensed financial statements have been prepared assuming that the Company will continue as a going concern that contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. However, the ability of the Company to continue as a going concern on a longer-term basis will be dependent upon the ability to generate sufficient cash flow from operations to meet its obligations on a timely basis and the ability to ultimately attain profitability. The condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The Company has paid for the development of the Digital Vault and ongoing operations through the borrowing of funds from an entity controlled by the major shareholders of CDD, loans directly from the major shareholders themselves (See Note 4 – Related Party Transactions) as well as through the sale of shares of its own common stock (See Note 5-Stockholders’ Equity).  Additionally, while the Company has been successful in the past in raising capital, no assurance can be given that these sources of financing will continue to be available to the Company and/or that demand for the Company’s equity instruments will be sufficient to meet its capital needs.

Management believes that the actions presently being taken to obtain additional funding and market the Digital Vault will be sufficient to enable the Company to continue as a going concern.

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NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited condensed financial statements of CDD have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and applicable regulations of the U.S. Securities and Exchange Commission.  Certain information and footnote disclosures normally included in condensed financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair statement of financial position and results of operations have been included.  Our operating results for the three and six months ended March 31, 2 010 are not necessarily indicative of the results that may be expected for future quarters and the year ending September 30, 2010. The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K filed with the SEC on December 29, 2009 which includes the audited financial statements and notes thereto of CDD as of September 30, 2009 and the risks factors contained therein.

Development Stage Company

The Company’s condensed financial statements are presented as those of a development stage enterprise.  Activities during the development stage primarily include the creation of a business plan and the development and marketing of the Digital Vault and raising capital.

Fair value estimates

The Company is required to estimate the fair value of all financial instruments included on its balance sheet.  The fair value of an asset or liability is the amount at which it could be exchanged or settled in a current transaction between willing parties.  The carrying values for cash and cash equivalents, prepaid assets, accounts payable and accrued liabilities approximate their fair value due to their short maturities.

Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Revenue recognition

The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when it has persuasive evidence of an arrangement that the services have been rendered to the customer, the sales price is fixed or determinable, and collectability is reasonably assured.  Subscription revenues shall be recognized over the period benefited. Deferred revenues shall be recorded when cash has been collected, however the related service has not yet been provided.

During November 2009, CDD entered into a contract with a third party LLC (“LLC”) whereby CDD would provide a version of its online file cabinet to act as an integrated subsection of LLC’s website.  For each subscription of the file cabinet sold, CDD will receive a monthly licensing fee.  As an inducement for CDD to enter into the contract, LLC agreed to pay CDD a monthly minimum fee of $1,750, of which the first three minimum monthly payments, totaling $5,250 were paid upon the execution of the contract.  For the three and six months ended March 31, 2010, revenues generated from LLC have totaled approximately $12,700 and $14,400, respectively, or 90% and 91% of total revenues, respectively.

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On February 1, 2010,CDD entered into a contract with an additional third party LLC (“LLC2”) whereby CDD would provide a private labeled version of its Digital Vault as a new product line for LLC2.  For each subscription of the file cabinet sold, CDD will receive a monthly licensing fee.  The contract includes a minimum monthly payment commitment of $950 which equates to 2,500 subscriptions.  As an inducement for CDD to enter into the contract, LLC2 agreed to pay CDD the first month’s minimum licensing fee of $950 plus development fees of $1,700 upon execution of the agreement.  The contract with LLC2 commenced on February 1, 2010.

Stock-based Compensation

Stock based compensation expense is recorded in accordance with FASB ASC Nos. 718 and 505 for stock and stock options awarded in return for goods and services received. The expense is measured at the grant-date fair value of the award and recognized as compensation expense on a straight-line basis over the service period, which is the vesting period. The Company estimates forfeitures that it expects will occur and records expense based upon the number of awards expected to vest.

NOTE 4 – RELATED PARTY TRANSACTIONS

In order to develop the Company’s Digital Vault and begin marketing of the Company, an entity owned by the founders of CDD (the “Related Entity”) made payments to various consultants on behalf of the Company in the amount of $15,172.  Subsequently, CDD entered into a note payable agreement with the Related Entity evidencing the amount of the funds that had been paid to date (the “2008 Note Payable”).  The 2008 Note Payable bears interest at 10% per annum and is due on September 30, 2010.  During October 2009, CDD borrowed an additional $3,500 (the “2009 Note Payable”) from the Related Entity in order to continue developing and marketing the Digital Vault.    The 2009 Note Payable bears interest at 6% per annum and is due on Oc tober 5, 2010.   As of March 31, 2010, CDD had accrued interest totaling $3,400 related to both the 2009 and 2008 Note Payables.

During March 2010, the two majority shareholders of CDD each lent the Company $1,500 to cover certain operating costs.  The $3,000 loan is noninterest bearing and is due on August 31, 2010.

The Company’s attorney is related to one of the founders of the Company and during the fiscal year ended September 30, 2009 has billed CDD $572 for the reimbursement of filing fees relating to CDD’s incorporation in the state of Nevada as well as its registration to do business in the state of California.  Such expenses are recorded as General and administrative expenses and included in Accounts payable and accrued expenses – related party in the accompanying condensed financial statements.

NOTE 5 – STOCKHOLDERS’ EQUITY

During the six months ended March 31, 2010, the company sold 53,333 shares of its common stock at $.30 per share resulting in proceeds of $16,000. These shares are restricted under Rule 144 of the Securities Act of 1933.

NOTE 6–STOCK INCENTIVE PLAN

As of March 31, 2010, we have granted options to purchase a total of 281,500 shares of common stock under the Company Stock Option Plan.  The options were granted to advisors and consultants for services rendered at a price equal to the fair market value of the common stock at the date of grant.

The Company recognizes option expense ratably over the vesting periods.  For the three and six months ended March 31, 2010, the Company recorded compensation expense related to options granted under the Plan of $3,482 and $16,383, respectively. For the three months ended March 31, 2009, the Company recorded compensation expense related to options granted under the Plan of $9,474.

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Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from initial estimates.  Stock-based compensation expense was recorded net of estimated forfeitures such that the expense was recorded only for those stock-based awards that are expected to vest.     

The fair value of option grants for the six months ended March 31, 2010 and 2009 was estimated using the Black-Scholes option pricing model with the following assumptions:

	Six Months Ended
	March 31, 2010			March 31, 2009
Expected dividend yield		0.00	%		0.00	%
Risk-free interest rate		2.5	%		1.5	%
Expected volatility		90	%		70	%
Expected life (in years)		3			3

The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. Because the Company’s employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options.  

Stock option activity under the Plan for the six months ended March 31, 2010 is summarized as follows:

	Shares		Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Life (in years)		Grant Date Fair Value
Outstanding at September 30, 2009		201,500	$	0.17		2.82	$	18,069
Options granted		80,000	$	0.30		2.75		13,930
Options exercised		-	$	-		-		-
Options cancelled/forfeited/ expired		-	$	-		-		-
Outstanding at March 31, 2010		281,500	$	0.21		2.23	$	31,999
Exercisable at March 31, 2010		281,500	$	0.21		2.23	$	31,999

As of March 31, 2010, all stock options had vested.  The Company intends to issue new shares to satisfy share option exercises.

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NOTE 7 – COMMITMENTS AND CONTINGENCIES

On August 27, 2009, CDD entered into an agreement with a consultant to solicit corporate sponsorship and promotion for HomeDataGuard as well as to provide business development activities for private label partnership opportunities.  The agreement calls for the payment of a retainer of $2,000 upon the execution of the agreement followed by monthly retainer of $2,000 in months two and three of the contract for a total of $6,000 for the three month term of the agreement.  As of December 31, 2009 the retainer portion of the agreement had been paid in full.  The agreement also calls for various payments to be made in cash and/or options based on performance-based commissions, the execution of various sponsorship and/or promotion transactions, and the consultant’s participation on CDD 217;s Strategic Advisory Board. Commissions of  $2,240 have been paid through the six months ended March 31,2010. The consultant has also been granted options to purchase 35,000 shares of common stock at $0.30 per share, all of which have vested as of March 31, 2010.  The agreement shall continue in force until terminated by either party with thirty days written notice.

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Safe Harbor for Forward-Looking Statements

When used in this report, the words “may,” “will,” “expect,” “anticipate,” “continue,” “estimate,” “project,” “intend,” and similar expressions are intended to identify forward-looking statements within the meaning of Section 27a of the Securities Act of 1933 and Section 21e of the Securities Exchange Act of 1934 regarding events, conditions, and financial trends that may affect the Company’s future plans of operations, business strategy, operating results, and financial position.  Persons reviewing this report are cautioned that any forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties and that actual result may differ materially from those included withi n the forward-looking statements as a result of various factors.  Such factors are discussed under the “Item 2.  Management’s Discussion and Analysis of Financial Condition or Plan of Operations,” and also include general economic factors and conditions that may directly or indirectly impact the Company’s financial condition or results of operations.

Description of Business:

Overview

Critical Digital Data, Inc. is a Nevada Corporation (the “Company” or “CDD”) incorporated on May 2, 2008, with its principal place of business in San Diego, California.  CDD is a development stage company that is developing and operating a direct-to-consumer online data storage service (“HomeDataGuard Personal Digital Vault Application,” or “Digital Vault”) specifically for data preservation and disaster recovery. As well, CDD is developing, marketing and licensing the HomeDataGuard Personal Digital Vault Application as an OEM/private label solution. The DigitalVault enables subscribers to create a “back-up” copy of their most critical documents and electronic personal dat a, in an off-site secure location.  We are operating the direct-to-consumer business of CDD under the service and brand name “HomeDataGuard” (sometimes herein referred to as “HDG”). HDG provides:

1)	Secure online digital storage (back-up) and reproduction services via www.HomeDataGuard.com and HomeDataGuard Personal Digital Vault Application, and;
2)	Access to independent service providers, “HomeDataPros®”, trained by us to provide confidential, efficient assistance in the conversion of customers’ printed documents to digital documents and assist in the account set-up for a secure HomeDataGuard Online File Cabinet.

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We are a development stage business and entered into our first private label licensing agreement of the DigitalVault in November 2009.  As of mid June, 2009, the HomeDataGuard.com website has been live and the HomeDataGuard Digital Vault Application is undergoing user testing.  Our common stock has been accepted for trading on the OTC Bulletin Board under the symbol "CDIX".  However, there are currently no "market makers" making a market for our common stock.

Background

A person’s most important personal data is at risk from destruction or damage in fires, floods, hurricanes, tornadoes, landslides and other natural disasters, as well as theft. Such data includes but is not limited to homeowner insurance policies, personal estate documents, mortgage and real estate documentation, stock certificates, product warranties, photographs of assets/property, birth certificates, tax records, etc.  Most of this data oftentimes solely exists in physical paper-based form.

We believe that the average individual does not spend very much time or put much thought into organizing and consolidating his or her most important physical papers. Oftentimes, a person’s most valued and critical physical documents are dispersed amongst boxes in garages, in closets, file cabinets at home and at work, in piles in one’s bedroom or kitchen, in bank safety deposit boxes, personal home safes, albums, etc. Likewise electronically stored data is spread amongst hard drives, external hard drives, floppy disks, CD-ROMs, flash drives, in email accounts, etc. Other critical documentation and data may be held by advisors (attorneys, accountants, physicians), on diverse servers etc.

HomeDataGuard was developed with the intent to be a very simple-to-use and secure digital repository for the aggregation, organization, storage and rapid retrieval of that personal critical data.

HomeDataGuard

HomeDataGuard, comprised of the HomeDataGuard Personal Digital Vault Application and the HomeDataGuard.com website, will enable a Subscriber, at any time, to digitally transfer a digital copy of their personal documents and information (“upload” and/or “download”) to and from their HomeDataGuard file cabinet on-demand.  To facilitate the aggregation and uploading of a Subscriber’s personal information, HomeDataPros, who will be independent service providers trained by the Company to help subscribers scan, upload and organize their data, will be available in select geographic regions, commencing in San Diego County.

Companies in the information protection and storage services industry store and manage information in a variety of media formats, which can broadly be divided into physical and electronic records, and provide a wide range of services related to the records stored. Physical records may include paper documents, as well as all other non-electronic media such as microfilm and microfiche, master audio and videotapes, film, X-rays and blueprints. Digital records may include files retained on some form of hardware device and files in word processing formats, database formats, spreadsheets, digital photographs, digital videos, pdfs, rtfs, etc. HomeDataGuard’s services and functionality will be geared toward storing and protecting inactive or semi-active information in most any digital file format, which is no t typically accessed frequently by its owners and updated only occasionally.

The HomeDataGuard Personal Digital Vault Application is designed to simulate a traditional bank-like physical vault containing a private room with a four-drawer file cabinet.   The virtual interface is extremely easy to use, and provides the Subscriber with a virtual experience that may feel very much like the real experience of opening and closing a file cabinet drawer, scrolling through file folders, inserting files inside folders, and moving folders around.

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A Subscriber logs in and is presented with a video which shows a steel vault unlocking and its door opening, complete with sound effects.  The registered user is taken inside the vault to his/her personal secure file cabinet, which stands next to a whiteboard which contains instructions.  The Subscriber can choose to store, organize and/or retrieve their data by accessing the appropriate file drawer and folders presented within

The Subscriber clicks on one of the file cabinet drawers, which rolls open to display the file folders contained inside.   When the Subscriber scrolls over a folder and selects to open it, the folder displays thumbnail images of the files contained within.  The Subscriber can upload a file into a pre-named folder.    The top two drawers contain several pre-named folders to help a Subscriber get started and be organized.  The Subscriber may also create dozens of new folders, edit folders, even move them to other drawers.  Subscribers have the ability to choose which folders and drawers to place their important data inside.  The website will provide guidance, prompts and checklists to subscribers, and ensure that they are reminded several t imes per year to make necessary updates, changes and/or add new information to their digital file cabinet.

When a Subscriber opens an account they initially do so with the purpose of storing important personal data and documents within their own private secure HomeDataGuard Online File Cabinet.   In order to transfer documents or information to one’s HomeDataGuard Online File Cabinet, that data must first exist in a digital format (“digital copy”.) It is then uploaded via the Internet to HomeDataGuard’s servers.   If the data does not pre-exist in a digital format, it would need to be converted by one of several methods, including but not limited to: being scanned; being faxed to a digital destination; be digitally photographed; or made into a digital movie.

Personal files can be uploaded by the Subscriber or for a fee by a HomeDataPro® or other trained professional.  To store the digital copies into their personal file cabinets, Subscribers would follow the prompts on the site.  Users are prompted to determine which named file folder to place the digital copies into, for organizational purposes.

Subscribers will be able to select an annual or monthly payment subscription plan, for access to their four drawer file cabinet (the “Basic” HomeDataGuard OnlineFile Cabinet.)  A subscriber can obtain, automatically, as much additional digital storage space as they need beyond the initial 4 gigabytes provided, and will be charged for each additional incremental gigabyte of space used on a monthly basis.

Data Access and Maintenance

Once a digital copy is uploaded to a Subscriber’s personal file cabinet, it is easily accessible to that Subscriber anytime from any hardware device that can access the Internet and download that file from HomeDataGuard.   Only that Subscriber will have access, unless he/she provides the username and password information directly to another party.  HomeDataGuard will, via email notifications, suggest that Subscribers change their password every few months and remind them to update their account information and add fresh data to their file cabinets if warranted.

Data Storage Functionality & Encryption

Data storage space is currently leased from Media Temple and Amazon Web Services. In the future, CDD may select other storage and hosting providers that meet HomeDataGuard’s system’s requirements.    All files uploaded to HomeDataGuard by its subscribers are always immediately and automatically encrypted before they are stored on our servers.

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HomeDataPros®

We intend to recommend trained and qualified independent professionals, who the company has certified as “HomeDataPros®.”   HomeDataPros® will be trained by us to provideconfidential, efficient assistance in the conversion of customers’ documents and information to digital copies and assist in the account set-up and uploading to  a secure online HomeDataGuard  Online File Cabinet.

HomeDataPros® will assist the user in the following activities: document scanning; creating digital video recordings of personal property and home inventory; digitally photographing property; and uploading any Subscriber-requested digital copies to the personal file cabinet on www.HomeDataGuard.com.

Market for HomeDataGuard

We anticipate that our initial customers will be consumer households that reside in San Diego County and other geographic locations where there is a high risk of damage to homes as a result of fires, floods, hurricanes, earthquakes and other disasters.

Market for Private Labeling the HomeDataGuard Personal Digital Vault Application

We anticipate that there will be an interest by other companies to private label the HomeDataGuard Personal Digital Vault Application, and are aggressively pursuing business development initiatives to seek out such relationships.

On November 18, 2009, the Company entered into a one year contract with a company who is private labeling a limited version of the HomeDataGuard Online File Cabinet.  This licensee offers consumers a bundled product offering providing several identity theft and fraud protection services, including the secure online document storage provided by CDD.

On February 1, 2010,CDD entered into a contract with an additional third party LLC (“LLC2”) whereby CDD would provide a private labeled version of its DigitalVault as a new product line for LLC2.  For each subscription of the file cabinet sold, CDD will receive a monthly licensing fee.  The contract includes a minimum monthly payment commitment of $950 which equates to 2,500 subscriptions.  As an inducement for CDD to enter into the contract, LLC2 agreed to pay CDD the first month’s minimum licensing fee of $950 plus development fees of $1,700 upon execution of the agreement.  The contract with LLC2 commenced on February 1, 2010.

Revenue

We expect to derive our revenue primarily from monthly license fees paid by the private label customers of the DigitalVault, and through initial and recurring subscription revenues to HomeDataGuard.com.  We expect that the typical private label customer will pay based upon a monthly revenue formula that includes total number of user/subscriber accounts and the total amount of storage space utilized.

For business-to-consumer subscriptions, it is anticipated that customers will subscribe for an annual license of  $49.95 per year for a HomeDataGuard Online File Cabinet, and that a portion of those subscribers will renew annually.  Starting with 10 gigabytes of storage space, a HomeDataGuard Online File Cabinet account will automatically expand its storage space on demand, and charge the subscriber for each incremental gigabyte of digital storage space used.

A la carte services provided by HomeDataPros® will be charged by the service provided and will be priced based upon time and services provided.

Growth Strategy

Our objective for HomeDataGuard.com is to establish a leadership position in the niche of record protection and storage services of critical personal information, protecting and storing our customers’ information without regard to media format or geographic location. Our primary avenues of growth are expected to be: (1) acquire consumer household customers within the US and Canada, starting within fire-prone and earthquake-prone regions of California; (2) establish and expand a workforce of HomeDataPro® professionals in those regions; (3) eventually expand into other regions of the United States.

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Our objective for private labeling is to establish a leadership position in the niche of consumer-centric OEM online storage solutions which companies can provide to their customers/members/employees as a free benefit or as a revenue-generating service for any data-storage related purpose.  Our primary avenues of growth are expected to be: (1) acquire private label customers from non-competing industry sectors within the domestic U.S.; (2) acquire larger, institutional private label customers domestically and internationally.

Intellectual Property

We rely on a combination of trademark, copyright, trade secret and patent laws in the United States as well as confidentiality procedures and contractual provisions to protect our proprietary technology and our brand. HomeDataGuard™ and HomeDataPro® are not registered trademarks as of the date of this S-1filing. An application to register HomeDataPro® as a service mark was submitted to the U.S. Patent & Trademark Office, as well as a follow-up Response to Office Action statement, and is expected to be granted within the next three to six months. The owners of the filed service mark are our co-founders, Dina Moskowitz & Marc Zimmerman who have agreed to assign the service mark to us.

In September 2008 the company submitted a copyright application to the U.S. Copyright Office for the HomeDataGuard.com Personal Digital Vault Application.  As of December 5, 2008, we have received confirmation that the copyright has been granted effective November 19, 2008.

We also rely on copyright laws to protect copy on our web site and all marketing materials. We have registered at least 40 Internet domain names related to our business in order to protect our proprietary interests. From time to time, we may encounter disputes over rights and obligations concerning intellectual property. Also, the efforts we have taken to protect our proprietary rights may not be sufficient or effective. Any significant impairment of our intellectual property rights could harm our business, our brand and reputation, or our ability to compete. Also, protecting our intellectual property rights could be costly and time consuming.

On February 2, 2009, the Company entered into a licensing agreement with a third party software development firm for a non-exclusive, perpetual and non-sublicensible right to use  certain proprietary software code for the Digital Vault application and HomeDataGuard website.  This relationship was terminated in September 2009 and the related proprietary software code has been removed from the Digital Vault application and HomeDataGuard website.

Employees

At the present time our Chief Executive Officer, Dina Moskowitz, and our President, Marc Zimmerman, are our only employees as well as our sole officers, directors and major shareholders.  Ms. Moskowitz and Mr. Zimmerman will devote such time as required to actively market and further develop our services and software products.  At present, we expect Ms. Moskowitz and Mr. Zimmerman to each devote at least 20 hours per week to our business.  Our executive officers have not received any compensation since the date of our incorporation, and we did not accrue any compensation. We do not anticipate hiring any additional employees until such time as additional staff is required to support our operations.

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Results of Operations

The following discussion should be read in conjunction with our condensed financial statements and the related notes that appear elsewhere in this Quarterly Report.

Revenues

CDD began recognizing revenues during December 2009 as a result of our private label agreement.  Such revenues are based on active subscriptions and totaled approximately $12,700 and $14,400 for the three and six months ended March 31, 2010, respectively

Cost of Goods Sold

Cost of Goods Sold for the three and six months ended March 31, 2010 totaled $2,240 and consisted primarily of commissions and hosting fees.

Operating Expenses-For the Three Months ended March 31, 2010 and 2009

Total operating expenses for the three months ended March 31, 2010 and 2009 totaled approximately $23,000 and $36,000, respectively, and consisted primarily of the following:

· Corporate fees, consisting primarily of costs necessary to be a publicly traded company totaled approximately $5,300 and $640 for the three months ended March 31, 2010 and 2009, respectively.

· Stock based compensation expense was approximately $3,500 and $9,000 during the three months ended March 31, 2010 and 2009, respectively.  In conjunction with CDD’s 2009 Stock Incentive Plan, we have granted options to purchase a total of 281,500 shares of common stock since the inception of the plan on March 11, 2009.  The value of the options is expensed over the vesting period of the options.

· Professional fees, excluding those recognized in relation to the 2009 Stock Incentive Plan, totaled approximately $1,200 and $2,700 for the three months ended March 31, 2010 and 2009  and relate primarily to accounting fees incurred in preparation of the Company’s Form 10-Q for the quarters ended March 31, 2010 and 2009, respectively.

· During the three months ended March 31, 2009, we issued warrants to purchase 133,333 shares of CDD common stock at $0.015 per share to a third party software development firm in exchange for a Licensing Agreement  providing CDD the right to use for internal purposes certain software developed by the software development firm.  The warrant is exercisable at any time on or before January 22, 2019 and may be exercisable in either cash or through the receipt of shares equal to the value of the warrant as defined in the Licensing Agreement.  The fair value of the 133,333 warrants was estimated to be approximately $19,000 and was expensed as software licensing costs.  No such costs were incurred during the three months ended March 31, 2010.

· Various general and administrative fees consisting primarily of the monthly liability insurance, depreciation, internet and web design services and office expenses totaled approximately $11,000 and $3,500 for the three months ended March 31, 2010 and 2009, respectively.  The increase from 2009 to 2010 is primarily due to depreciation on CDD’s website which was not launched until June 2009 and accordingly, there was no related depreciation during the three months ended March 31, 2009.

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Operating Expenses-For the Six Months ended March 31, 2010 and 2009

Total operating expenses for the six months ended March 31, 2010 and 2009 totaled approximately $65,000 and $40,000, respectively, and consisted primarily of the following:

· Stock based compensation expense was approximately $16,000 and $9,000 during the six months ended March 31, 2010 and 2009, respectively.

· Professional fees, excluding those recognized in relation to the 2009 Stock Incentive Plan, totaled approximately $11,000 and $4,000 for the six months ended March 31, 2010 and 2009  and relate primarily to accounting fees incurred in preparation of the Company’s various filings with the Securities and Exchange Commission, as well as, promotional and public relation costs incurred in fiscal year 2010.

· Corporate fees, consisting primarily of costs necessary to be a publicly traded company totaled approximately $5,300 and $640 for the three months ended March 31, 2010 and 2009, respectively.

· During the six months ended March 31, 2009, we issued warrants to purchase 133,333 shares of CDD common stock at $0.015 per share to a third party software development firm in exchange for a Licensing Agreement  providing CDD the right to use for internal purposes certain software developed by the software development firm.  The warrant is exercisable at any time on or before January 22, 2019 and may be exercisable in either cash or through the receipt of shares equal to the value of the warrant as defined in the Licensing Agreement.  The fair value of the 133,333 warrants was estimated to be approximately $19,000 and was expensed as software licensing costs.  No such costs were incurred during the six months ended March 31, 2010.

· General and administrative fees totaled approximately$24,000 and $5,000 for the six months ended March 31, 2010 and 2009.   Such costs consist primarily of the monthly liability insurance, depreciation, internet and web design services and office expenses.  The increase from 2009 to 2010 is primarily due to depreciation on CDD’s website which was not launched until June 2009 and accordingly, there was no related depreciation during the three months ended March 31, 2009.

Operating Expenses – For the Period from May 2, 2008 (Inception) through March 31, 2010

Total operating expenses for the period from May 2, 2008 (Inception) through March 31, 2010 totaled approximately $171,000 and consisted primarily of the following:

· Stock based compensation expense was approximately $32,000 for the period from May 2, 2008 (Inception) through March 31, 2010 resulting from the granting of options to purchase 281,500 shares of common stock during said period. The options were valued at approximately $30,000 using the Black-Scholes option pricing model.  The value of the options is expensed over the vesting period of the options.  All options had vested as of March 31, 2010.

· Accounting fees relating to the Company’s Registration Statement filed on Form S-1 in December 2008, as well as Quarterly Reports and the Annual Report of the Company’s financial statements totaled approximately $21,000 for the period from May 2, 2008 (Inception) through March 31, 2010.

· Fees incurred to promote HDG totaled approximately $16,000 during said period.

· Marketing fees incurred to launch HDG and begin advertising the Company to the public totaled approximately $18,000 for the period from May 2, 2008 (Inception) through March 31, 2010.

· In January 2009, we issued warrants to purchase 133,333 shares of CDD common stock at $0.015 per share to a third party software development firm in exchange for a Licensing Agreement  providing CDD the right to use for internal purposes certain software developed by the software development firm.  The warrant is exercisable at any time on or before January 22, 2019 and may be exercisable in either cash or through the receipt of shares equal to the value of the warrant as defined in the Licensing Agreement.  The fair value of the 133,333 warrants was estimated to be approximately $19,000 and was expensed as software licensing costs.

· Various general and administrative fees consisting primarily of the monthly liability insurance, depreciation, internet and web design services and office expenses totaled approximately $58,000 for the period from May 2, 2008 (Inception) through March 31, 2010.

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Other Expenses

During the six months ended March 31, 2010 and 2009, the Company incurred $858 and $757, respectively of other expenses resulting from interest incurred on notes payable to a related entity.  During the period from May 2, 2008 (Inception) through March 31, 2010 the Company incurred $4,663 of other expenses of which $1,600 represents the state minimum tax imposed on corporations and $3,063 results from interest incurred on the notes payable. In order to develop the Company’s Digital Vault and begin marketing of the Company, an entity owned by the founders of CDD (the “Related Entity”) made payments to various consultants on behalf of the Company in the amount of $15,172.  Subsequently, CDD entered into a note payable agreement with the Related Entity evidencing the amount of the f unds that had been paid to date (the “2008 Note Payable”).  The 2008 Note Payable bears interest at 10% per annum and is due on September 30, 2010.  During October 2009, CDD borrowed an additional $3,500 (the “2009 Note Payable”) from the Related Entity in order to continue developing and marketing the Digital Vault.  The 2009 Note Payable bears interest at 6% per annum and is due on October 5, 2010.   As of March 31, 2010, CDD had accrued interest totaling $3,063 related to both the 2009 and 2008 Note Payables.

Net Loss

During the six months ended March 31, 2010 and for the period from May 2, 2008 (Inception) through March 31, 2010 the Company incurred a net loss of $52,221, and $163,466 respectively, due primarily to operating expenses as described above.

Capital Resources and Liquidity

Net cash used in operating activities was approximately $20,000, $14,000 and $79,000 for the six months ended March 31, 2010, 2009, and for the period from May 2, 2008 (Inception) through March 31, 2010, respectively and is primarily attributable to the payment of marketing and professional fees, liability insurance and office expenses.

Net cash used in investing activities was approximately $8,000, $16,000 and $47,000 for the six months ended March 31, 2010, 2009, and for the period from May 2, 2008 (Inception) through March 31, 2010, respectively, resulting from the development of the HomeDataGuard Online Digital Vault.

Net cash provided by financing activities during the six months ended March 31, 2010, 2009 and for the period from May 2, 2008 (Inception) through March 31, 2010 was approximately $22,500, $35,000 and $130,000, respectively and resulted primarily from the Company’s sale of its common stock via private placement memorandums during each respective period.

We currently rely on cash flows from financing activities to fund our capital expenditures and to support our working capital requirements. We expect that future cash requirements will principally be for capital expenditures and working capital requirements.

We anticipate that depending on market conditions and our plan of operations, we may continue to incur operating losses in the foreseeable future. Therefore, our auditors have raised substantial doubt about our ability to continue as a going concern.

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ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.

As a “smaller reporting company,” we are not required to provide the information under this Item 3.

ITEM 4. Controls and Procedures

(a) Evaluation of disclosure controls and procedures. Based on the evaluation of our disclosure controls and procedures (as defined in Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e) required by Securities Exchange Act Rules 13a-15(b) or 15d-15(b), our Chief Executive Officer/Chief Financial Officer has concluded that as of the end of the period covered by this report, our disclosure controls and procedures were effective.

(b) Changes in internal controls. There were no changes in our internal controls over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1.�� Legal Proceedings

We know of no material, existing or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceeding or material pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our company.

ITEM 2.  Unregistered Sales of Equity Securities and Use of Proceeds

During the six months ended March 31, 2010, the company sold 53,333 shares of its common stock at $.30 per share resulting in proceeds of $16,000. These shares are restricted under Rule 144 of the Securities Act of 1933.   Proceeds from the sale of the common stock is being utilized for the development and marketing of HomeDataGuard.

ITEM 6.  Exhibits

Copies of the following documents are included as exhibits to this report pursuant to Item 601 of Regulation S-B.

SEC Ref. No.	Title of Document
31.1	Certification of the Principal Executive
	Officer/ Principal Financial Officer pursuant
	to Section 302 of the Sarbanes-Oxley Act of 2002*
32.1	Certification of the Principal Executive Officer/
	Principal Financial Officer pursuant to U.S.C.
	Section 1350 as adopted pursuant to Section 906
	of the Sarbanes-Oxley Act of 2002*

* Filed herewith.

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SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

CRITICAL DIGITAL DATA, INC.

Date: May 13, 2010

By: /s/ Dina Moskowitz                                   

Dina Moskowitz

Chief Executive Officer/Chief Financial Officer

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